California Considers Pulling Back the Curtain on Tax Breaks for Special Interests

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Bills moving through the California legislature would make it much easier to determine whether California’s special tax breaks — costing billions of dollars annually — are worth the trouble.  Specifically, the Assembly would require that the names of publicly traded corporations, and the amounts they received in specific tax breaks, be made publicly available on a searchable website.  The Senate, in turn, is seeking to create a new job creation reporting requirement, and to require that new tax credits include specific, measurable goals and sunset dates.  Business groups have predictably lined up in opposition to these bills.

Movement in the California Senate

In passing SB 1272, the Senate found that “The Legislature should apply the same level of review and performance measure that it applies to spending programs to tax preference programs, including tax credits.”  In order to help make this ideal a reality, SB 1272 requires that each new credit be created with defined goals, as well as performance measures for evaluating the credit’s success in achieving those goals.  The bill also requires that data collection requirements be attached to each new tax credit in order to make such evaluations possible. Finally, in a move similar to one recently taken by Oregon, the bill would require each new tax credit to sunset after seven years. 

SB 1391 has a slightly more narrow focus than SB 1272, requiring any entity claiming a job creation tax credit to report on the number of jobs created as a result of the credit. 

Both SB 1272 and SB 1391 have passed the Senate, and will receive hearings in front of the Assembly Committee on Revenue and Taxation next Monday (June 28).

Movement in the California Assembly

On the Assembly side, AB 2666 would create a requirement that the names and amounts of tax credits received by publicly traded companies be made available on a searchable website.  The bill states that this website would be created with the goal of increasing “public awareness of the amount and scope of tax expenditures for businesses in this state.” 

Work of CTJ Cited

Interestingly, in order to demonstrate the potential value of publicly-available, company-specific tax data, the official bill analysis cites the enormous impact that CTJ’s analyses of SEC data had in bringing about federal tax reform: “Robert McIntyre, working at Citizens for Tax Justice combed through the financial reports of the nation's largest companies and found that 128 of the 250 largest U.S firms paid no federal corporate income tax in at least one year between 1981 and 1983 (17 paid no tax in all three).  The resulting furor pushed Congress to enact the Tax Reform Act of 1986.” 

AB 2666 has already passed the Assembly, and is currently making its way through the Senate.

Business Lobby Does As Expected

Predictably, business groups in the state have already lined up in opposition to these good-government measures.  Four groups have chosen to officially oppose all three bills: the California Chamber of Commerce, California Manufacturers and Technology Association, California Aerospace Technology Association, and TechAmerica.  A slew of other business groups — including the Bankers Association and Retailers Association — have come out in opposition to at least one of the bills.  The fight to enact SB 1272, SB 1391, and AB 2666 into law will no doubt involve a tough uphill battle against these powerful special interests.

You can find information on each of these bills on the California legislature’s website.

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