Tax Cut Battle at Impasse as Bill Is Vetoed

The Capitol’s summer debate over tax cuts settled into a new stalemate Tuesday when Gov. Pete Wilson vetoed the Democrats’ plan for a quarter-cent cut in the state sales tax.

Wilson called the Democratic cut--nearly a $1-billion reduction that would last just one year--a “ridiculous” offer at a time when state coffers hold a $4.4-billion surplus.

He joined Republican leaders in repeating their support for a permanent $3.6-billion drop in the annual fees that motorists pay when they register their cars. Democrats have already rejected that one.

So now budget talks have come to a delicate pause, waiting for one side or the other--the Republicans or the Democrats--to suggest a compromise tax cut plan. The state has been without a budget since July 1.

“The next step is to hope,” Wilson told reporters.

“This little drill that they just tried I don’t think was very meaningful,” he said. “It was, pure and simple, an effort to try and change the image of the Democrats in the Legislature from being anti-tax cut to being pro-tax cut. I don’t think it worked.”

The Assembly gave final legislative approval to the sales tax cut Monday evening on a 54-6 vote in which several Republicans did not participate.

Wilson promised a quick veto, and Tuesday--minutes after the bill arrived on his desk about 2 p.m.--he called television cameras into his private office to witness his veto signing.

The governor said he believes that the ball is back in the Legislature’s court, where he expects Democratic leaders to return with another tax cut plan. Until there is another proposal, he said, he sees no reason to meet with the Democrats.

But the two sides appeared unable to even agree on that next step.

Assembly Speaker Antonio Villaraigosa (D-Los Angeles) said Tuesday that he thinks it is time for the governor to meet with legislative leaders and discuss a possible compromise. The two sides have left plenty of room to negotiate.

Republicans have essentially limited their conditions to two: that the tax cut be substantial and that it be permanent. Democrats are wary of a permanent tax cut and are committed to adequate relief for lower- and middle-income taxpayers.

Meanwhile, legislators are struggling to agree on another decision--this one regarding a multibillion-dollar school construction bond for November’s ballot.

The deadline for deciding is Monday--unless lawmakers want to pay $3 million extra for an additional voter information pamphlet, in which case a decision can be put off until next month.

Villaraigosa offered a new plan Tuesday in hopes of finding agreement. It would slash the bond from the previously proposed $9 billion to about $4.5 billion.

But Republicans said the proposal still lacks “reforms” needed to help reduce the cost of building new schools.

They want the state to establish uniform school construction grants based on the size of the school. They also want to limit the amount that housing developers might be forced to pay for school construction.

Without such steps, Assembly Republican Leader Bill Leonard of San Bernardino predicted that Villaraigosa’s proposal would be “DOA” when placed before GOP lawmakers.

At the same time, Villaraigosa said, capping developer fees is “unacceptable” to several Democrats, and he added: “I agree with them.”

“Clearly, we haven’t been able to forge a deal,” the frustrated speaker said.

The measure needs two-thirds majorities in both houses and Wilson’s signature to qualify for the ballot.

By law, developers pay school districts about $1.92 per square foot for residential construction, and courts have ruled that the assessments can go higher where schools can demonstrate the need.

According to Assemblyman Keith Olberg of Victorville, the Republicans’ chief advocate on the developer fee issue, that’s unfair to new home buyers, who often have thousands of dollars tacked onto the home price to offset the fees.

Some Democrats argue that without the ability to assess developer fees with flexibility, school districts are left with inadequate sources of funding.