CLINTON’S ECONOMIC PLAN : The Impact in California

Though President Clinton has yet to unveil his economic plan for the nation (he does that tonight), the outlines of his program have been spelled out in the past week. Here is how it looks California is going to be affected:

Small Businesses

Clinton plans to cut capital gains taxes for investments in start-up businesses that may help create new jobs in California, as people laid off from some of the state’s more troubled industries are encouraged to start businesses of their own. But existing mom-and-pop firms don’t see much relief on the horizon.

Defense

The planned hike in corporate taxes--from 34% to 36%--combined with cuts in defense spending will add to the myriad problems facing Southern California’s ailing aerospace industry. But Clinton’s promise to invest in retraining displaced defense workers may hasten the conversion of the region’s economy to non-defense industries.

High Technology

Clinton is going to propose a tax credit for business investment in equipment, though to be about 10%. While computer makers worry that the tax credit may not include computer purchases, Clinton’s commitment to such projects as a nationwide computer highway and his promise to make permanent the research and development tax credit should help bolster the fortunes of California’s high-tech companies.

Health Care

Pharmeceutical makers are likely to see slower profit growth in the wake of Clinton’s call for price controls on the industry. But economists say his proposals to make health care more affordable should help the health care industry--California’s largest employer--over the long-term.

Energy

Neither of the two most likely broad-based energy taxes--a tax on energy content (BTUs), or a flat percentage of fuel prices--would unduly hurt or help California’s energy industries. Windmills and other alternative energy sources might get a boost if they are excluded from the tax. And electric utilities might gain from a tax on their electricity output rather than on the fuels used to produce the power, because it takes three BTUs of fuel to produce one BTU of electricity.

Agriculture

An energy tax will take a toll on California’s farmers, who use electricity or diesel fuel for pumping water. Cuts in agricultural subsidies could hurt growers of commodity crops such as wheat and cotton, but growers of vegetables and fruits have long favored eliminating such subsidies.

Retailing

California’s major retailers, encouraged by a recent upsurge in consumer confidence after months of slow sales, are worried that tax increases may send customers back into hibernation. A greater tax burden on rich Americans may translate into a harder time for upscale stores.

Construction

Planned heavy spending to repair the nation’s infrastructure is good news for construction firms like the San Francisco-based Bechtel Group.