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Gubernatorial Deja Vu

Rebuffed again, Wilson should compromise on tax reduction

May 30, 1996

Judging by the thumbs-down that Gov. Pete Wilson got from a state Senate panel, his plan to cut individual and business taxes by 15% across the board seems unlikely to be resurrected intact in budget talks. That's for the best, we think. Although California's brisk economic recovery has buoyed state revenues, it is premature to enact wholesale tax cuts, especially since that would jeopardize future funding for schools.

But targeted tax cuts do make sense. If the governor's goal is to create a better business climate in the state--to create jobs, as he puts it--selected tax cuts for businesses warrant serious discussion. That's because California, an average state in terms of overall tax burden, ranks high when it comes to taxes on business, No. 2 among western states and No. 4 overall.

After the Senate Revenue and Taxation Committee rejected Wilson's tax plan on Tuesday, Senate President Bill Lockyer (D-Hayward) indicated a willingness to compromise with the governor on a tax cut as part of the budget process. Lockyer said such a compromise might include a "modest" cut in corporate taxes but nothing for individuals (the rates for the top personal income tax brackets were reduced at the end of last year). Another compromise approach might be tax incentives targeted on specific troubled or growth industries.

Deja vu? Yes, the governor proposed the same across-the-board 15% tax cut last year and the same Senate panel rejected it. The Legislature last year approved a variety of cuts in corporate taxes but Wilson vetoed them, arguing that while the changes would result in a net cut in corporate taxes they would force higher taxes for some businesses because of a need to make state tax law conform to federal standards.

For now, Wilson is sticking to his call for an across-the-board tax cut. He insists that failure to reduce taxes would cost jobs. But an overzealous tax cut would reduce state spending on education in long run. And if the state does not produce an adequately educated work force, it will lose jobs anyway.

The best interests of California rest in safeguarding K-12 education while considering targeted tax relief to create a more hospitable climate for business. The long term is crucial. Compromise is the answer.

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