Meg Whitman's plan to boost California's economy by cutting taxes and government regulations touched off debate Tuesday between liberal economists, who called it "deeply flawed" and potentially damaging to the state's economy, and conservatives who praised it as a "well-planned road map" to recovery.

Public discussion of the Republican's proposal - outlined in a 48-page policy book distributed to 500,000 Californians as part of her campaign for governor - came in response to a report by a team of leading academics who said the plan is based on "faulty economic theories and on studies that are fundamentally unsound."

UC Berkeley economist Michael Reich, who wrote the 15-page analysis released Tuesday by the Center for American Progress, a liberal think tank, said Whitman's plan relies upon "a number of factual and conceptual errors."

Her idea to eliminate capital gains taxes, for example, would reduce state revenue by $4 billion to $4.5 billion a year for five years, Reich wrote, exacerbating the state budget deficit that now stands at $19 billion.

In addition, Reich's study said, Whitman's claim that the state has lost its competitive edge as a result of a poor business climate, high-cost labor, too much regulation and too-high taxes is not backed up by facts.

"Contrary to Whitman's diagnosis, the state's current economic woes result primarily from the deep national economic downturn, combined with a particularly severe hit from the U.S. mortgage finance crisis," Reich wrote, adding that her plan "neither mentions the housing and credit bubbles and their aftermath nor how the state should respond to them."

Report dismissed

Economist Michael Boskin, a senior fellow at the Hoover Institution at Stanford University and a member of the Whitman campaign's economic task force, countered Tuesday that Whitman's proposals are a "well-planned road map to create new jobs, reform California government spending and encourage businesses to thrive and grow in California."

California Republican Party spokeswoman Crystal Feldman dismissed Reich's report.

"The Center for American Progress is nothing but an instigator for the failed policies of the pro-government, pro-tax politicians in Washington, D.C.," Feldman said.

The report did not compare Whitman's economic-recovery proposals with those of Democrat Jerry Brown, her rival in the Nov. 2 election, because he has not released an economic policy program, aside from promoting green jobs.

Aggressive debate

With less than three months until the election, the debate over economic policy underscored how the high-stakes gubernatorial campaign has intensified as Whitman, the former CEO of eBay, and her rival, California Attorney General Brown, have engaged in increasingly aggressive sparring on key issues such as the economy.

Whitman's economic proposals also include reforming state employee pensions, reducing the state government workforce by 40,000 employees, streamlining business regulations and cutting $15 billion from the state budget.

But Reich's analysis suggests that Whitman's calls for tax cuts "would reduce the state's economic growth while exacerbating the state's budget deficit problems."

In addition, the reduction of thousands of state government jobs combined with billions in spending cuts would have negative effects on employment, Reich said Tuesday.

He and UC Berkeley professor and former Labor Secretary Robert Reich (no relation) and USC Professor Manurl Pastor were particularly critical of Whitman's pledge that, if elected, she would suspend for at least a year the state's landmark climate-change law, AB32.

The economists said suspending the law would "sharply reduce clean-tech venture capital spending" and jobs in that industry in California.

In addition, Robert Reich said Whitman's plan to attract business and global capital to the state by lowering taxes, reducing regulations and cutting wages and benefits won't work because "there's always someplace else around the world that can do it more cheaply."

But Boskin said in an e-mail to The Chronicle that Whitman's plan would "immediately jump-start hiring with tax cuts and streamlined regulations." After "economic recovery takes hold," he said, "she will pursue tax reform policies to return long-term prosperity to California. Her plan is designed to make California more competitive and finally put a stop to the state's chronic budget crises."

State Senate Republican leader Dennis Hollingsworth, a Whitman supporter, said "the facts are clear - California has the ninth-highest corporate tax income rate in the nation and we have the highest gas taxes in the nation."

He said Whitman's plan would "reduce the tax burden on California's working families" and boost the economy.