Capitol Alert

By Dan Walters
dwalters@sacbee.com

Multistate corporations scored a major victory Tuesday in their long-running legal battle with California tax authorities over how they are to be taxed, one that could cost the state treasury hundreds of millions of dollars.

The 1st District Court of Appeal unanimously ruled that California must abide by a long-standing multistate compact that apportioned corporate taxable income on the basis of three equally weighted factors: payroll, sales and property. To do otherwise, it said, would, in effect, violate a contract.

The decision gives the corporations relief from a 1993 state law that gave double weight to sales, thereby increasing corporate income taxes on out-of-state corporations doing business in California while giving those based in the state some tax relief.

More recently, in fact, state officials have sought to eliminate the three-factor system altogether and go to a "single-sales" system that would, they believe, raise revenues from out-of-state corporations by more than a billion dollars a year.

Assembly Speaker John A. Pérez has proposed such a change to expand college aid, while a pending November ballot measure, Proposition 39, would do the same for energy efficiency.

The lawsuit before the court, brought by a group of corporations headed by the Gillette consumer products company, had been rejected by a lower court. The Franchise Tax Board, which defended the state's position, now must decide whether to appeal to the state Supreme Court.

Proposition 13, the landmark property tax limitation passed by California voters in 1978, has survived another legal assault.

The 2nd District Court of Appeal in Los Angeles on Tuesday denied, without comment, an appeal of a lower court decision rejecting a challenge to the measure from Charles Young, the former chancellor of the UCLA campus.

Although Proposition 13 was upheld by the state Supreme Court shortly after its passage, Young contended that by requiring a two-thirds legislative vote for imposing new taxes, the measure constituited a "revision" of the state constitution that could not be enacted by voters.

RENO - In a withering indictment of President Barack Obama's foreign policy record, Republican Mitt Romney accused the administration Tuesday of leaking national security secrets for political gain, weakening the U.S. military and the nation's stature abroad.

"Sadly, this president has diminished American leadership, and we are reaping the consequences," Romney said in a high-profile speech to the national convention of the Veterans of Foreign Wars. "The world is dangerous, destructive, chaotic."

Romney said at the gathering in Reno that Obama has failed to prevent or explain leaks of national security secrets involving the killing of Osama bin Laden and other military operations, including in Iran.

"This isn't a partisan issue; it's a national security crisis," Romney said. "This conduct is contemptible. It betrays our national interest. It compromises our men and women in the field."

RENO - Mark Block, the campaign strategist who became a minor Internet sensation when the Herman Cain campaign last year released an online-only advertisement featuring Block smoking a cigarette, was watching Cain at a rally in Reno on Monday afternoon, a Marlboro Light in hand.

The famous ad was shot outside a Las Vegas hotel when Cain was still a Republican candidate for president. The film crew was supposed to be filming Cain, Block said, but the candidate was busy.

Instead, Block was filmed speaking directly to the camera, then taking a drag and leisurely exhaling.

"I still can't go anywhere without anybody asking for an autograph on a cigarette," he said.

Cain spoke Monday at an anti-Obama rally hours after the president delivered remarks here. Cain called supporters of the president "the stupid people" and vowed to help defeat Obama.

Speaking with reporters after the rally, Cain defended Republican Mitt Romney from calls for him to release more than two years of tax returns. He said people only want to see them to nitpick.

Besides, Cain said, "I love the fact that the guy is rich."

VIDEO: In today's report, Dan Walters says the money the Parks and Recreation Department has been squirreling away could making it harder for Gov. Jerry Brown to pass his tax measure.

Republican presidential hopeful Mitt Romney is scheduled to speak at the Veterans of Foreign Wars Convention in Reno today. President Barack Obama spoke at the same convention yesterday, as David Siders reported. Obama is now in Portland for a new round of fundraisers.

Romney is estimated to have raised $10 million in California Sunday and Monday. He'll continue seeking campaign funds in the states today, before heading overseas for a tour of several countries, including Poland and Israel.

MINIMUM WAGE: Thousands are expected to march in more than 30 events today in cities nationwide to lobby for better pay for low-wage workers. Sacramento participants will march on the Chamber of Commerce, asking for an increase in the federal minimum wage, currently $7.25 an hour. The march begins with a noon press conference on the north steps of the state Capitol. Then participants will rally at the Chamber of Commerce offices at 1215 K Street.

Dan Walters says Gov. Jerry Brown's November ballot measure has a 50-50 chance of passing.

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