The Center of the California Enterprise Zone Information Universe

California Budget Project’s “New” Report

The California Budget Project released a document to the media the morning of the Joint Assembly Hearing – Budget SubCommittee #4 on State Administration and Revenue & Taxation Committee on Feb. 7. The document called “California’s Enterprise Zone Program: No Bang for the Buck” received wide attention in the media, a testament to CBP’s impressive public relations skills. The CBP piece formed the basis of highly critical articles and commentaries in the Los Angeles Times, the Sacramento Bee, the Bay Citizen, and elsewhere.

Many of the claims made by CBP in this latest release are rehashes of arguments they have been making for years, and some of the criticisms are fairly flimsy. As Steve Dotan points out, most of the footnotes refer either to the PPIC study or back to earlier CBP critical essays of the EZ program.

On page 2 CBP claims, “Very large corporations claim most of the EZ tax breaks,” and “Small businesses are not a major beneficiary of EZ tax breaks.” But there is no normalization of the data to show how usage works as a percentage of the overall tax burden. Of course the largest corporations who have the numerically largest tax liabilities will also have the numerically largest credit claims. This in no way suggests that the tax credits are disproportionate in their distribution. If big corporation A owes $10,000,000 in taxes to California and gets to reduce that by 1% because of Enterprise Zone credits, they will save $100,000 on their tax bill. If small business B owes $10,000 in taxes, but gets Enterprise Zone credits to offset 50% of their liability they will save $5,000. Who got the bigger credit?

Similarly, on page 3 they complain, “Corporations located in Long Beach, Fresno, Santa Ana, Antelope Valley and San Jose also claimed substantial tax breaks, while those in rural areas with very high unemployment rates, such as Calexico, Delano and Shafter, claimed relatively fewer tax breaks.” More businesses in rural Enterprise Zones would claim credits if there were more businesses in rural Enterprise Zones. Of course more businesses in densely populated areas claim credits simply because there are more businesses there period.

Then there are more careless errors like footnote 21 which cites a no longer effective statute allowing Enterprise Zones to receive 5-year extensions. That was a one-time provision from 2001 that was never renewed.

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