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Assembly OKs $100 Million in Tax Breaks : Capitol: GOP hails passage--with some Democratic help--of bills to aid businesses and individuals. Others say state treasury cannot afford the loss of revenue.

August 25, 1995|MAX VANZI | TIMES STAFF WRITER

SACRAMENTO — While thunder on the right reverberated through the state Senate, Republicans in the Assembly staged their own show of strength Thursday, orchestrating lower house passage of $100 million in tax breaks for businesses and individuals.

Buoyed by new conservative leadership in both houses, Assembly tax-cutters dominated debate and controlled the votes as measures passed that would lower taxes for airlines, military veterans and new and old industries.

Four Republicans and one moderate Democrat authored the measures and attracted solid Republican unity and enough support from Democrats to win passage--an unusual occurrence on a partisan issue in the Assembly, where 39 Democrats can still block Republican bills in the 79-member house.

Between the tax cut votes, Assembly Republicans cheered at news from across the rotunda that the new Senate Republican leader is Rob Hurtt of Orange County, replacing moderate Ken Maddy of Fresno. On Monday, Assembly Republicans picked their own new leader, Curt Pringle (R-Garden Grove), who is also a staunch Orange County conservative.

The tax-cutting bills passed Thursday would:

* Exempt airlines and railroads from paying sales and other taxes on purchases of fuel used on trips made outside California. Cost to state and local treasuries: $50.5 million. (AB 566 by Howard Kaloogian (R-Carlsbad)).

* Allow a 6% tax credit on expenses incurred for companies that expand or establish a headquarters office in California and employ 100 people in that office. Cost to state: $10 million in the first year; doubling and tripling in the future. (AB 556 by Denise Ducheny (D-San Diego)).

* Allow businesses new to the state to pay in gradual amounts over five years the $800-per-year tax levied "for the privilege of doing business in California." This bill also waives taxes due for businesses that closed after 1987 and did not fully comply with state requirements for dissolution. Cost to state: $20.7 million. (AB 744 by Steven Kuykendall (R-Rancho Palos Verdes)).

* Continue under state administration a federal program, now lapsed, that allows an employee a tax exclusion of up to $5,250 for training or retraining expenses borne by the employer but that would otherwise be a part of the employee's taxable income. Cost to state: $17 million, $12 million in future years. (AB 1905 by Jim Cunneen (R-Cupertino)).

* Exempt from California taxes retirement income of former military personnel who are no longer state residents. Cost to state: $300,000. (AB 604, by William J. Knight (R-Palmdale)).

During the Assembly tax debates, Democrats said a new dynamic appeared to be at work. Liberal Assemblyman Phil Burton (D-San Francisco) said that in addition to the 39 predictable Republican votes, "two or three Democrats are going along, and that's all it takes [for the majority vote necessary to cut taxes]."

Freshman Assemblyman Wally Knox (D-Los Angeles) said it was alarming to witness what he called "lack of concern over the state's dire economic straits." From the recent legislative battle over balancing a $57.5-billion state budget to the frantic search for state assistance in bailing out financially ailing counties such as Los Angeles, Knox said, it was a strange time to be voting for revenue-cutting tax breaks.

Of one of the tax relief measures, Assemblyman Phil Isenberg (D-Sacramento) said: "It's good policy, but its cost will come from the general fund, and the general fund does not have the money."

Assemblyman Louis Caldera (D-Los Angeles) said it was unrealistic for Republicans to expect that the tax cuts would be enacted into law. He called the measures "fund-raising vehicles, a nod by Republican members to a particular industry" to show allegiance.

Many Assembly Republicans who voted for the tax relief bills, Caldera said, "expect and hope that the Senate will kill them," realizing that the state treasury cannot afford to take the losses.

But those who authored the measures, and their allies, spoke forcefully for tax relief.

Urging passage of a bill to lighten the tax load for businesses new to the state, Assemblyman Brooks Firestone (R-Olivos) said that as it is, businesses are leaving rather than arriving.

"Other states are stealing our jobs, our industry and our revenue," he said.

Republicans cheered when Assemblyman Howard Kaloogian (R-Carlsbad), citing the Laffer Curve principle developed by economist Arthur Laffer, said the state would benefit from easing taxes on businesses.

"Tax receipts are down because because tax rates are up," he said. "Both tax receipts and consumption will go up when taxes go down."

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