Dan Walters: SpaceX tax break reveals lack of consistency

04/23/2014 12:00 AM

04/23/2014 11:46 AM

A fairly constant refrain among California’s Democratic politicians and their liberal allies is that corporations should be paying more in taxes to support public services.

Consequently, the Legislature each year sees a raft of bills that would, in one form or another, increase business taxes – such as this year’s measure that would allow school districts to impose higher “parcel taxes” on commercial property than on residential property.

“Severance taxes” on oil production is another favorite, along with making it easier to reassess business real estate for tax purposes, and raising cigarette taxes.

There is, however, no consistency. The same folks who demand higher business taxes as a matter of supposed principle are often willing, even eager, to give certain industries and even certain corporations big tax breaks.

Southern California’s film industry is one of the highly favored. Democrats lined up a few years ago to enact a multimillion-dollar tax break for film production and are doing it again to extend and expand the tax credit.

And then there’s Assembly Bill 777, which is close to winning final legislative approval.

Carried by Assemblyman Al Muratsuchi, D-Torrance, the bill would exempt corporate “tangible personal property” used for space flight from taxes levied on most other commercial equipment.

It’s a subsidy, plain and simple, for SpaceX, the satellite company founded by inventor/entrepreneur Elon Musk, best known as the head of the Tesla electric car company.

Tesla and its very pricey sports car are already beneficiaries of multiple subsidies from the state and federal governments, but notably California is not on the short list of states under consideration for the firm’s planned megafactory for batteries.

The Los Angeles County assessor’s office dinged SpaceX, headquartered in Hawthorne, for not paying taxes on some of its property, and the issue is being hashed out on appeal. But the company wants to short-circuit that process with a law exempting any space-related property from taxation.

The movie industry and SpaceX situations exemplify an attitude in the Capitol that goes something like this: If you are a politically incorrect business, your taxes should be raised, but if you are trendy, like space travel, or your executives contribute heavily to Democratic campaigns, like the film industry, you should get tax breaks.

Santa Clara County Assessor Lawrence Stone, the lonely voice of opposition to AB 777, says – quite accurately – that it sends a “dangerous message to corporations, encouraging them to bypass the local property tax system (and) in effect, it encourages the creation of two property tax systems, one for the small-business owner or homeowner, and another for those major corporations who can afford to lobby their legislator.”

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