Wilson Vows Veto of Bills to Raise Taxes : Budget: Many Democrats believe new levies on income and property are needed to solve cash shortage. Brown suggests tax on services.

Toughening his stance on budget negotiations, Gov. Pete Wilson vowed Tuesday to veto legislation that would raise income and property taxes, considered by many Democrats to be crucial in solving the state’s $12.6-billion cash shortage.

But in a direct challenge to Wilson, Assembly Speaker Willie Brown (D-San Francisco) called for $7 billion in new state taxes, primarily from services provided by lawyers, accountants, architects, plumbers and others.

He said, however, that raising such a large sum from a new tax might be impractical, and suggested that the governor and legislators continue looking for ways to raise the income tax, with special consideration to boosting the rates of the state’s wealthiest taxpayers.

Later in the day, Brown and Senate President Pro Tem David A. Roberti (D-Los Angeles) met privately in the governor’s office with Wilson and Republican legislative leaders to debate taxes and other issues. Although the Democrats differ on which taxes they would prefer to see raised, both leaders generally agree that the governor and Legislature should be looking at tax increases rather than spending cuts to finance most of the deficit.

“We are at serious negotiating time,” Roberti said before he went into the meeting.

But after the meeting, Wilson and the lawmakers said they were unable to agree on any of the tax and budget issues. Wilson described the session as “useful and civil.”

As both sides took their cases to the public, Wilson and the Democratic leaders remained in sharp disagreement over several key issues, including the timetable set by the governor for action on the budget. Brown said Wilson’s goal of having a new state budget enacted by May 1 was “unrealistic.” The governor, he said, should expect it no sooner than June 1.

Brown told reporters during a Capitol news conference that his proposal for a tax on services reflects the reality of California’s modern-day economy. The 6% to 7% sales tax on manufactured products and other goods now is the state’s second-largest revenue source, trailing only the personal income tax. There is no tax on services now.

“Clearly, the service side of the world is growing; the manufacturing side of the world is decreasing,” Brown said.

Brown outlined a potential budget deal that calls for a shift of $2.3 billion in state-financed health services to counties, budget cuts of about $5 billion, and state tax increases of $7 billion. Altogether, the tax increases under Brown’s plan would total $9.3 billion because the health services transfer would come with local authority to raise revenues.

He flatly rejected some of the taxes contained in a $1.8-billion tax increase package proposed by Wilson in January, calling them “ludicrous.” They include a cut in the renter’s tax credit and proposed new taxes on candy, snack foods, newspapers and magazines and a sharp increase in motor vehicle registration fees. Brown is opposed to the Wilson proposal to sharply reduce the renter’s tax credit.

For his part, Wilson indicated that his patience was wearing thin. During a morning speech to 700 members of the California Chamber of Commerce, he noted that lawmakers had missed an April 1 deadline he had set for enactment of an initial round of bills to raise taxes and reduce spending. Wilson told his audience that lawmakers “just don’t seem to have yet grasped the urgency of the situation.”

The promise of the vetoes came later in the speech when Wilson characterized two tax bills Democrats are relying on as threatening to the state’s business climate.

Wilson was enthusiastically applauded when he told the business leaders: “I will not accept any tax hikes that chase jobs out of California.”

Later, he went even further. “If any of these job-killing bills reach my desk, I’ll use my bill-killing veto pen to see to it that we do not kill growth in California,” he said.

Wilson argued that the cost of doing business in California already is too high, in part because of taxes on business. The governor noted that a number of major California corporations are considering expansion in other states, rather than building here.

Wilson’s remarks were aimed in part at a Democratic proposal to raise the income tax rate to 11% from the current 9.3% for individuals earning $100,000 or more and couples making $200,000.

Wilson also zeroed in on a property tax measure sponsored by Sen. Quentin L. Kopp (I-San Francisco) that would require the automatic reassessment of property belonging to corporations any time more than 50% of the company’s shares are traded or sold.

The governor said the Kopp proposal was a variation on the concept of different systems to tax the property of businesses and individuals. Businesses have repeatedly fought off efforts to create a so-called “split roll,” and corporate lobbyists call the Kopp bill one of the most worrisome tax measures circulating in the Capitol.

While Wilson’s chief focus was on business, a decidedly different tone was struck when Wilson was followed to the podium by Assemblyman John Vasconcellos (D-Santa Clara), chairman of the Assembly Ways and Means Committee.

In an emotional speech, Vasconcellos pleaded on behalf of the poor, elderly and sick, all of whom face a reduction in services under Wilson’s budget plan. He said 1.4 million children in California already are living below the poverty line, and a further reduction in services would create more problems of unemployment, alcohol and drug abuse and criminal activity.

The Ways and Means chairman said Californians have enjoyed one tax break after another since 1978, when voters passed Proposition 13 and slashed their property taxes. He said various cuts in property, income and other taxes have saved Californians the equivalent of $30 billion a year.