Revenue Bill Seeks to Head Off Wilson Veto of Budget

Key legislative leaders, searching for an 11th-hour compromise that will head off Gov. Pete Wilson’s threatened veto of the recently passed $56.4-billion budget, came up with a $2.2-billion revenue bill that raises taxes on businesses and the state’s wealthiest taxpayers.

The newest plan, which quickly drew opposition from Assembly Republicans was approved on a 5-1 vote by a Democratic-controlled two-house conference committee redoing the tax bill.

The action came on a day when lawmakers hoped to close out the budget debate but instead appeared to be stymied by long-standing political feuds in the Assembly and Senate. The disputes were over taxes and Wilson-backed changes in the workers compensation system that would make it more difficult to collect money for job-related stress.

With the ongoing squabbling, legislative leaders repeatedly put off promised votes on the remaining $2 billion-plus in tax increases needed to balance and erase a projected $14.3-billion deficit.

Wilson has linked his support for the tax bill with a proposal to lower the premiums businesses pay for workers compensation. He told legislators he would veto the budget if he does not get both the tax bill and the measure that would make it tougher for workers to put in claims for so-called “stress” injuries.

Senate President Pro Tem David A. Roberti (D-Los Angeles) blamed the lack of progress on Wilson’s insistence that workers compensation system reform be part of the budget agreement.

Roberti said: “If we are going to discuss workers comp, it ought to be in the context of reform of the whole health care system.”

The tax plan, drafted by Senate GOP Leader Ken Maddy of Fresno, contains elements of an earlier proposal backed by Wilson and Assembly Speaker Willie Brown (D-San Francisco), including a personal income tax increase that would affect only the state’s top earners. But it also includes additional provisions strongly opposed by business groups.

These include a hike in the bank and corporation income tax rate from 9.3% to 9.6% as well as a strongly opposed 2% tax on telecommunications services, such as telephone and cable television use.

Maddy said signals from Wilson were not positive. “I don’t think he likes this plan,” the GOP leader said. A spokesman for Wilson said the governor had not had time to review the plan and formulate a position.

The problem for Maddy and other legislative leaders is that the plan Wilson supported was so heavily weighted with benefits for business that many Democrats said they would vote against it. “It’s a total giveaway. Business makes out like a burglar,” said Sen. Daniel E. Boatwright (D-Concord), chairman of the Senate Business and Professions Committee. He supports the compromise plan proposed by Maddy.

The newest tax proposals are designed as a substitute for the 2% utility tax and an equally unpopular measure that would require withholding of income tax for independent contractors, ranging from plumbers to doctors, lawyers and accountants.

The proposed income tax hike contained in the Maddy bill would boost the top tax rate from 9.3% to 10.3% for individuals with incomes of $200,000 or couples earning $400,000 or more. The Wilson-backed plan called for a two-step rate hike. It would raise the top rate from 9.3% to 10% on individuals earning $100,000 and couples making $200,000 and to 11% on individuals making $200,000 and couples earning $400,000.

Wilson had until midnight Wednesday to sign or veto the budget legislation. But one deal after another that the Republican governor negotiated in recent weeks with legislative leaders fell by the wayside as rank-and-file lawmakers refused to go along.

Republicans emerging from a meeting with Wilson reported that the governor threatened to veto the budget unless he got a workers compensation bill that he liked. Democrats said they were getting a similar message from the governor’s office.

But many lawmakers on both sides of the aisle doubted that the governor would jettison the entire budget for the sake of the workers compensation issue. The Legislature and Wilson already have agreed on more than $5 billion in taxes and billions more in budget cuts and accounting adjustments to help erase most of the shortfall.

Still, the latest deal on workers compensation appeared to be crumbling Wednesday afternoon when the Democratic-controlled Assembly Insurance Committee rejected two versions of the proposal to change the $10-billion workers compensation system.

Democrats said the governor was seeking too much of a rollback in workers rights in exchange for a tax increase that would only be temporary. Republicans complained that the income tax increase for the wealthy was too high a price to pay for a workers compensation deal that could not guarantee reduced premiums for business.

One of the measures rejected by the Insurance Committee was supported by the governor’s Republican allies and was thought to be what Wilson wanted. It failed to get sufficient Democratic votes for passage.

The other bill was a Democratic-drafted measure that fell short of meeting Wilson’s demands. It was rejected when it did not win unanimous Democratic support and did not attract a single Republican vote.

Times staff writers Jerry Gillam, Carl Ingram and George Skelton contributed to this story.