Sacramento Bee columnist Dan Walters blasts the Enterprise Zone program in a column about the irrelevancy of the Lieutenant Governor and the wastefulness of the Economic Development Commission. Sacbee.com requires a login to read the article, but it was also reprinted here in the Fresno Bee. Unfortunately, his criticism is based on surprisingly superficial analysis:
The various tax breaks targeted to specific communities and/or industries are especially egregious.
One of the costliest is the two-decade-old “enterprise zone” program under which communities offer tax breaks for investment that supposedly helps low-income people. Last January, the Los Angeles Times detailed how enterprise zone “vouchers” only rarely help the poor, more often benefit the wealthy and are sold by cities to firms far removed from their borders.
The Franchise Tax Board is questioning the legality of some vouchers and the Legislature has adopted some modest reforms, while extending the life of existing zones.
Instead of a cleanup, however, the Schwarzenegger administration is expanding use of enterprise zones and legislation to make it easier to create them is moving. Meanwhile, the Assembly has voted to punch more than a half-billion dollars in new loopholes into the state’s already distorted tax laws.
They never learn.
The reference to the Los Angeles Times is to an article published on January 31, 2006 (not as recent as Walters makes it sound) about the case of Deluxe Corp. before the Board of Equalization. A lot of water has passed under the bridge since that case including the implementation of vouchering regulations. Walters’ assertion that vouchers are “sold by cities to firms” would represent an egregious an prosecutable crime. To my knowledge, the Attorney General has never conducted a criminal investigation into the selling of tax credit vouchers, nor does Walters provide any evidence of this practice.
Of course, to those of us who know what he is talking about, he is referring to the erstwhile practice of charging a fee for cross-jurisdictional vouchering. However, he fails to mention that fees for vouchers are now required by statute and that furthermore, on both the State and local levels, these fees provide a significant portion of the funding to cover the administrative costs of the program. In other words, the vouchering fees cause the program’s administration to be funded by those businesses that utilize the program rather than by other taxpayer funds.
Does Mr. Walters expect the average reader to understand all of this? My guess is that not even Mr. Walters himself understands all of this. The implication that the program is fraught with criminality and fraud, is therefore based on either willful distortion or a woeful lack of research.
