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Gov. Jerry Brown discusses his California Jobs First Plan during a Capitol news conference in Sacramento, Calif., Thursday, Sept. 8, 2011. The plan, unveiled, Tuesday, will ask lawmakers to change a tax formula that benefited large, out-of-state corporations. Also seen is Assembly Cameron Smyth, R-Santa Clarita, left, and Assemlbyman Nathan Fletcher, R-San Diego, right, who support the plan.(AP Photo/Rich Pedroncelli)

SACRAMENTO -- Amid unrelenting partisan strife in California and the nation's capital, a glimmer of cooperation glinted in the state Capitol on Thursday.

Only hours after Gov. Jerry Brown stood alongside two Republican assemblymen to herald a bipartisan agreement on taxes, the Assembly on a two-thirds vote approved legislation to provide $1 billion in tax relief to California businesses and individuals while closing a loophole that benefits out-of-state corporations. But it was unclear late Thursday whether the Senate Democrats could muster the two GOP votes needed to approve the package in time before the legislative session ends Friday.

The Senate adjourned Thursday night without voting on the tax package.

Brown, who has been ballyhooing bipartisanship since taking office in January, hailed the 54-10 Assembly vote as a first step to the kind of political comity needed to move forward as a state.

"Tonight, Democrats and Republicans in the California State Assembly came together in bipartisan support of tax relief for businesses and working families," Brown said in a statement. "The California Jobs First Plan closes a toxic loophole that rewards out-of-state job creation. The plan instead uses $1 billion in savings to support job creation right here at home."

The governor singled out Assemblymen Nathan Fletcher, R-San Diego, and Cameron Smyth, R-Santa Clarita, for "putting aside partisan differences and acting as Californians first. Now, small businesses and working families in California are counting on the state Senate to do what is right ... and putting our state back to work."


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Assembly Speaker John Perez, D-Los Angeles, said that by closing the loophole and investing the resulting $1 billion in savings into the state's economy, "we have taken another necessary step to create jobs and drive economic development for Californians."

Republican Senate leader Bob Dutton, R-Rancho Cucamonga, however, threw cold water on the rare show of bipartisanship, signaling that closing the deal in the Senate is unlikely -- at least before the session ends. Instead, in a letter to the governor, he urged Brown to call a special session on a broad tax reform package.

"Now, one day before the end of session, you have unveiled a tax increase proposal that was developed behind closed doors without any input from Senate Republicans," Dutton wrote. "There is nothing more complex than tax reform, and trying to jam through a proposal on the last day of session without transparency or input from the public and tax experts is irresponsible."

In addition to closing the loophole for out-of-state firms, the tax package, a modification of a plan announced by Brown last week, would:

  • Reduce the tax rate by a half a percentage point for the first $50,000 in taxable income for most corporations.

  • Offer a 10 percent exemption for the first $50,000 in business income for those paying personal income taxes.

  • Increase the standard deduction by $1,000 for individuals and $2,000 for couples.

  • Give California manufacturers a break on sales taxes for equipment purchases -- including a three-year exemption for startups.

    On the Assembly floor, countless Republicans spoke of being conflicted over the vote, only to declare their opposition. Many said they could not vote for a bill that had been handed to them only an hour earlier. Others said that while they agreed with providing tax relief for manufacturers and small businesses, closing the "loophole" was tantamount to raising taxes.

    "I see a lot of things I like," said Assemblywoman Diane Harkey, R-Dana Point. "But I'm having a problem going mandatory on the single sales factor."

    The arcane term was referring to the part of the legislation that would require all businesses to pay taxes based on sales rather than allowing out-of-state companies to choose how to calculate their taxes.

    Assemblyman Felipe Fuentes, D-Los Angeles, said he detected some softening in the GOP's past opposition to the idea of bipartisanship compromise.

    "Congratulations, that's the first step to compromise," said Fuentes, the author of the bill to close the corporate loophole.

    Fletcher, the Republican whip, chastened his GOP colleagues for defending a "broken system" in which "we tell companies it doesn't matter if you're here or not, we'll help you out either way."

    "We realize that sometimes we have to be willing to step outside of our comfort zone, just a little bit, to do the right thing," Fletcher said.

    A deal like this "is the reason I came to Sacramento," said his fellow Republican Smyth, R-Santa Clarita, the other GOP vote. "To do what is right for the state. Everyone here has been willing to put politics aside."

    ASSEMBLY PASSES
    Brown's proposal
    The Assembly on Thursday night passed a tax package that would:
  • Eliminate a tax loophole that rewards out-of-state businesses for moving jobs out of California by allowing them to choose the way they calculate their tax.
  • Reduce the tax rate by a half of a percentage point for the first $50,000 in taxable income for most corporations.
  • Exempt 10 percent of the first $50,000 in business income for those paying
    personal income taxes.
  • Increase the standard deduction of $1,000 for individuals and $2,000 for couples.
  • Give small businesses tax incentives for hiring new employees.
    Source: Office of the governor