Democrats Call for Tax on Rich to Aid Schools

Senate Democrats, saying they must choose between protecting schoolchildren and “saving the fat cats,” insisted Wednesday that California’s wealthiest people pay higher income taxes and that the additional revenue be earmarked to prevent severe cuts in school funding.

The demand flew in the face of Republican Gov. Pete Wilson’s proposed solution to the state’s budget crisis. Wilson opposes any income tax increase, favoring instead raising the sales tax by 1 1/4 cents.

“The higher you raise taxes, the less (wealthier Californians) have to invest to create jobs,” said gubernatorial press secretary Bill Livingstone. “That is why Wilson objects to an increase in the income tax.”

At a closed-door meeting on the $12.6-billion budget shortfall, Democrats not only demanded higher income taxes on top earners but called for a reduction to 50% from the 80% tax writeoff allowed for business entertainment, including the so-called three-martini lunch.

Senate Leader David A. Roberti (D-Los Angeles) indicated to reporters later that he believed no budget-balancing program would be approved by Senate Democrats unless it raised the taxes on households whose income is $200,000 a year and higher. “I would say no,” he said.

The Senate Democrats’ insistence on higher income taxes reflected a toughened position as Wilson and the Legislature try to fashion a state budget to overcome the revenue deficit. The action also placed Senate Democrats closer to adopting a united front with Assembly Democrats.

Roberti indicated that the financial troubles of local schools are far more serious than legislators previously believed. He said the money to prevent the kind of financial collapse suffered by the Richmond school district in the Bay Area must come from the wealthy “who have been protected every inch of the way” since their taxes were reduced inadvertently in 1987.

“I don’t think any of us realized the financial plight of the schools,” Roberti said. The Senate leader said he was told that the Los Angeles Unified School District, the state’s largest, faces a potential loss of $350 million in the fiscal year starting July 1.

He said schools statewide face a financial “hit” so big that “they can still operate, but the kids might as well not show up at the schools . . . There will be no programs for them.”

“It is either (protecting) the schools or saving the fat cats of California,” he said. “We cannot tell the schools to take a hit unless we try to get some of that money from people in the upper income brackets.”

Under the Senate Democrats’ proposal, the state income tax rate would increase from 9.3% to 11% for single people making at least $100,000 a year and couples receiving $200,000 or more annually. They received a break four years ago when state tax codes were rewritten to conform to federal rules.

Roberti said restoring the 11% bracket would provide from $1.7 billion and $2.7 billion for education, depending on how taxpayer deductions were figured. Wilson last week proposed raising about $300 million in income taxes by restricting certain writeoffs by wealthier Californians.

As for reducing the business entertainment writeoff, he said, “Fifty percent is good enough for anybody.”

Wilson has proposed raising $6.7 billion in new taxes, cutting services by $4.8 billion and making various bookkeeping changes that would produce about $1.4 billion.

Roberti, who produced no hard figures for the increased taxes favored by Senate Democrats, termed their plan both an addition to what Wilson proposed in taxes and a “substitution thereof” with details to be announced later. Assembly Democrats have indicated they will not accept Wilson’s 1 1/4-cent sales tax increase.