Wilson Asks Delay on Renters Credit Checks : Finances: The governor seeks to block delivery until lawmakers act on his proposal to repeal the tax benefit.

By VIRGINIA ELLIS

Jan. 27, 1993 12 AM PT

TIMES STAFF WRITER

SACRAMENTO — In a move that provoked spirited protest from Democrats, the Wilson Administration has asked state tax officials to withhold 1992 tax refund and renters credit checks destined for millions of low-income Californians.

The Franchise Tax Board, the agency that collects state income taxes, has moved up its regular meeting by two weeks to Feb. 4 so it can make a quick decision on the Administration’s request that the checks be held until the Legislature acts on Gov. Pete Wilson’s proposal to repeal the renter tax credit.

In his 1993 budget plan, Wilson called for the elimination of the renters tax credit retroactive to 1992, saying it would save about $800 million over a two-year period and help erase an estimated $8-billion budget shortfall.

A spokeswoman for the governor said it is necessary to take action now because once the Franchise Tax Board begins processing renter refunds it would deny the Legislature the option of making the tax credit’s repeal apply to 1992.

“The whole object is not to close out this option by just processing the claims,” said the spokeswoman, Kassy Perry. “What we’re asking them to do is just wait on the processing (of the refunds) until the Legislature and the governor can work together to find a budget solution.”

But the proposal drew immediate criticism from the tax board’s Democratic majority, which said it was unlikely to endorse such a plan. Senate President Pro Tem David Roberti (D-Van Nuys) scheduled a news conference for today to denounce the action.

“To stop processing people’s tax returns and to stop sending them refunds as quickly as you can just because of a proposal from one person, the governor, strikes me as extreme,” said Brad Sherman, who as chairman of the State Board of Equalization holds one of three seats on the Franchise Tax Board.

Sherman said he could not support any request from Wilson that would adversely affect “the poorest in the state.”

His comments were echoed by Controller Gray Davis, who also holds a seat on the board. “I am pleased to talk to the governor and hear him out but my bias is not to pick on renters . . . and take from the most vulnerable people in society,” Davis said.

State tax officials said about 3 million low-income renters would be affected, and the delay in processing would not only hold up the renters’ refund but also any other income tax refund the renter-taxpayers might be entitled to.

Designed by the Legislature to give income tax relief to renters who can’t take advantage of property tax and mortgage interest deductions given homeowners, the renters tax credit is available to those who live in a rented home for at least half of the year.

It provides a $120 tax credit to married couples who earn $41,440 or less and a $60 tax credit to single people whose income is $20,720 or less.

Each year about 4 million Californians apply for the credit, including 1.1 million who have no taxable income and get the credit in the form of a direct cash payment. Fewer than a million of those who apply get no payment because they owe additional taxes.

Wilson has pushed each year for doing away with the renters credit. He contends that eliminating the credit is not a tax increase because the renters credit is nothing more than a subsidy.

In his first year in office, he was successful in placing income restrictions on the renters credit. Last year, he withdrew his proposal after lawmakers in both parties said repeal of the renter credit was the same as a tax increase.

“The renters credit is a subsidy the state simply can no longer afford,” said Perry, Wilson’s spokeswoman. “When we are looking at protecting vulnerable populations like the aged, blind and disabled and have very few resources for those programs we have to strike a balance between competing priorities.”