Reporting Doug Sovern
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SACRAMENTO (CBS SF) – Governor Jerry Brown wants California to adopt the same corporate tax policy that’s worked in Texas, Massachusetts and most of the states, but Republicans have denounced the proposal as just another tax increase that will hurt businesses.
Most states tax only sales within that state.
California however allows corporations to choose whether to be taxed on sales, or on a combination of sales, property value and payroll, a policy that costs the state $1 billion annually in lost revenue according to the non-partisan Legislative Analyst’s Office.
KCBS’ Doug Sovern Reports:
California tax law is what motivated Genentech to build a new plant in Oregon instead of expanding in South San Francisco or another part of the state, said Andrea Jackson, the company’s director of state government affairs.
“It’s bad policy. It incentivizes out-of-state companies to build out of state,” Jackson said.
Bringing California in line with the rest of the country would also create 40,000 new jobs, according to Brown.
The state GOP has disputed that assertion, dismissing the governor’s proposal as a tax increase on California corporations.
“It’s undermining those of us that support jobs and are really trying to make a difference. It’s just calling us out and saying, you know, why won’t you vote for taxes?” said Assembly Minority Leader Connie Conway.
Brown’s plan calls for a 3.9 percent state sales tax exemption for startup manufacturers and a 3 percent exemption for all other firms buying manufacturing equipment. Such an exemption is aimed at benefiting California manufacturers, bio-pharmaceuticals, clean energy and software developers.
The governor also wants to raise the employer tax credit and give it to more small businesses. He wants to raise the credit from $3,000 to $4,000 per worker for businesses that employ up to 50 people. Currently, the credit applies only to businesses with up to 20 employees.
The proposal is drafted in two bills before the Legislature: SB116 by Sen. Kevin de Leon, D-Los Angeles; and AB40X by Assemblyman Michael Allen, D-Santa Rosa. It requires support from at least two Republicans in the Senate and Assembly, but it did not appear to gain GOP support.
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