Our View: California lawmakers create worthy compromise on taxes

July 7, 2013 

Several of our local legislators played key roles in the passage of a tax policy overhaul that will encourage businesses by altering for the better the wasteful, $750 million-a-year enterprise zone tax breaks.

Assembly Bill 93 includes strategies, such as tax credits, to help small businesses and larger companies hire new workers. Big retailers, restaurant chains and temporary employment agencies couldn't claim the credits. The legislation, now on the governor's desk, seeks to stimulate manufacturing by granting sales and use tax exemptions worth up to $500 million a year to companies that buy new equipment. Film studios, biotech firms, oil refineries and many others could be in line for the break.

Importantly, AB 93 would require reporting of results. If the new system doesn't work, lawmakers could scrap it.

Sen. Anthony Cannella, R-Ceres, had defended enterprise zones against strong opposition from Democratic leaders and labor groups that wanted them abolished. The senator told us that he preferred to work for a reasonable replacement rather than fight a losing battle to protect enterprise zones.

He worked closely with Assemblyman Adam Gray, D-Merced, on the compromise that was ultimately approved. Sen. Tom Berryhill, R-Twain Harte and one other Republican joined 27 Democrats to approve the bill in the Senate. Sen. Cathleen Galgiani, D-Stockton, also was a supporter. It required a two-thirds majority (30 votes) to pass.

In the Assembly, AB 93 was approved 54-16. Assemblywoman Kristin Olsen, R-Riverbank, and Assemblyman Frank Bigelow, R-R-O'Neals, were among the nine members not voting on it.

Gov. Jerry Brown is expected to sign it because he made the abolition of enterprise zones a cause.

The measure would phase out the worst aspects of enterprise zones by, for example, no longer allowing employers to claim credits for hires done five years earlier.

This bill would provide credits to employers that hire new workers at hourly wages of $12 to $28. In a concession extracted by Cannella, employers in part of the Central Valley could receive credits for new hires paid as little as $10 an hour. Credits would be directed to parts of California with the highest employment and worst poverty — and clearly Merced and Stanislaus counties are included in that.

No doubt, enterprise zones have helped some businesses expand. But the system is askew. No premium has been placed on high-end manufacturing. A job is a job, under the current system. As a result, strip clubs and poker parlors have received credits worth as much as $37,000 per employee simply because they are in one of 42 enterprise zones.

California's economic recovery remains unsteady. AB 93 won't get the state out of the doldrums. But unlike the wasteful enterprise zone tax break, AB 93 would set the state on a new tack, one that actually might persuade businesses to locate here. We're especially pleased that our legislators contributed to this worthwhile compromise.

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