Proposal to Reduce Renters Tax Credit Assailed : State finance: Foes of the governor’s budget-trimming plan tell a Los Angeles hearing it amounts to special tax increase that would hurt the poor.

A proposal by lame-duck Gov. George Deukmejian to reduce the renters tax credit was strongly denounced Monday as a special tax increase on the poor during a rare hearing in Los Angeles by the state Senate Budget and Fiscal Review Committee.

Majority-party Democrats opposed to the governor’s plan moved the hearing from Sacramento because of the high renter population here. Renters constitute about 65% of the households in Los Angeles, or 817,000 families, according to city housing officials.

The governor’s proposal would reduce the credit to a flat $52 a year, down from the current credit of $120 for married couples, heads of households and surviving spouses and $60 for individuals. Those amounts are paid to all renters, even people such as welfare recipients who have no taxable income.

Reaction to the governor’s plan in Los Angeles was predictable as Mayor Tom Bradley led a group of critics in the County Board of Supervisors hearing room in voicing strong disapproval of the governor’s budget move.

Bradley called the proposal “an insult to the people of this state who can least afford it.” The Democratic mayor released figures showing that of the 2.2 million households that qualify for the credit statewide, more than two-thirds have incomes of $10,000 a year or less. In Los Angeles, the average renter earns $26,000 annually, Bradley said.

Gary Squier, head of Bradley’s housing program, sharply disagreed with the portrayal of the proposal by the Republican Deukmejian as elimination of a benefit, arguing that “it will have the identical effect of a tax increase.”

The credit dates back to passage of Proposition 13 in 1978, which dramatically reduced taxes for property owners. Lawmakers created the special tax program to provide some equality to renters in the face of huge benefits given to property owners when the initiative passed.

With the state facing a potential $800-million deficit in the current year’s budget and a shortfall next year in the range of $5 billion to $6 billion, Deukmejian offered up the renters credit reduction as part of a $1-billion emergency plan of cuts and revenue increases.

But the governor’s plan, which also called for a reduction in funding for public schools of $526 million annually, fell on its face almost immediately.

Generally, lawmakers said they would rather wait and deal with Pete Wilson after the governor-elect is sworn in Jan. 7 before tackling a comprehensive budget plan.

More specifically, Democrats criticized the proposal because it would single out low-income Californians for an extra tax bite. The plan ignored a tradition in the Legislature of dealing with renter and homeowner tax benefits together as a matter of fairness.

During the hearing Monday, Gail Greer Lyle, director of the nonpartisan Commission on State Finance, fueled the controversy when she released a chart showing that bank and corporation taxes over the last five years have steadily declined, in part because of tax breaks approved by the Legislature in 1987.

David Hamlin, president of the Park La Brea Tenants Assn., said, “I was astounded to hear that the bank and corporation taxes in California have been dropping steadily. I don’t think it is appropriate to ask the renters, who represent the lowest level of income earners in this state, to make up the difference.”

Senate President Pro Tem David A. Roberti (D-Los Angeles), one of five Los Angeles-area lawmakers who attended the hearing, said he and other Democrats strongly oppose the governor’s plan. Roberti said it makes no sense to target renters for tax increases when wealthier corporate and individual taxpayers are not touched.

Only one of the nine people who testified during the three-hour hearing was in favor of the governor’s move. James S. Dwight Jr., chief deputy director of the Department of Finance, defended the proposal in light of the state’s pressing budget problems.