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June 26, 2013
Editorial: Tax deal could help create jobs

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(June 26 -- By the Editorial Board)

A bipartisan state Senate has approved a tax policy overhaul that could spur hiring into jobs that pay a living wage.

The Assembly should do the same.

Republican Sens. Anthony Cannella of Ceres, Tom Berryhill of Modesto and Steve Knight of Palmdale joined 27 Democrats late Tuesday to approve Assembly Bill 93. The bill would alter for the better the wasteful, $750 million a year enterprise zone tax break.

The vote was a victory for Gov. Jerry Brown, who has made the abolition of enterprise zones a cause; Senate President Pro Tem Darrell Steinberg, who lined up votes; labor and forward-looking corporations, which fought for the change; and thoughtful tax policy.

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.

The current enterprise zone credit would be replaced by credits worth $110 million a year aimed at helping small businesses and larger companies hire new workers at hourly wages of between $12 and $28. Big retailers, restaurant chains and temporary employment agencies couldn't claim the credits.

Credits would be directed to parts of California with the highest employment and worst poverty. 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.

AB 93 seeks to stimulate manufacturing by granting sales and use tax exemptions worth as much as $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.

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 located 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. It deserves the Assembly's support.

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