A Riverside County lawmaker is blasting Gov. Jerry Brown’s proposal to limit the tax incentives available to businesses that hire workers in depressed areas, saying the plan would hamper job growth in the Inland Empire.
“Gov. Brown’s budget proposal will punish hard-working Californians, especially small- business owners trying to get by in a struggling economy,” said Assemblyman Paul Cook, R-Beaumont, in reference to the governor’s enterprise zone reform plan.
“Enterprise zones serve economically distressed areas by providing lower levels of taxation for businesses, stimulating investment and job creation. … Our region cannot afford to lose businesses and jobs. We need to fight to maintain our enterprise zones.”
Brown’s office did not immediately respond to requests for comment.
The governor called for the elimination of enterprise zones in his January budget but modified the proposal in his May Revise to restrict allowances available to businesses.
What’s at stake
There are 42 enterprise zones statewide, including one in Coachella.
Earlier this year, the Riverside County Board of Supervisors — at the urging of Supervisor John Benoit — approved a resolution opposing the governor’s proposed changes.
According to the California Association of Enterprise Zones, businesses that expand payrolls within a zone can claim a state tax credit of $36,000 or more over a five-year period for each new full-time employee.
There are also special deductions for equipment depreciation and operating losses, the group said.
Under Brown’s plan, so-called “hiring credits” would be awarded to enterprise zone businesses only when there’s a net increase in the number of employees. The governor highlighted deficiencies in the current law that permit a business that lays off two employees to still claim a tax credit for hiring a new worker in the same year.
Brown also said some businesses had resorted to “retro-vouchering,” or claiming tax credits for hiring in previous years based on a tax consultant’s advice instead of a genuine need.
The May revise advocates a $5,000 tax credit for each “incremental full-time employee” added to a business’ payroll in an enterprise zone. Claims for credits would also be limited to the current calendar year and beyond, unless a proprietor filed for a credit within 30 days of hiring a new employee in one of the previous years.
According to the governor, the revamp will help the state reduce its $10.8 billion deficit.
Cook equated the change to a tax hike on businesses that established operations in an enterprise zone “based on promised tax relief from the state.”
“Now the state wants to punish those businesses whose only crime is surviving and keeping Californians working during this economic downturn,” the assemblyman said. “I still think the best way to solve the budget is to encourage the economy … and there is no place for tax gimmicks like the governor’s enterprise zone proposal.”
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Posted in California Budget 2011