Delay of Renters’ Tax Checks Rejected : Government: State board votes down governor’s plan to hold refunds to low-income people, orders release of $26 million.

A Democratic majority on the Franchise Tax Board on Thursday rejected the Wilson Administration’s request to delay tax refunds destined for low-income renters, saying the move would have denied funds to those most in need.

The two Democrats on the three-member board--Controller Gray Davis and Board of Equalization Chairman Brad Sherman--then ordered the board’s staff to immediately begin processing about $26 million in refunds that had been withheld since last week.

“This proposal in my judgment is Robin Hood in reverse,” said Davis. “He (Gov. Pete Wilson) is acting like the sheriff of Nottingham, taking away from the poor and giving tax breaks to the rich.”

The lone vote in favor of holding up the refunds came from Chief Deputy Finance Director Susanne Burton, who had urged the board to wait until the Legislature has an opportunity to consider Wilson’s proposal to repeal the renter tax credit. The governor wants the Legislature to authorize stopping renter credit payments beginning with checks due to go out now for 1992.

If the credit claimed by about 4.4 million taxpayers were eliminated, the economically strapped state would save about $400 million a year, financial advisers say.

Burton, who represents Finance Director Tom Hayes, Wilson’s only appointee to the board, said once the tax board starts distributing refunds the Legislature, as a practical matter, would be precluded from making the tax credit’s repeal apply to 1992.

“Before we close out that option, the Legislature needs to have an opportunity to review the case,” she said.

But the Democrats, relishing the opportunity to take a political swipe at Wilson, began denouncing the proposal even before the tax board had an opportunity to meet. Davis and Sherman gave notice that they would oppose any plan that would “ask those who can least afford it to be the first to suffer” in this year’s state budget crisis.

Last week, Senate President Pro Tem David A. Roberti (D-Van Nuys) held a news conference to criticize the board’s executive director, Gerald H. Goldberg, for ordering that the first batch of renter refunds be held up until Thursday’s meeting.

Goldberg defended his decision, saying it will affect about 266,000 taxpayers and delay the distribution of refund checks a maximum of a week.

The tax credit, first approved in 1972, attempts to provide some income tax relief to renters who cannot take advantage of deductions afforded homeowners. It provides a $120 tax credit to married couples who earn $41,440 or less and a $60 credit to single people whose income is $20,720 or less.

Both Sherman and Davis argued that the Legislature did not support Wilson’s proposal and it would be unfair to withhold refunds when there was little likelihood that the renters credit would be repealed.

Their arguments were bolstered by Assembly Revenue and Tax Committee Chairman Johan Klehs, (D-San Leandro) who appeared before the board to present a letter signed by a bipartisan majority of his committee. The committee majority confirmed in the letter that it would not support retroactive repeal of the tax credit.

“There are literally no grounds whatsoever to withhold valid refunds,” Klehs said.

Sherman said for the state to withhold the refunds would be a “breach of faith” with the taxpayers.

“If you can pull the rug out from renters today, you can pull the rug out from other taxpayers tomorrow,” he said.

Several citizens groups sent representatives to oppose the governor’s request, including one senior organization that complained elderly women would be particularly hard hit by repeal of the credit.

“We don’t feel that taking away money from old ladies is the way to solve the state budget crisis,” said Ted Ruhig, president of the California Seniors Political Action Committee.