No Tax Hikes While He’s in Office, Governor Vows

Gov. George Deukmejian, reacting to discussions by lawmakers of possible tax increases to make up for shortages in state revenues, promised Wednesday that there will be no general tax increases while he is governor.

Deukmejian moved quickly to douse speculation that sales, income or other tax increases would be used to close a potential gap in state revenues of $3 billion. Asked if he could assure voters that there would be no other tax increase, Deukmejian replied, “I’m saying that while I’m governor, yes. That’s absolutely.”

Later he added, “If your question is am I going to agree to increases in taxes, my answer is no, because that’s not going to solve the problem.” Deukmejian has said he is willing to discuss with Democrats ways to resolve the state’s financial difficulties, but on Wednesday he was emphatic in his insistence that there will be no tax increase.

Deukmejian can speak with such assurance because there are enough Republican tax foes in the Assembly to prevent the two-thirds majority needed to override his veto of a tax measure.

The governor’s pledge came as supporters of Proposition 111, the ballot measure that would modify the state spending limit and trigger a gasoline tax hike, expressed concern that the new talk of additional tax increases could hurt their chances in the June 5 election.

“It’s simply unfortunate and I think it’s ill-timed,” said Arthur Bauer, executive director of Californians for Better Transportation. “I think the campaign has been doing extremely well. I think 111 is winnable but when the playing field becomes tilted like it has just has been, you have to double your efforts.”

The discussion of possible tax increases was initiated by a staff memorandum circulated by the Assembly Revenue and Taxation Committee outlining various tax measures that could be used to raise new revenue and avert a potential fiscal crisis. The memo suggested several options, including increases in the top bracket of the personal income tax, continuation of an earthquake sales tax hike and boosts in business taxes.

Assemblyman Johan Klehs (D-Castro Valley), the committee’s chairman, said the new revenue sources are needed to make up for an unexpected $500-million drop in tax revenues and $400 million that schools must have to accommodate an unexpected surge in pupil enrollment. In addition, budget officials said the state was already about $1.6 billion short of what is needed to meet legal spending requirements and keep up with the normal growth in state services.

While Deukmejian appeared to be closing the door on a general tax increase, he avoided any mention of the possibility of so-called revenue enhancements. In 1988 he proposed a package of measures that would raise revenues by adjusting income tax brackets and changing the way businesses were allowed to report losses for income purposes. He later withdrew the proposal when it was labeled a tax increase.

However, on Wednesday Deukmejian said he will insist that the present crisis be solved by suspending certain legal requirements that he contends are driving up costs faster than the state can generate revenues to pay for them. Specifically, Deukmejian wants a mechanism in place that would allow automatic cost-of-living adjustments for a variety of programs to be reduced in lean budget years.

“Raising taxes here in California in order to deal with the budget problem is not the answer because if you simply raise taxes and you increase the base of the budget itself, you’re still going to have the same problem year after year,” he said.

His proposal drew immediate support from Larry McCarthy, president of the California Taxpayers Assn. and a co-chairman of the campaign to pass Proposition 111.

“We think it’s unnecessary to even be talking about a tax increase at this point,” he said. “The governor has identified what sounds like the appropriate strategy to deal with this problem.”

McCarthy said he was worried that voters might be discouraged from voting for Proposition 111 because of the talk of tax increases.

“We think 111 is constructed in such a way as to protect taxpayers against tax increases, but discussions like this are really unfortunate because it makes people worry and wonder,” he said.

Times staff writer Daniel M. Weintraub contributed to this story.

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