Lower Tax Rate May Ring In New Year : Rebate: But method of refunding $330 million collected under Proposition A, ruled illegal by state Supreme Court, promises to be a contentious issue.

The county sales tax could drop by half a cent Jan. 1 as a result of Thursday’s California Supreme Court decision overturning Proposition A, according to a key official on the State Board of Equalization.

But the mechanics of a rebate of the $330 million collected over the past three years are much more uncertain--and sure to be more controversial.

Ernest Dronenburg Jr., vice chairman of the State Board of Equalization, said he may seek authority from county supervisors as early as today to halt collection of the half-cent “special tax” ruled illegal by the state Supreme Court.

If the authority is granted, Dronenburg said, he hopes collections of the tax revenue will halt Dec. 31, dropping the sales tax in San Diego County to 7.75% from the current 8.25%.

But Dronenburg said there are several options under consideration for repaying taxpayers the money they have been illegally assessed since Jan. 1, 1989. And none of them will make everyone happy.

“There is no purely equitable way to do it,” Dronenburg said Thursday.

The board’s options include:

* Dropping the sales tax another half-cent, to 7.25%, for the time it takes to rebate the pool of already collected revenue to taxpayers. That sum will increase by several million dollars in the next two weeks.

* An income tax credit for San Diego County residents.

* A $330-million property tax cut for county property owners.

Ironically, in a friend-of-the court brief filed earlier this year in the Proposition A case, the Board of Equalization actually argued against dropping the sales tax rate and contended that a fourth method was the fairest: Having buyers present purchase receipts for sales tax rebates.

“The receipts argument sounds logical, but there are a lot of people who haven’t been (keeping receipts),” Dronenburg said Thursday, in dismissing that option.

Under the Supreme Court decision, state Appeal Court judges are required to approve any rebate plan forwarded by the five-member State Board of Equalization. But Dronenburg conceded that there are some flaws in the plans.

People who have moved out of the county, and tourists who paid the tax passing through will get nothing. A property tax cut obviously shortchanges those who own no taxable land. An income tax, depending on how it is assessed, may be proportionately unfair.

If a half-cent decrease in the sales tax were the chosen method, Dronenburg said, the decline would come out of the 5.5% of the revenue that goes to the state general fund. The state would then tap the $330-million pool, until it runs out, to make up the loss. The half-cent of additional tax then would be reinstated.

But because the Board of Equalization lacks legal authority to enforce such an arrangement, the Court of Appeal would have to grant it that power, Dronenburg said.