ANGELIDES: END LUCRATIVE TAX CUTS FOR THE WEALTHY LOOPHOLES CALLED BALANCED-BUDGET OBSTACLE.

Byline: Harrison Sheppard Sacramento Bureau

SACRAMENTO - State Treasurer Phil Angelides and a group of Democratic lawmakers called on state officials Tuesday to close $386 million in loopholes for corporations and the wealthy to help balance the state budget.

Most of the loopholes require a two-thirds vote to close, meaning Democrats will have to persuade a number of Republicans to agree.

Angelides, considered a likely challenger to Gov. Arnold Schwarzenegger in 2006, criticized the governor's budget plan for cutting services to some of the most vulnerable segments of society without ending a single tax loophole.

``Our tax code has been riddled with special breaks for the powerful, to the detriment of young people and the very people who can least afford to sacrifice,'' Angelides said.

Angelides also said the Legislature and the governor should review every loophole every year, just as they review every department and program when building the state budget.

Most of the loophole closures are expected to meet resistance from GOP lawmakers, as well as business and taxpayer groups.

``One person's loophole is another person's reasonable tax break, is another person's fulfillment of a societal good,'' said Jon Coupal, president of the Howard Jarvis Taxpayers Association. ``When those with a reputation of simply wanting more revenue claim that there are loopholes that need to be closed, I think you have to take those allegations with a large block of salt.''

H.D. Palmer, a spokesman for Schwarzenegger's Department of Finance, said the administration had not analyzed the proposals or taken a position on them. But he said dismissing the tax breaks as loopholes could be a mischaracterization.

``I'd bet there are more than a few men and women running farms in this state who would take issue with the treasurer's characterization of their cost of operations as, in his words, wasteful.''

Angelides was joined at the news conference by seven Democratic lawmakers, some of whom have already introduced legislation to close some of the loopholes.

Among them were Assembly members Lloyd Levine, D-Van Nuys; Mark Ridley-Thomas, D-Los Angeles; and Judy Chu, D-Monterey Park; and Sen. Gil Cedillo, D-Los Angeles.

Staff Writer Steve Geissinger contributed to this report.

Harrison Sheppard, [phone]

harrison.sheppard(at)dailynews.com

UNDER CONSIDERATION

State Treasurer Phil Angelides and Democratic lawmakers want to eliminate or limit a number of tax breaks:

--The ``yacht loophole,'' which lets Californians avoid sales tax on a yacht, airplane or other luxury item by keeping it out of the state for the first 90 days. Cost: $56 million a year.

--The depletion allowance, which gives oil and gas companies a tax deduction for using up limited natural resources. Cost: $11 million a year.

--Only businesses with less than $50 million in gross receipts would qualify to file as an ``S corporation,'' allowing them to pay taxes of 1.5 percent instead of 8.84 percent. Cost: $175 million a year.

--Repeal three separate tax breaks for farm equipment and fuel, which were approved in 2001. Cost: $105 million a year.

--Close the loophole that lets companies avoid taxes by moving their headquarters offshore in name only while maintaining substantial operations here. Cost: $10 million a year.

--The ``nowhere income'' loophole that allows national companies to use differences in state and federal tax code to have income that is apportioned to no specific state and therefore not taxed. Cost: $30 million a year.

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UNDER CONSIDERATION (see text)