Tax on Newspapers, Magazines Gains : State budget: Senate OKs the levy as part of package despite a strong lobbying effort by publishers association.

A proposed sales tax on newspapers and magazines began moving through the Legislature on Tuesday as part of the effort to close the state’s $3.6-billion budget gap--despite vigorous lobbying by newspapers.

The Senate approved the tax in a package of budget bills on which final action was expected late Tuesday.

Citing press freedom, competitiveness and common sense, the California Newspaper Publishers Assn.’s Sacramento lobbyist has been busy buttonholing legislators, and newspaper executives across the state--from the 20,000-circulation Santa Maria Times to the 1.2-million-circulation Los Angeles Times--have been contacting their local lawmakers.

The newspapers’ efforts haven’t knocked the sales tax proposal off the negotiating table. Although approved in the Senate, the measure’s prospects in the Assembly are uncertain.

But Capitol insiders are betting that by the time the budget negotiations are completed, lawmakers and the governor will have found some other way to raise the $54 million that the periodical taxwould generate.

“All of us are feeling the heat,” said Senate Republican Leader Ken Maddy of Fresno, who proposed the tax as part of a $729-million plan to raise taxes and fees. The plan also would reimpose the sales tax on the sale or rental of motion pictures and recordings and on some movie production expenses.

Maddy said his staff has heard from the Santa Maria paper, which is in his district. Senate Leader David A. Roberti (D-Los Angeles) got a call and a letter from Los Angeles Times President Richard T. Schlosberg III, according to Roberti press secretary Robert Forsyth. Forsyth said Roberti intends to support the proposal.

“This thing is affecting every segment of California,” Forsyth said. “Why not newspapers?”

Assemblyman Charles W. Quackenbush (R-Saratoga), who watched from close range as a similar proposal died without a vote in an Assembly committee last year, said the experience reminded him of some old advice that has been attributed to various sages: Never pick a fight with someone who buys ink by the barrel.

“There is a feeling that a newspaper could take it out on a legislator and hurt him at the ballot box with unfavorable editorials and unflattering articles,” Quackenbush said. “A newspaper could really tube your career.”

So far, however, the opposition has come almost exclusively from business-side newspaper executives. Maddy said he had yet to see a paper editorialize against the proposal. A columnist for the Sacramento Union did write that the idea reminded him of the Stamp Act, Great Britain’s pre-Revolutionary War attempt to tax newspapers, books, pamphlets and similar products in the American colonies.

The Maddy plan would repeal the sales tax exemption that newspapers have enjoyed since 1941, when the Legislature relieved the industry of paying the tax that was imposed statewide in 1933. Apparently, few newspapers ever paid the levy, and they were able to persuade lawmakers that a tax on “information” was a bad idea and would prove difficult to collect. The same arguments are being used today.

The publishers argue that the tax could not be collected at news racks without tacking an extra nickel onto the price of a paper, which would drive away customers, restricting the flow of information to Californians, and perhaps lowering revenue and cutting into the amount the paper could spend gathering the news.

Michael Dorais, the publishers’ Sacramento lobbyist, said the proposal would make tax collectors of the children who toss newspapers onto porches throughout California.

The boys and girls and, increasingly, the adults who deliver newspapers usually serve as independent contractors. They buy papers from the publisher and then resell them to subscribers. Under that arrangement, the retail distributors, not the publisher, would have to collect the tax from subscribers.

“It’s not reasonable to expect these kids to be collecting the tax and turning that money over to the state,” Dorais said.

Schlosberg, who runs the business side of The Times, which in its editorials has urged the Legislature to raise revenue without a general tax increase, said the newspaper’s position on this revenue-raiser is that “the exemption has been in place for almost 50 years and it would be inappropriate from a public policy point of view as well as a practical point of view to change anything.”

Dorais added that these are not particularly good economic times for newspapers. He noted that the Los Angeles Herald Examiner closed last year and at least two other metropolitan California dailies are having financial trouble.

“The fact is, newspapers cannot afford a new tax,” Dorais said. “We aren’t in a position where we can just add 6% to the cost of doing business.”