Big Assembly Vote OKs Tax Break for Farmers

SACRAMENTO —  The Assembly voted overwhelming approval Thursday of Gov. George Deukmejian’s election-year program to give tax breaks to hard-pressed California farmers.

“This will say to our farmers, who are in bad shape, ‘Stay with it and over the next five years you’ll be able to endure your losses,’ ” Assembly Speaker Willie Brown (D-San Francisco) said as the lower house passed the measure 70 to 1.

The measure was sent back to the Senate for concurrence in Assembly amendments as both houses rushed to adjourn early for an Easter recess.

The farmers’ tax relief proposal is part of Deukmejian’s “rural renaissance” program to bolster the economies of the state’s depressed agriculture and timber regions.

The tax break would enable growers who lose money to carry the losses forward on their books to reduce their income taxes in future years when they begin to show a profit. Under existing law, the losses must be deducted in the year in which they are incurred.

The state Franchise Tax Board estimates that the farm tax break will reduce state revenues by $6 million this year and by as much as $12 million in 1988. Analysts said there was no firm estimate on the total cost because the bill applies to losses incurred through 1992, and allows them to be carried over for up to 15 years.

Although support for the measure was bipartisan, some irritated Democrats called attention to Deukmejian’s earlier vetoes of similar measures sent to him by the Democratic-controlled Legislature before he embraced the concept as his own last fall.

“Now it’s an election year and everyone is getting up to embrace it as a good Republican strategy,” Assemblyman Sam Farr (D-Carmel) complained. “Let’s give credit where credit is due.”

Deukmejian last vetoed a Democratic farm tax relief measure in 1984, saying that it would not prevent growers from going bankrupt and that it would encourage other financially strapped industries to seek similar tax breaks.

Last September, however, as Deukmejian geared up for his reelection effort, he proposed the tax break as part of a 12-point program to bolster the economy of rural California, which, he claimed, was ignored by former Gov. Edmund G. Brown Jr.

The governor’s “rural renaissance” package, which also proposes money for road construction, local government assistance and overseas promotion of farm products, actually was drawn from half a dozen bills already pending in the Legislature. Among them were five bills sponsored by Democrats, including the farm tax proposal by Sen. Henry J. Mello (D-Watsonville).

Like the financially strapped farmers of the Midwest, many California growers borrowed heavily over the last 10 years to get into farming and then saw their incomes plunge for a variety of reasons. These included overproduction and a strong dollar that made imported products relatively cheap and priced U.S. agricultural products out of many overseas markets.

The fall in agricultural farm income brought farm foreclosures to their highest level in years. By the end of 1984, California banks had written off $240 million in bad farm loans--about 26% of all the defaulted agriculture loans in the nation.

It is unclear how much help the California tax measure could offer, because state income taxes are small compared to amounts collected by the federal government. Also, while the measure would allow losses to be carried over for up to 15 years, it would limit each grower to $250,000 in deductions over that period.

Democratic Assemblyman Rusty Areas, a Los Banos dairy farmer, said that while the bill may not prevent many farm foreclosures, “there are very few things we can do to provide relief to farmers. Most of them are federal remedies.”

In an effort to keep large agribusiness concerns from profiting from the plan, the measure would limit the tax breaks to corporations with 10 or fewer shareholders.