Utilities Tax Dies in Assembly Panel : Budget: Backers predict it will be revived as part of broad funding package. The levy would affect water, cable TV, phones, gas and electricity.

A fast-moving $1.3-billion utilities tax proposal was stopped in its tracks Tuesday when Republicans opposed to taxing anyone and Democrats opposed to taxing the middle class rejected the measure in an Assembly committee.

The bill’s backers attributed the setback in the Assembly Revenue and Taxation Committee to political posturing and predicted that the legislation would win approval after Gov. Pete Wilson and legislative leaders agree on a complete package to erase the state’s projected $14.3-billion budget shortfall.

The bill was passed by the Senate, 27-7, Monday night. But a California Poll released Tuesday morning showed that a utility tax is the least popular of 16 separate proposals to help balance the budget. Fifteen percent of those polled favored the idea while 63% opposed it.

The measure would place a 2.75% tax on water, cable television and telecommunications services. A similar levy would be applied to gas and electricity services and would be based on the amount of energy used by each customer. The poorest California residents would be exempted.

The bill was opposed by the conservative California Taxpayers Assn., which often defends business interests, and the liberal California Tax Reform Assn., which has pushed for higher taxes on corporations and the wealthy. It also was opposed by banks, manufacturers and cable television and telephone companies.

“I think it falls unfairly on the poor and the middle class and I think it falls unfairly on certain businesses,” said Democratic Assemblyman Johan Klehs of Castro Valley, the committee chairman. “I prefer a broader-based increase in the corporate tax. Before we impose taxes like this we should be taxing the rich.”

Republican Assemblywoman Tricia Hunter of Bonita said Republican lawmakers will refuse to support tax increases until Democrats approve long-term changes in state government that will result in permanent savings for taxpayers.

Only three members of the 11-member committee--all Democrats--voted for the bill.

But Assemblyman Phillip Isenberg (D-Sacramento), a member of the committee and one of the key players in the closed-door negotiations where decisions on the budget are really made, scoffed at the idea that the utility tax was dead.

“Are you crazy?” he replied when a reporter asked if the bill’s fate was sealed. The bill’s author, Democratic Sen. Dan Boatwright of Concord, added: “Nothing’s ever dead around here.”

Isenberg said Democrats and Republicans are hoping for an easy way out of the budget predicament and will change their votes once they realize that they cannot avoid the tough decisions.

“Republicans don’t want to cut (services), although they’ll never say it, and Democrats don’t want to (raise the) tax, although we’ll never say it,” Isenberg said. “We’re both hoping somehow a miracle happens, the skies open, buckets of money pour into the state and nobody has to have any cuts and the world will be a better place. They all know it won’t happen. But they can’t afford to bring themselves yet to vote yes on something.”

The broad-based utility tax plan is being pushed as an alternative to Wilson’s proposal for a 6% tax on telephone services. Legislators who have talked to the governor say he has agreed to support a 2% tax on all utilities but has not agreed to the higher, 2.75% tax proposed in Boatwright’s bill.

Wilson also has proposed a 1 1/4-cent increase in the sales tax and higher alcohol taxes and motor vehicle license fees.

Some opponents of the utility tax complained that the proposal would hit hardest on the middle class and the poor, even though poor and elderly residents who already are eligible for subsidized utility services would be exempted.

“This is one of the most regressive taxes ever conceived,” said David Doerr, a lobbyist for the California Taxpayers Assn. “It is a very bad tax.”

Cable television’s lobbyist said his industry was being “unfairly singled out” for a tax that would not hit over-the-air television networks. A banking industry advocate complained that taxing private phone services used by banks and hotels would be hopelessly complicated. A Farm Bureau spokesman said the levy would hurt farmers, who would pay higher taxes on the water and energy that they use to grow crops.

Boatwright, the bill’s author, brushed aside the criticism.

“They don’t want income taxes,” he said of the bill’s opponents. “They don’t want changes in the property tax. They don’t want this measure with the excise and utility taxes. A lot of people don’t want the sales and use tax. Someone is going to have to start giving. . . . It’s like a game of chicken.”

Meanwhile, the Senate on Tuesday rejected by one vote legislation to raise the income tax rate from 9.3% to 11% on taxpayers earning $100,000 and couples making $200,000 a year. The measure was put forward as an alternative to Wilson’s proposal to raise the sales tax, but could muster only 26 votes--25 Democrats and an independent. It needed 27 for passage.

The Senate already approved a more modest proposal that would raise the top rate to 10%. It was rejected in the Assembly.