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Dan Walters on AB 484

Sacramento Bee columnist Dan Walters uses the failure of AB 484 as another opportunity to attack the Enterprise Zone program:

One of the Capitol’s hoarier public dialogues is Republicans complaining about Democrats’ excessive spending and Democrats bemoaning Republicans’ refusal to close unjustified corporate tax loopholes.
Both sides have a point.
Democrats do have a difficult time reducing spending even when its justification is scant, particularly if it affects unionized civil service jobs.

And Republicans do seem unable to differentiate between increasing taxes and closing loopholes, even those that merely line someone’s pockets.

That said, there’s no bright line of difference.

Republicans are loath to cut spending on prisons, for instance, even though the state has been spending roughly twice as much as it should be. And Democrats have their pet special-interest tax loopholes, such as the one benefiting the movie industry.

Truth is, there’s no real fiscal difference between a direct appropriation from the state budget and a tax loophole. Indeed, those who follow budgetary matters call the latter “tax expenditures” and they total tens of billions of dollars a year.

The life and death of Assembly Bill 484 illustrates the syndrome.

It has to do with “enterprise zones,” which first appeared in California nearly 30 years ago, via legislation carried by one of the Legislature’s most conservative Republicans (Pat Nolan) and one of its most liberal Democrats (Maxine Waters).

Businesses receive tax credits for locating in and hiring workers from communities with particularly high levels of unemployment.

Initially, it cost the state treasury just a few million dollars a year, but “consultants” began advising local governments and companies on how to maximize its benefits and eventually the state’s 42 enterprise zones were siphoning more than a half-billion dollars a year from the state budget.

Virtually every independent study has concluded that the escalating enterprise zone tax expenditure is not benefiting California’s economy in net terms. It has become just another entitlement – a case study in corporate welfare – and developed its own protective political apparatus.

Assemblyman Luis Alejo, D-Watsonville, wrote AB 484 to keep alive an enterprise zone in his district that had reached its 15-year limit and another in the Antelope Valley, with that community’s Republican assemblyman, Steve Knight, as co-author.

The bill – grafted into an unrelated measure that had already passed the Assembly – made it through one Senate committee but died in the Senate Governance and Finance Committee, with all of Alejo’s fellow Democrats voting to kill it.

Gov. Jerry Brown says enterprise zones drain tax money better spent on other purposes and wants to kill them, just as he axed redevelopment.

He’s right, but as with redevelopment, tax entitlements are difficult to kill.

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