Salon (first appeared at Capital & Main): Will California take a hard look at tax breaks for wealthy and businesses amid growing deficit?
California loses $70 billion in tax breaks each year, and many benefit high-end earners and corporations, the latter of which contribute “about half as much of their profits in state taxes than they did a generation ago due to reductions in the tax rate in the 1980s and 1990s.”
With the state facing a budget shortfall, the State Assembly’s Revenue and Taxation Committee has planned a hearing for Feb. 22 to take a deeper dive into the subject.
Per reporter Jessica Goodheart:
California, as it turns out, trails other states, including Texas and Florida, when it comes to evaluating its tax incentives, according to a report by the Pew Charitable Trusts. Former state Sen. Hannah-Beth Jackson attempted to remedy this in 2019 and then again in 2020 with bills that would have required an evaluation of some of the state’s largest corporate tax breaks.
The bill Jackson introduced in 2019 would have created a board to review major tax expenditures and make recommendations to the legislature. It was approved by state lawmakers but vetoed by Gov. Newsom after 57 businesses, trade associations, and taxpayer groups rallied in opposition, including the California Taxpayers’ Association. “That always makes me chuckle because they pretend like they really care about the taxpayer,” said Jackson, who now runs a strategic consulting firm in Santa Barbara…
One of the major challenges facing policymakers who want to throttle back on corporate tax breaks is that states are in competition with one another, creating what critics say is a race to the bottom. “California is doing what it’s doing defensively,” said Greg LeRoy, executive director of Good Jobs First, a nonpartisan research organization based in Washington, D.C., that monitors corporate tax breaks and subsidies.
Tax breaks can go away. LeRoy noted that “a political rainbow of actors” came together to roll back a multibillion dollar tax incentive program benefiting energy companies in Texas as a way to fund schools. A decade ago, at the height of the Great Recession, California abolished its enterprise zone program, which was aimed at creating jobs in economically distressed parts of the state but was deemed an ineffective giveaway to large corporations.
For tax expenditure programs to end, “There has to be a campaign, maybe a horror story,” LeRoy said.
Read the full story at Salon.