Repeal Tax Breaks for Big Corporations—Vote YES on Proposition 24

Time and again, we’ve seen how the two-thirds requirement to pass a state budget has allowed the Republican minority to hold our budget process hostage in order to get what they want. And what they want are huge tax giveaways for a small number of incredibly wealthy corporations — giveaways that will cost our state billions.

In September 2008 and February 2009, Republicans demanded the passage of three massive tax breaks for corporations as part of the budget deal. These tax breaks will tear a gaping hole in the already tattered state budget, and would increase our budget deficit by estimated $1.3 billion every year after they take effect.

The solution to this problem lies in Proposition 24. If passed, Prop 24 would stop the giveaway of billions of dollars in state money to corporations by repealing the three tax breaks enacted in the 2008 and 2009 budget deals. Prop 24 would finally ensure that multi-national corporations pay their fair share to the state for the benefits they receive by doing business in California.

A recent analysis of Proposition 24 by the non-partisan California Budget Project clearly illustrates who exactly benefits from the Republicans’ corporate tax breaks —and it’s not your local mom-and-pop corner store. The CBP report uses Franchise Tax Board estimates to show how just one of the tax reductions, the elective single sales factor apportionment (SSF), would benefit a very small number of very large corporations. Their analysis also demonstrates that the other two tax breaks benefit small numbers of companies as well. According to the report:

  • Only 1.2 percent of the state’s corporations would benefit from elective SSF at a cost of $850 million in 2015-16.
  • Nine corporations – 0.001% of all California corporations – would receive tax cuts of more than $20 million…
  • SSF apportionment would overwhelmingly benefit California’s largest corporations; 80 percent of the benefits would go to companies with gross receipts in excess of $1 billion. These beneficiaries account for just 0.1 percent of all California corporations.
  • Ninety-five percent of the benefits would go to 0.3 percent of the state’s corporations.
  • Twenty-eight utility corporations would receive tax cuts averaging $1.5 million per firm. This is significant since these firms are tied to California by virtue of the service they produce and the customers they serve.

The worst part is that the few corporations that do benefit from the tax breaks are not required to actually create any new jobs in California with that extra money — they can use their tax savings in other divisions, or in other locations outside of California, or even to give raises and bonuses to their executives. There’s little evidence to indicate that these massive tax breaks would do anything to stave off unemployment or help get our economy back on track.

California has historically attracted businesses because of our skilled workforce, world-class universities that spur innovations, high quality roads and ports, and the unparalleled quality of life. California became an economic powerhouse because the state’s leaders invested in infrastructure, education, public services and all of the key factors that attract business to the state. Clark Kerr, who built the University of California into a world-class system once said he saw UC as “bait to be dangled in front of industry, with drawing power greater than low taxes or cheap labor.”

Today, California is running on the fumes of investments that happened in the 1950s and 60s. Schools are dramatically under-funded and neglected. Fees at UC have skyrocketed, while classes are eliminated. Our once great highways and ports are congested and crumbling. Public services from libraries to parks to public safety operate on shoestring budgets, if at all.

Budget cuts are destroying what once made California a great place to do business, to work, to live and to raise a family. But these cuts could be lessened or eliminated if we stop the corporate tax breaks. It’s time to end the cuts and restore fairness to California’s budget — Vote Yes on Proposition 24.