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Report: State’s Broken Enterprise Zone Program Subsidizes Strip Clubs with Taxpayer Dollars

New Investigative Report: State's Broken Enterprise Zone Program Subsidizes Strip Clubs with Taxpayer Dollars

KCRA News reports local strip club received tax giveaways

Taxpayers Ask: How many other California strip clubs are walking away with our money?

SACRAMENTO, CA —  A stunning investigative report by KCRA News revealed that a local strip club pocketed tens of thousands in tax credits, raising new questions over how the broken Enterprise Zone program is spending our tax dollars.

“We’ve known for years that the enterprise zone program is bilking taxpayers without creating jobs,” said California Labor Federation Executive Secretary-Treasurer Art Pulaski. “It’s appalling to find out now that taxpayer money that’s supposed to be going to boosting jobs and our economy is actually going into the pockets of strip club owners. This broken program is in desperate need of serious reform. We hope this new report is enough to finally get legislators to act.”

The revelations about spending on strip clubs adds to mounting concern over the broken Enterprise Zone program which has handed out billions of dollars in tax credits without proof of new job creation even as schools, health care for children and seniors, and public safety services have been hit with billions of dollars in funding cuts in recent years.

A report by Pulitzer Prize-winning journalist Gary Cohn that appeared in yesterday’s Frying Pan News blog highlights one of the program’s biggest flaws: providing incentives for companies to move from one area of the state to another, creating no net new jobs and devastating families along the way.

Despite being touted as a job-creation program, the most reliable, independent research finds that the EZ program fails to create jobs or new business.  A far cry from boosting fledging businesses, corporations with assets of $1 billion or more claimed 61 percent of EZ tax credits. And while the KCRA report uncovered the taxpayer dollars going to a Sacramento-area strip club, the EZ program is so shrouded in secrecy that taxpayers have no idea how many other strip clubs are receiving similar tax giveaways.

“It’s even more disturbing that we have no idea how widespread this problem is,” said Pulaski. “Because this program is cloaked in secrecy, we aren’t able to know how many of our taxpayer dollars are going to strip clubs all across the state. That lack of transparency is indefensible.”

Because this wasteful tax giveaway program does not require new jobs to be created and companies that receive tax credits are shielded from public view, billions in EZ dollars have been spent without accountability to the public.

Taxpayer advocates said the KCRA report points to the need for serious reform to the program. Both Governor Brown’s budget proposal and legislation in the Senate — SB 434 (Hill) — offer significant reforms that would stop the worst abuses of the program, incentivize good, middle class jobs and make the program more transparent and accountable.  

“Today’s report makes clear that the EZ program has strayed from its intention to be an economic driver for the state and now operates recklessly with no accountability or oversight,” said United Food and Commercial Workers Executive Director Jim Araby. “It’s time legislators stood up for taxpayers by  getting serious about real reform that prioritizes good jobs over wasteful strip club subsidies.”

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