New Report Identifies Billions in Wasteful Corporate Tax Breaks State Could Use to Close Budget Gap
California Labor Federation Calls for Thorough Review of Tax Breaks before any Cuts to Essential Services
View the report at
(Sacramento) — A new report released today by the California Tax Reform Association identified more than $6 billion in wasteful corporate tax loopholes and dodges that are bleeding the state of much-needed revenue that should be used to help close the budget deficit and prevent cuts to vital services.
Report author Lenny Goldberg said corporate tax breaks, many of which were put into place as part of backroom deals in previous budget negotiations, represent egregious examples of waste, fraud and abuse in our tax code.
“If California had a normal government, billions in loopholes would be closed,” Goldberg said. “There is overwhelming public support for closing loopholes before cutting vital programs. Hopefully the Republicans will listen to the will of the majority of Californians and end these abuses in the tax system before harming schools and services.”
In response to the report, the California Labor Federation called on the legislature to do a thorough review of every corporate tax break that currently does not include a sunset provision prior to making any of the cuts proposed in the Governor’s May Budget Revise. Many of the state’s corporate tax breaks lack any transparency or accountability, meaning taxpayers have no idea if the breaks are serving their intended purpose of boosting the economy or creating jobs.
“We simply cannot continue to dole out massive tax breaks to the wealthy and well-connected at a time when the state is asking Californians to sacrifice essential funding for schools, public safety, health care and services for our most vulnerable,” said California Labor Federation Executive Secretary-Treasurer Art Pulaski. “Taxpayers deserve to know whether these giveaways are producing any positive benefit to our state. If they’re not, they should be immediately abolished and those funds should go to services all Californians value.”
The report singles out a number of tax breaks and dodges that would provide immediate help in closing the deficit, if abolished.
Among the report’s findings:
- Eliminating the “elective” tax loophole, which benefits out-of-state corporations, would increase revenue by $1 billion per year. Assembly Speaker John Perez currently has a proposal to use that revenue to lower college tuition through his Middle Class Scholarship bill.
- Adopting an oil severance tax would produce $2 billion a year. Big oil companies are making record profits and raising gas prices on Californians while avoiding taxes. California is the only state in the country, and the only place in the world, that fails to tax oil production.
- A change-of-ownership loophole allows big corporations to avoid paying property taxes based on current value, draining the state and local governments of $2 billion a year and putting other businesses at a competitive disadvantage.
- A maze of other loopholes and tax dodges are costing the state $2 billion a year, including the failed enterprise zone tax credits which subsidizes the elimination of good-paying jobs by giving businesses an incentive to move to different locations and hire replacement workers, often at lower wages.
“Our tax code needs to reflect the interests of middle-class Californians, not the special interests of corporate CEOs and their lobbyists,” Pulaski said. “If working and middle-class people are going to take a hit in tough times, it shouldn't be to pay for tax breaks for millionaires and big companies that ship our jobs overseas.”