‘Loopholes’ Targeted in Drug War : Van de Kamp Seeks $1.7 Billion From Business Tax Breaks

Atty. Gen. John K. Van de Kamp called Thursday for closing “corporate tax loopholes” to raise $1.7 billion to pay for a crackdown on drug dealers and help addicts kick their habits.

The Democratic gubernatorial hopeful shied away from calling his proposal a tax increase, preferring instead to use the euphemism, “revenue enhancement.”

“It’s a revenue enhancement, there’s no question about that,” Van de Kamp said testily when asked if his proposal amounted to a tax increase. “It increases revenues for the state. You can call it whatever you want.”

Describing California as “the No. 1 target for the Colombian drug cartels,” the attorney general said his eight-year program could put more than 2,000 police officers on the street and expand drug treatment programs throughout the state.

The money would be raised by closing “loopholes” in the state’s corporate tax laws that allow businesses to keep an average of $222 million a year, Van de Kamp said.

At a Capitol press conference, Van de Kamp repeatedly invoked the name of former Republican President Ronald Reagan, who signed legislation eliminating similar tax exemptions as one small part of the massive federal tax overhaul of 1986.

“He was willing to do it. Why shouldn’t I?” the Democrat asked.

Van de Kamp’s idea drew a frosty response from the governor he hopes to succeed. A spokesman for Gov. George Deukmejian said the Republican chief executive would veto the measure if it reached his desk because it would raise taxes.

“It appears to be a tax increase on business without any offsetting tax reductions,” said Kevin Brett, Deukmejian’s press secretary. “The governor does not support real or perceived tax increases without a vote of the people.”

But Brett acknowledged that Van de Kamp’s tax proposal is identical to part of a “revenue enhancement” plan Deukmejian himself offered last year to make up for a drop in state tax receipts. The governor angrily withdrew his proposal after it was branded a tax increase.

Altogether, Van de Kamp proposed eliminating 10 tax breaks for business, including the deferral of taxes on vacation pay, installment sales and income from long-term contracts.

The money raised would go into the “California Anti-Drug Superfund,” which would be devoted to the expansion of anti-drug activities. Among the programs funded would be expansion of local law enforcement, prosecution of drug cases, drug education and addict-treatment programs.

Under the attorney general’s plan, the drug provision will be amended into a bill carried by Johan Klehs (D-Castro Valley)--now stalled on the Assembly floor--that would eliminate the 10 tax breaks for business.

“Assemblyman Klehs and I are proposing legislation that will prove to the drug lords and the gangs and the pushers that Californians mean what they say: This state is deadly serious about winning the war on drugs,” Van de Kamp said.

Klehs acknowledged that business leaders are opposed to the bill, which would result in a first-year tax increase of $355 million. “The business community would prefer to have $355 million in new loopholes created for them,” Klehs said.

THE L.A. CONNECTION--Indictments in Upstate New York point to Los Angeles as the nation’s leading cocaine distribution center. Metro, Page 3