It Only Seems Like Peanuts : Wiping out the renters tax credit would hit a whole lot of people where it hurts

Gov. Pete Wilson is obligated to find ways to trim spending. That’s a big part of his job because of an estimated $8-billion state budget shortfall. But his proposal to eliminate the renters credit for low- and moderate-income tenants is troubling unless a similar sacrifice is demanded of wealthier Californians.

During his first year in office, Wilson succeeded in having income limits set on who could receive the renters tax credit.

Married couples may earn no more than $41,440 to claim the $120 credit allowed those who live in a rented home for at least six months of the year. Singles may earn no more than $20,720 to claim the $60 credit earmarked for them. These income caps eliminated government subsidies to the affluent.

The income restrictions also mean that the credit benefits only those Californians who typically cannot afford to own a home. If those with low or moderate incomes are being asked to give up their renters credit, shouldn’t the state be asking a similar sacrifice of those with more comfortable means?

More than 44% of Californians rent apartments or other housing. Unusually high rents burden nearly half of the tenants who live in Los Angeles, Orange County, San Francisco and San Diego. Because of a lack of decent, affordable housing in these areas, tenants are often required to pay as much as half of their income for rent; the government standard is 28% of income. For single mothers, $60 could represent a week of groceries or payment of a utility bill. For couples, $120 may mean a month’s worth of gasoline, a week of day care or other necessities such as clothing for the children.

About 4 million renters apply for the tax credit. The cost to the state treasury is nearly $400 million. That isn’t peanuts, particularly when the state is in dire straits financially.

Gov. Wilson wants to save $800 million by retroactively ending the renters credit. Renters would lose the amount due them for last year and this year. That’s a political decision. But while Wilson slugs it out with the Democrats in Sacramento, the Franchise Tax Board is holding up the payments due for 1992. Those checks, no matter how small each of them is, shouldn’t be held hostage to politics.

The Democrats aren’t about to penalize poor Californians, whom they count among their supporters. As long as Wilson insists on targeting poor and moderate-income renters, tax-the-rich counterproposals from the Democrats are inevitable. And extremes lead to polarization, which leads to--well, we all remember last year’s budget debacle.

That’s why, as the governor and the Legislature work to balance the budget, they must also work to balance the sacrifices.