Assembly OKs Wilson’s Plan to Cut Taxes

On the deadline for filing income taxes, the California Assembly on Monday approved Gov. Pete Wilson’s 15% cut in personal income and business taxes, sending the bill to the state Senate, where Democrats killed an almost identical measure last year.

Wilson lauded the Assembly, saying that “for the millions of Californians who are scrambling to meet [Monday’s] tax deadline, they can take some comfort that the Assembly took the first step in giving all hard-working Californians a 15% across-the-board tax cut.”

In the Democrat-controlled state Senate, however, President Pro Tem Bill Lockyer of Hayward called the vote to cut taxes on the April 15 tax deadline “political posturing.” Lockyer predicted that even without a tax cut, the state government in years to come faces “nothing but red ink.”

“Vital programs can’t be funded if we recklessly cut revenue sources,” Lockyer said. “So I think we need to do it carefully.”

While a 15% income and business tax cut probably will fail in the Senate, Lockyer raised the possibility that some compromise can be reached as part of this year’s state budget deal. Referring to the potential that there could be some income tax reduction, Lockyer said: “I don’t rule it out.”

Lockyer said he remains interested in giving selected industries--such as the high-tech, aerospace and housing sectors--tax breaks as part of an effort to stimulate the economy.

Wilson’s tax cut proposal cleared the Assembly on a 43-26 vote, with support from all Republicans, the lone Reform Party member and a single Democrat. Seven Democrats did not vote.

The Republican proposal seeks to cut income, business and banking taxes by 5% in each of the next three years, for a total of 15%. The measure would reduce corporate, banking and personal income taxes--and state revenue--by $10 billion over the next four years.

Democrats opposed the measure, saying that because of the loss in revenue, public schools would lose $6 billion over what they would receive without a tax cut over the next four years, and would continue to lose money each year in the future.

On Monday, Assemblyman Jim Brulte (R-Rancho Cucamonga), who is carrying Wilson’s tax cut bill, offered Democrats a compromise. He agreed to adopt a Democrat-originated proposal that would cause the state to forgo tax reductions in any year in which it could not fully fund public schools.

“You can give this tax cut and [still fund schools] and, by the way, you create jobs along the way,” Brulte said. “You might have to cut welfare. What’s wrong with cutting welfare?”

As soon as Republicans embraced that amendment, however, Democrats’ support for it disappeared and they killed it in a procedural maneuver. That prompted Brulte and other Assembly Republicans to accuse Democrats of hypocrisy.

“It’s political grandstanding and a smoke screen,” Assembly Democratic Leader Richard Katz of Sylmar said of Brulte’s maneuver.

While acknowledging that Democrats originally proposed the school funding amendment, Katz said that Democrats “in retrospect concluded that it’s not an adequate guarantee.”

Lockyer also scoffed at Brulte’s school funding offer, saying: “This sounds like another political device to avoid the fundamental flaw in the bill--which is that it is cannibalizing public school funding.

“I don’t expect much more than political statements from Mr. Brulte. He’s a political animal,” Lockyer said. “It’s not a serious policy.”

Republicans argue that the tax cut is needed to stimulate California’s economy and job growth, and cite statistics showing that corporate taxes are the highest in the Western states and among the highest in the nation.

Republicans also contend that any loss in revenue from the tax cut would be minimal, citing predictions that so many new jobs would be created that state tax revenue would increase.

Wilson and his aides have been pushing the tax cut to business groups across the state, and several major business-related political organizations have endorsed it.

More than half the states approved tax cuts last year, while only a few raised taxes. Although he failed to win approval for the tax cut last year in the Senate, Brulte said he is confident the Legislature will end up approving some tax cut this year.

Noting that half the state Senate seats and all 80 Assembly seats are up in this election year, he said, “We are closer this year than we were last year to being held accountable by the voters.”