Gov. Jerry Brown, Assembly legislators reach tax deal

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Gov. Jerry Brown and legislators in the state Assembly have reached a tentative agreement on a $1-billion tax swap that would end a major tax break for out-of-state businesses, lower personal income taxes for millions of Californians and give more incentives to smaller, California-based companies.

The deal is scheduled to be announced at an afternoon press conference with the governor and representatives of both parties in the Assembly, according to multiple sources involved in the negotiations.

The deal was negotiated by Brown, Assemblyman Nathan Fletcher (R-San Diego) and Assembly Democratic leadership. It remains unclear whether it has the bipartisan backing needed to clear the state Senate.

Both Brown and Fletcher’s offices refused to comment.

Among those opposed to the deal is tobacco giant Altria Group. The proposal would change current law, which allows Altria and other large companies to choose which formula to use when computing their state tax liability.

The deal, reached Wednesday night, would eliminate that flexibility, generating $1.1 billion annually. That money would now be used to increase the standard state income tax deduction by $1,000 per individual, and lower the tax rate on certain state corporations.

As word of the accord spread through the Capitol, tobacco lobbyists were camped outside the State Senate chambers, trying to persuade Republicans there to torpedo the deal.

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-- Anthony York in Sacramento