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A major overhaul of California's enterprise zone program, eliminating a hiring tax credit for business that has been criticized as being ineffective and substituting a new tax credit for vocational training, cleared the state Senate today.

Senate President Pro Tem Darrell Steinberg, who is personally carrying Senate Bill 974, cited a report by the Public Policy Institute of California concluding that the enterprise zone program, which costs the state an estimated half-billion dollars a year in revenue, is ineffective.

Under the program, cities and counties petition the state to create the zones, and businesses located in them are given state tax credits for employees. But PPIC's report -- disputed by enterprise-zone advocates -- says that it could not detect any net increase in employment from the zones.

SB 974, if passed by the Assembly and signed by Gov. Arnold Schwarzenegger, would eliminate the hiring credit and, instead, give businesses similar credits for creating job training programs.The "Career Pathways Investment Credit" would be administered by the state Department of Education.

Education groups have lined up behind Steinberg's bill but it is widely opposed by business groups, which argue that the enterprise zone tax breaks encourage investment and hiring. The bill cleared the Senate on a 21-16 vote.



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