We’ve been sounding the alarm on the need for enterprise zone (EZ) reform for years. The bloated, wasteful corporate tax giveaway program is bilking California taxpayers to the tune of $750 million a year without doing much, if anything, to create jobs. After last week’s KCRA investigative report, based on records the California Labor Federation obtained, revealed strip clubs were among the recipients of taxpayer dollars, there’s renewed momentum behind the reform efforts.
At a press conference today in front of Déjà Vu Showgirls club in Rancho Cordova, Republican State Sen. Anthony Cannella and Democratic State Sen. Jerry Hill joined California Labor Federation's Sara Flocks to call on the Legislature to pass significant reforms this year to the program that’s gone horribly awry. In its current form, the EZ program is a huge giveaway to strip clubs, cardrooms and corporate giants. EZs incentivize companies to move from one area of the state to another, laying off workers and devastating families and communities in the process.
We need to stop strip clubs from getting taxpayer dollars. We need to reform enterprise zone regulation to provide transparency across the state, to ensure a company is not simply moving to the next city to take advantage of the benefits and using the program as an excuse to cut wages.
Sen. Hill is the author of SB 434, EZ reform legislation that would create more transparency in the program, require that companies create net new jobs to claim credits and attach wage standards to ensure the program incentivizes the creation of good jobs. Gov. Brown has also offered a significant reform proposal as part of his budget that would transform the broken program into real job creation incentives with accountability and transparency.
California’s enterprise zone program has devolved into free money for companies like (Déjà Vu). It’s already cost taxpayers more than $4 billion, and it’s growing by 30 percent a year. The majority of these tax credits go to companies that are just replacing existing workers. This is the kind of government program that drives people crazy.
A report in today’s Sacramento Bee revealed the enterprise zone program is doling out big money to huge corporations like FedEx and Walmart, in addition to the strip clubs. These wealthy companies are primarily low-wage employers with high turnover. Their corporate tax consultants know that they can claim EZ tax credits going back four years, which means companies like Walmart are collecting credits for workers that are no longer employed.
From the Bee:
An assortment of fast-food restaurants, manufacturers and retailers are on the lists. So are two strip clubs in Rancho Cordova, which have claimed a combined 24 vouchers dating back to 2010. Opponents have seized on that fact to assail the program.
“That's just an inappropriate use of money,” said state Sen. Lois Wolk, D-Davis, chair of the Senate Governance and Finance Committee, which considers tax legislation. “Our schools need money, our strip clubs do not.”
The program is shrouded in secrecy so taxpayers have little knowledge of where their dollars are going, or what effect those dollars are having on jobs. The California Labor Federation spent weeks trying to obtain records from enterprise zones across the state that show which companies are receiving tax breaks through the program. The Sacramento Enterprise Zone was the only program to respond.
Today, Flocks called for all EZs across the state to immediately release information that would allow taxpayers to see who’s getting the credits and whether those credits are actually creating jobs. In Sacramento, the data obtained on Déjà Vu show that all the credits the strip club claimed — up to $37,500 per credit — were for existing positions. Not a new job in the bunch.
The enterprise zone program is indefensible. Instead of creating new jobs, this program is giving taxpayer money to strip clubs and mega corporations like Walmart. The reforms proposed by the governor and Sen. Hill through SB 434 would end the waste of taxpayer dollars in the enterprise zone program. The reforms flip this program into real job creation incentives that prioritize good-paying jobs for those who need them most.
Learn more about enterprise zones.