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One State Budget Watcher Questions Tax Break Benefits

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(Sacramento, CA)
Monday, July 19, 2010
The topic of tax breaks often comes up this time of year—during budget talks.   Jean Ross with the California Budget Project disputes the idea that such tax breaks generate enough economic growth in communities to pay for themselves. Ross, who heads up the organization that advocates for middle and low income Californians, has written a study on the issue. She acknowledges some of the money from such incentives remains in California- but not all—and certainly not enough to make up for the loss.

If you cut a tax paid by business, some of the benefit of the tax cut will go to shareholders in New York, or London or around the world… In contrast, when the state takes in fewer tax dollars, virtually all of the impact is here in California.”

Ross says the Budget Project also supports Proposition 24 that would overturn corporate tax breaks that were negotiated as part of recent budget deals. One of those breaks allows businesses to transfer tax credits among their related companies.  Another would allow companies to write off current losses against profits made in previous tax years. Alan Zaremberg with the California Chamber of Commerce argues those kinds of breaks are needed to encourage business.
Other states offer much greater financial incentives than California. You know when you complain about tax credits, there are some states that don’t have income tax—at all!”
As for this year’s budget, Democratic leaders have urged delaying the corporate tax breaks as a way to help bridge the state’s 19-billion dollar budget gap.
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