Deukmejian Withdraws His Controversial Tax Plan : Still Claims It Wasn’t an Increase

Gov. George Deukmejian today withdrew his controversial tax plan that had come under heavy criticism from a broad political spectrum, including his own party.

“I’ve withdrawn the proposal so that no one will be able to say, no one will be able to write, that there was a tax increase,” Deukmejian said during a news conference in Los Angeles.

“Unfortunately, some Republican legislators and Republican leaders have gotten caught up in the web spun by the media,” he said.

Legislators, he said, have told him that because the plan was being characterized as a tax increase, “it might make it a little more difficult for some legislators to support it.”

Deukmejian said he will wait for the Legislature to formulate a budget and will then use his “trusty blue pencil” to trim the spending plan.

Freezing Tax Brackets

The governor’s three-part tax plan would have raised $410 million by freezing tax brackets and not allowing adjustments for cost-of-living increases. It would have raised $250 million by changing state business tax law to reflect changes in the federal code and $140 million by postponing for one year a tax break that allowed businesses to carry losses over a three-year period.

The governor had proposed the plan to eliminate a surprise $2.3-billion two-year shortfall in revenues recently forecast by state budget analysts.

“I don’t want there to be any misunderstanding about where California stands and where I stand on tax increases,” the governor told a news conference.

Deukmejian, who has been criticized by lawmakers of both parties for refusing to publicly acknowledge that his budget-balancing plan contained tax increases, has offered a $44.5-billion budget for the 1988-89 fiscal year that begins July 1.

Deukmejian rejected the term tax increase, using instead the term, revenue adjustment.

Senate OKs Own Version

Moments before Deukmejian spoke, the Senate passed its own $45-billion version of the state spending plan. The vote was 35 to 1 for the bill by Sen. Alfred E. Alquist (D-San Jose).

The Assembly blocked its own version of the governor’s version Thursday (Story, Page 3) and is expected to take up the issue again next week.

The Assembly’s budget bill, by Assemblyman John Vasconcellos (D-Santa Clara), went down to defeat Thursday on a 49-26 vote, five aye votes short of the two-thirds majority needed for approval.

Like the Assembly, the Senate rejected an amendment to restrict the use of Medi-Cal funds for abortions, marking the first time in a decade that the state budget will not contain such language.

The Assembly vote was supposed to be a formality, a first step in putting the rival Senate and Assembly spending plans before a two-house conference committee, which will try to work out a compromise budget for the fiscal year that begins July 1.

Problems Ahead

But Assembly leaders of both parties were unable to persuade enough legislators to vote for the budget bill even for a formality. The failure is one sign of the potential political problems ahead for this year’s budget process.

Earlier today, Deukmejian took the airwaves in his battle against highway gridlock, conducting live drive-time interviews with radio stations to drum up support for Proposition 74 and to encourage commuters to join car pools.

The governor told radio listeners on KFBK in Sacramento and KFI in Los Angeles that a vote for Proposition 74 would improve their morning commute.