Restoration of Renters’ Credit Vetoed

Gov. Pete Wilson, refusing to whittle away at the state budget compromise he fashioned with the Legislature, Thursday vetoed legislation aimed at restoring $135 million worth of income tax breaks taken from renters.

In a message accompanying his veto of the bill by Assemblyman Mike Gotch (D-San Diego), Wilson insisted the unpopular tax increases and spending cuts enacted last summer to balance the budget were intended to “spread the pain” across all economic and social levels of California.

“I will not begin to dismantle that agreement piece by piece,” he said.

But Gotch, whose bill to fully restore the renters’ credit, deplored the veto as a “slap at the face of every senior citizen, married couple or single mother who rents rather than owns a home.”

The renters’ credit feature of the settlement is expected to reduce or eliminate the state income tax break of an estimated 1.7 million filers. Last year, approximately 5.4 million renters received the relief.

Last winter, Wilson proposed halving the $60 credit for single renters and the $120 break for married tenants. The Legislature initially balked, but finally agreed to a compromise intended to protect low-income tenants but require those with moderate and higher incomes to pay more taxes.

Under the compromise, single renters with adjusted gross incomes under $20,000 and married couples earning less than $40,000 will continue to receive their full refunds of $60 and $120, respectively.

However, the credit will be cut to $30 for single filers with incomes up to $20,500. It will be reduced to $60 for married couples whose incomes total $40,001 to $41,000. Singles earning more than $20,500 and married couples receiving more than $41,000 will get no renters’ credit.

“Many Californians pay more than 60% of their income for rent and the renters’ credit is the only tax relief available to them,” Gotch said.

Gotch’s legislation to restore the tax credit, popular with election-conscious members of the Assembly, received heavy bipartisan approval by the lower house last month. The Senate, however, passed it with only two votes to spare.

The tax break for renters was created in 1978 after passage of Proposition 13, which provided substantial tax relief for California property owners.