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California's Tax-Cutting Legislature?



Drop by the California State Capitol at just the right moment and you might be surprised to hear liberal legislators sounding like tax-cutting conservatives.

In support of a multi-million dollar tax cut for business, one liberal lawmaker argues, "We need to send a message to New York... and other states competing for our jobs and say, 'It stops here.'"

Adds another: "We can't afford to let any more jobs abandon our state."

One more chimes in: "Right now we're getting our lunch handed to us by these other states."

You'd be right to scratch your head. For years lawmakers have voted for tax hikes and burdensome regulations that drive jobs away from our state. As a consequence, Californians pay some of the highest tax rates in the nation.

Given this grim reality, any sign that tax-and-spend lawmakers might see the error of their ways is cause for hope, if not outright celebration.

A few recent developments are encouraging:

  • In May, Governor Brown signed legislation to help boost California's economy and create more opportunity for job growth in our aerospace industry. AB 777 updates the tax code to return spaceflight vehicles to their original classification of business inventory, keeping California competitive in a budding multi-billion dollar industry.
  • In July, a new sales tax exemption for qualifying manufacturing, research and development equipment takes effect. The Governor and Legislature approved the changes last year as part of an overhaul of economic development policies. After years of losing good-paying manufacturing jobs to other states, California can finally compete with states that have offered this commonsense tax break for years.
  • The Assembly unanimously approved bipartisan legislation to expand funding for California's film tax credit. AB 1839 would increase funding for tax credits aimed at keeping production of films and TV series in California. Although the California Film Commission received 497 applications for the tax credit this year, due to limited funding only 23 projects were selected.
  • The Governor and legislators are scrambling to find incentives that might encourage Tesla Motors to locate a new factory for its electric car batteries and 6500 jobs in California. The legislative effort, embodied in SB 1309 came after Tesla founder Elon Musk called California's chances "improbable" given our state's "complex and lengthy" permitting process.

In supporting these targeted measures, Democrats are agreeing with Republicans that California tax policy directly impacts our state's ability to compete for jobs and investment. They also are finally acknowledging that California is on the losing end of this competition in at least some industries.

This admission is significant because it shows California's great weather and natural beauty are not enough to keep us competitive and ensure our state's continued growth and prosperity.

Many of the lawmakers who recognize the value of targeted tax relief often ignore the broader implications of their statements. When California loses jobs due to high taxes and regulations, the problem isn't confined to select industries.

Yet rather than craft inclusive tax policies that benefit all job creators, the Democrats in the Legislature are picking winners and losers. As a result, job creators with broad appeal, political clout or media attention get tax relief; others, like many small businesses, facing similar competitive pressures get left out.

We should want all California entrepreneurs and businesses to be successful, because their success benefits all of us. Accordingly, we must recognize that high tax rates and regulatory costs undermines economic activity we can and cannot see.

If targeted tax relief is good for jobs, wouldn't broad-based tax relief be better?


George Runner represents more than nine million Californians as a taxpayer advocate and elected member of the State Board of Equalization. For more information, visit boe.ca.gov/Runner.

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