By Kevin Yamamura
kyamamura@sacbee.com
Published: Friday, Sep. 9, 2011 – 12:00 am | Page 1A
Last Modified: Friday, Sep. 9, 2011 – 12:15 am

In an eleventh-hour bid to claim victory on job creation, Gov. Jerry Brown will work today to push a corporate tax deal through the state Senate on the final day of this year’s legislative session.

Brown secured passage of the plan in the Assembly on Thursday, but lacks Republican support in the Senate.

The Democratic governor’s revised tax plan raises about $1 billion in corporate taxes, mostly from out-of-state companies, and redirects that money toward tax breaks for California businesses and individuals.

He enlisted two Assembly Republicans to support the package, but he still must find votes from at least two reluctant Senate Republicans for his plan. The Legislature is scheduled to close its regular session tonight.

Brown and lawmakers hailed the plan as a jobs creator, though they offered few projections on its economic stimulus impact. Brown was joined at a news conference by GOP Assemblymen Nathan Fletcher and Cameron Smyth, who voted Thursday evening to put the legislation, Assembly Bill 1X 40, over the top in the lower house. The measure passed on a 54-10 vote, with the bare minimum for the needed two-thirds majority.

“This is a very important coming together of very disparate individuals and philosophical views to do something for California,” Brown said.

Senate Republican Leader Bob Dutton, R-Rancho Cucamonga, immediately denounced the proposal as a “tax increase” because it results in higher taxes for some businesses. He asked the governor to call a special session that would allow further discussion beyond Friday’s scheduled legislative close.

Under the new compromise, Californians would receive an increase in the income tax standard deduction of $1,000 for individuals and $2,000 for couples. The change amounts to roughly $50 in relief for each individual filer who does not itemize tax deductions like mortgage interest, according to the Department of Finance.

Startup manufacturers will receive a 4 percent sales tax reduction on equipment purchases, while other firms will get a 1 percent reduction.

The plan also contains a series of business income tax breaks. It would cut the corporate tax rate from 8.84 percent to 8.34 percent on the first $50,000 in taxable income. It would exempt 10 percent of the first $50,000 for small- business operators who file as personal income taxpayers. It would cut the “minimum franchise tax” that all businesses must pay from $800 to $750.

Since announcing his plan last month, Brown had been negotiating primarily with Fletcher, a Republican who is running for mayor in San Diego. The city is home to biotechnology firms and telecommunications giant Qualcomm. Such California-based businesses support the corporate tax change because it provides tax breaks and would raise costs for out-of-state competitors.

“By switching to a mandatory single sales factor, we’re closing an indefensible loophole,” Fletcher said. “By closing a corporate loophole that only benefits out-of-state corporations, we’re providing real and permanent tax relief to Californians.”

Under a 2009 budget deal, California lawmakers allowed companies starting this year to calculate their tax liability based solely on the share of sales in the state. That helped companies headquartered in the state that previously had to factor property and payroll into their tax bill. But in making the change, California allowed out-of-state companies to continue using the old system, which results in lower costs than the sales-based formula would.

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