Democrats Defend Tax Credits for Renters : Politics: They strongly oppose the governor’s plan to stop payment of $400 million to low-income residents.

Gov. Pete Wilson’s plan to stop payment of almost $400 million worth of tax relief owed to low-income California renters--and disclosure that the checks already are being held up--ran into heavy Democratic opposition Wednesday.

“They are entitled to their money,” declared Senate President Pro Tem David A. Roberti (D-Van Nuys), asserting that 1992 tax credits and cash refunds legally claimed by the renters “should not be delayed on the basis of political machinations.”

Roberti and other Democrats objected to an unpublicized order last week by a powerful state tax administrator to hold up the first batch of renters credit payments owed for 1992 until at least Feb. 4.

The administrator, Gerald H. Goldberg, executive officer of the income tax-collecting Franchise Tax Board, ordered the payments blocked at the suggestion of a representative of Wilson, who has no direct authority over Goldberg.

As part of his strategy to balance the state budget, Wilson earlier in the month proposed eliminating the renters tax credit for 4 million Californians, including $395 million owed to them for 1992. For 1993, the program is expected to provide another $445 million in tax breaks. Wilson considers the tax credit a subsidy that can be eliminated as California embarks on a third year of agonizingly painful cuts in state services.

The tax credit program provides relief for renters who do not enjoy the tax write-offs available to homeowners. A single renter earning up to $20,700 a year gets a $60 credit on state income taxes, and married couples whose income is less than $41,400 are eligible for $120.

Dan Schnur, gubernatorial director of communications, said Wednesday that Wilson anticipates the Democratic-dominated tax board will ignore his request and go forward with the payments. But he said the governor wanted retroactive repeal of the tax credit at least to be discussed by the board so “they could prepare” for possible repeal later.

In spite of stiff Democratic opposition in the Legislature, Schnur said, the board should be “aware that there is a very real chance that the renters tax credit is going to be repealed.”

Democrats have deplored elimination of the renters credit as an $840-million tax increase on the “most disadvantaged” taxpayers at a time when Wilson is seeking tax breaks for some businesses.

Jim Reber, a spokesman for the tax board, said Wednesday that so far this month 143,000 renters have applied for credits worth $13.4 million.

Ordinarily, he said, people who filed during the first three weeks of January could expect to receive a check during the first week of February. If the Democratic-dominated board, as expected, votes Feb. 4 to go ahead and make the payments, the checks could be in the mail almost immediately.

Democrats on the Franchise Tax Board--state Controller Gray Davis and Board of Equalization Chairman Brad Sherman--outnumber Wilson’s lone appointee, state Finance Director Tom Hayes.

Davis and Sherman made clear Tuesday night that they opposed withholding the renters’ checks.

Reber said Goldberg decided to hold up issuing the payments until the board’s policy-makers--Davis, Sherman and Hayes--could examine the issue and decide whether to proceed. To start the payment process and then interrupt it could lead to severe administrative and legal troubles, officials said.

Roberti, the Senate’s chief protector of the renters credit program, said that Goldberg’s action in holding up the payments gave Wilson an advantage in what is shaping up to be the third year that the governor and the Democratic Legislature have gone to war over the renters credit.

In a related issue, the bipartisan Commission on State Finance concluded Wednesday that Wilson’s proposed $37.3-billion general fund budget for the next fiscal year would produce a $1-billion deficit even if the Republican governor gets the renters credit repeal and every other cut in his spending plan.

The seven-member panel, chaired by Democratic state Treasurer Kathleen Brown, said Wilson had overestimated the amount of tax revenue the state’s economy would generate and had included in his budget an unrealistic assumption about the savings his welfare reduction plan would produce if enacted.

“The governor’s budget is likely to fall out of balance,” said Kevin Scott, the commission’s executive director.

Scott said he expects the state’s bank and corporation tax to fall about $600 million short of Wilson Administration projections for 1993-94 and the sales and use tax to produce about $186 million less than Wilson is expecting. Scott also said that although Wilson’s proposed 19% cut in welfare benefits, if enacted, would save money, it is unrealistic to count on a $157-million savings.

Deputy Finance Director Steven Olsen said the Administration’s differences with the commission were minor. “All these things are within the range of estimates,” he said.

Times staff writer Daniel Weintraub contributed to this article.