This afternoon I stood with Governor Jerry Brown to announce we have reached an agreement on his jobs plan. The agreement we reached closes a tax loophole on out of state corporations while cutting taxes for small businesses and working families. San Diego County Assessor Ernie Dronenburg authored a column for the Flashreport I thought you may be interested in reading.
CONSERVATIVES SHOULD RALLY BEHIND THIS TAX DEAL
Ernie Dronenburg, San Diego County Assessor
September 8, 2011
Today’s proposal — embraced by Governor Jerry Brown — is a great first step toward making California a more competitive place to create jobs. It will permanently lower the business tax and income tax on small businesses, provide tax relief for working families and cut the sales tax on manufacturing equipment purchases. I wholeheartedly support it and call on all parties to pass it without delay to put California on a path towards economic recovery.
We have all watched with dismay as California has become a place less and less hospitable for private sector job creation. Our high rates of taxation, regulatory environment, and high cost of living have contributed to our state’s very high unemployment rate. We have also watched with dismay as other states have enacted tax reforms to target our job creators.
Part of Assemblyman Fletcher’s tax reform compromise is focused on a part of the corporate income tax law known as single sales factor. This change provides a real incentive for job creation in our state. It encourages employment, investment, and economic growth. Governors Chris Christie, Rick Perry, Mitch Daniels and others have enacted such change and created a more competitive environment in their states.
By making the single sales factor mandatory, all corporations are on the same playing field. California got close to this reform two years ago, but missed the boat because of last minute lobbying by out-of-state interests. The single sales factor was adopted, but out-of-state companies convinced the legislature to put a loophole in the law allowing them to have the option of the old system in place as well. This “election” allows companies to pick which tax system to use. In essence the prior change retained the disincentives for adding jobs, and new plants in California. By moving to mandatory single sales factor, we are encouraging and supporting job creators and manufacturing expansion here in California.
Now is the time to right that wrong and create a tax reform package that is designed to encourage job creation and plant expansion. California is daily losing jobs to other states but this package of tax reforms will, without decreasing the net receipts to the state, put us on the offensive in the battle with other states for new jobs. Out-of-state companies got the special loophole in the law two years ago: they could continue to sell just as much of their products in California, but the law would reward them with lower tax bills as long as they did everything possible to keep their jobs, facilities, and operations out of our state. Incredibly, we have been forcing innovative, successful California-based companies to pay their fair share in taxes — while rewarding their out-of-state competitors with special tax breaks for keeping jobs and plants out of our state. This is bad for California businesses, bad for California workers, and bad for our state budget.
Today’s reform package offers long-awaited relief for all California businesses. For small businesses, especially those who invest in new manufacturing equipment,, it provides sales tax relief. In addition, this is the first time I can remember our state actually lowering the income tax burden on California small businesses. It also increases the standard deduction for individuals and families giving relief to California’s lowest-earners.
Small business creates more jobs than any other area of our economy and if encouraged and supported they will grow new jobs. Apple computer started as a small California business and we must try to encourage and support today’s apple seeds. The proposal contains provisions to ensure it is revenue neutral, but it does in fact lower the tax burden on Californians, and will help create a competitive environment that will lead to private sector job growth in California.
Out –of-state companies and political ideologues may oppose these changes, but their opposition is not based in sound tax policy or common sense.
It is time to move past political rhetoric and embrace bold well-thought-out plans that will make California a more competitive place for private sector job creation. It is time to do the people’s business and get something done that will put California on the offensive in the very competitive market for job and business expansion.
Simply put, this plan does that, and should be quickly enacted.