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California and the West

Budget Fight Focuses on Sales Tax

Finances: Senate GOP backs Democrats' quarter-cent cut, but Wilson was planning a veto. Assembly bickering also stalls a deal.

July 03, 1998|DAN MORAIN | TIMES STAFF WRITER

SACRAMENTO — The Senate, groping for a way to jump-start stalled state budget negotiations, Thursday unanimously approved an extended cut in the state sales tax of a quarter-cent and immediately sent the matter over to the Assembly.

But the lower house quickly became enmeshed in partisan bickering and did not vote, further delaying a possible budget deal.

Even if lawmakers in the Assembly had managed to end their skirmishing, Gov. Pete Wilson was preparing to veto the Democratic plan as soon as it reached his desk.

"This is not meaningful tax relief," said Sean Walsh, Wilson's spokesman. "This is gumballs for parents who shop at Price Club."

Although Democrats increased their tax-cut proposal from their original plan, the result of Thursday's events was that lawmakers made little headway in reaching a deal with Wilson over a new state budget, which is now three days overdue.

Democratic leaders initially had proposed a half-year cut in the sales tax. The cut would save taxpayers 25 cents on every $100 of purchases, and would have amounted to about $455 million statewide. Republicans, led by Wilson, quickly denounced the proposal as too small. Republicans also went out of their way to deride it as a mere six-month reduction.

After a day of internal debate, Senate Democrats, who want a quick budget accord, pushed to sweeten the offer by extending the cut to a full year. That would amount to a savings to Californians of $955 million in 1999.

"It's not the tax cut the governor is looking for," Senate President Pro Tem John Burton (D-San Francisco) said. "But we stand here saying a $1-billion tax cut is pretty good medicine for the people of this state."

The Democratic plan would lower the state sales-tax rate, which currently is 6% of the value of purchases on all items other than groceries and prescription drugs, to 5.75%.

On large purchases, the quarter-cent cut would save, for example, $50 for the buyer of a $20,000 car. About a third of all sales tax is paid by business.

The governor also wants a tax cut. But his proposal calls for lowering the vehicle license fee, or so-called car tax, by 75% over three years. Wilson's plan would save vehicle owners $2 billion next year, or twice as much as the Democrats are offering through their sales-tax cut.

When fully phased in after the turn of the century, Wilson's tax cut would amount to $3.6 billion a year--an average of $128 a year per vehicle.

The Senate vote on the sales tax reduction was 38-0. Although the vote was unanimous, Republicans and Democrats differed sharply in describing the tax-cut package.

Republican lawmakers, who are lining up behind Wilson's proposal, initially balked at supporting the sales-tax cut. But after an hour of internal debate, they opted to support it, thereby saving them the hassle of having to explain to voters why they were voting against a $1-billion tax cut.

"When a dog talks," Senate Republican Leader Ross Johnson of Irvine said, "you're not as concerned about what the dog has to say. It's just the miracle that the dog is talking at all. So we're pleased that our Democratic colleagues are talking a little bit about a tax reduction."

Burton responded by barking into his microphone.

The good-natured partisanship in the Senate, however, degenerated into bickering in the lower house. There, Republicans demanded that the Democratic-controlled Assembly agree to send the bill to the governor Thursday, so Wilson could veto it immediately.

When Speaker Antonio Villaraigosa (D-Los Angeles) refused, Republicans used a parliamentary procedure to block a vote on the tax cut, a ploy that ended up delaying a vote at least until Monday, as the lower house adjourned for the weekend.

Unable to end the fight, an angry Villaraigosa hustled out of the Assembly chambers.

"The thrust of their [initial] criticism was that it was a six-month deal," Villaraigosa said. "Now, the thrust of their criticism is that it's not enough. They're always going to have a reason not to support a tax cut unless it's their tax cut."

Wilson has proposed a $75.8- billion state budget that includes a significant boost for public schools, while also cutting the annual fees vehicle owners pay to register their cars.

Democrats are calling for even more spending on public schools, and are battling the car tax cut, stressing that money from the fees goes to cities and counties, much of it earmarked for health, mental health and social service programs.

Even without a budget, the state continues to pay most of its bills, as civil servants and welfare recipients continue to receive paychecks. Credit unions that cater to state employees, accustomed to annual budget fights, already are preparing to offer loans to the relative handful of state workers who don't get paid until a budget is in place.

However, the lack of a budget damages a variety of businesses. Private firms that deliver goods to state institutions don't get paid, for example. Nor do nursing homes that care for people who receive Medi-Cal.

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