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NEWS ANALYSIS : Will Tax Cuts Really Deliver on Promises? : State: Some analysts warn that Gov. Wilson's proposed cuts will hurt, not help, the economy if they result in reduced services.

January 11, 1995|PATRICK LEE | TIMES STAFF WRITER

Delaware would seem to support Wilson's argument. It has reduced taxes from a high of nearly 20% to about 8% in the last decade and a half and has done well economically in that time, Gold said.

"But it also implemented policies to make itself attractive to banks to set up credit card operations, like repealing usury laws on interest rates, and that certainly had a big effect in stimulating its economy," Gold said. In addition, Delaware's economy is so small that a tax cut is more likely to have a marked effect.

None of this has dampened the enthusiasm of some California industry officials for the proposed tax cuts.

Barry Sedlik, manager of business retention at Southern California Edison Co., says his firm's own economic analysis shows that the 1993 investment tax credit will eventually result in billions of dollars of new investment in the state. "We would assume that the benefits (of a tax cut) would be even larger, so we see it as a very big boon."

"The idea of a tax cut . . . is very welcome to business," said Ray Remy, president of the Los Angeles Area Chamber of Commerce.

But he withheld judgment about whether the cuts would impair the ability of the state to pay for adequate public services, particularly with the increased need for prisons under the new "three-strikes and you're out" law, constitutionally mandated education spending and other costs.

Moreover, he said, a tax cut "in and of itself is not going to change the attitudes of a lot of businesses . . . to stay or come in. You have to combine it with tort reform, additional workers' compensation reform. . . . You put that package together, and we get more and more competitive."

* WILSONOMICS

Governor proposes $56.3-billion budget. A1

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