Given the way California’s Governor unveiled his jobs plan, it seems he’s taken a page from the playbook of the President of the United States, seeking to use the issue to score political points against Republicans rather than repeal laws which increase the cost of doing business in the Golden State. The “news conference,” the LA Times reports, “at times seemed more like a partisan rally than an attempt to reach across the aisle. Democrats used the governor’s announcement to rap Republicans’ knuckles for favoring out-of-state companies at the request of conservative activists who oppose changes in the corporate tax structure.”
The governor contends that California’s current “complex tax formula . . . allows a tax break for companies that move jobs out of state. He wants to eliminate that ‘outrageous and perverse’ incentive.” To fix that, the Democrat . . .
. . . wants to change the state’s tax code in a way that would reap more revenue from some companies that employ the bulk of their workers outside California, while creating new tax breaks for firms that hire in the state or buy business equipment here.
Problem is is that such changes might spur those companies which are based in California and employ workers in other states to join those companies that have already left the state. The intention may be to bring jobs back to California; the result would be for more firms to leave the state. This proposed change basically just imposes another burden on California employers. Firms would avoid that burden by leaving the state.
In short, Brown’s plan would only succeed in making the currently complex tax formula even more complex. He’d be wiser to simplify the formula and cut regulations.
His proposed “tax credits for companies of up to 50 employees” which hire new workers in the state would certainly decrease the cost of bringing on new employees, so it does represent a step, albeit a modest one, in the right direction, but it doesn’t address the real problem the complicated tax “formula” and the state’s burdensome regulations.
He may make it less expensive to bring on a new employee, but it would still remain costly to do business in the state.
Republicans who oppose this plan would be wise to put forward an alternative which both cuts taxes on business and reduces regulation.