bapifar01: California Gov. Brown announces bipartisan 'jobs' and taxes plan

Monday, 12 September 2011

California Gov. Brown announces bipartisan 'jobs' and taxes plan

California Gov. Jerry Brown and two Republican members of the Assembly announced a deal on what Brown is calling a jobs plan for the state Thursday. The basis for the plan is elimination of a corporate tax loophole that has enabled businesses to choose between two options for calculating taxes owed; one option is being eliminated. This will reportedly raise $1 billion in revenue each year.

What's less awesome is that, rather than using the $1 billion to help balance the state budget or actually create jobs, due to Republican pressure it is being poured back into more tax cuts:

Under the plan, Californians would receive an increase in their personal income tax standard deduction, jumping from $3,769 to $4,769 for individuals and $7,538 to $9,538 for couples.
Start-up manufacturers will receive a 4 percent sales tax reduction on equipment purchases, while other firms will get a 1 percent reduction.

The plan also contains a series of business income tax breaks. It would cut the corporate tax rate from 8.84 percent to 8.34 percent on the first $50,000 in taxable income. It would exempt 10 percent of the first $50,000 for small businesses who file as personal income taxpayers. And it would cut the "minimum franchise tax" that all businesses must pay from $800 to $750.

As the LA Times editorialized:

The proposed $4,000 tax credit, which would expire at the end of 2014, may not be large or durable enough to persuade a small business to add workers for the long run. But a bigger problem with the bill is that the credits would be available to any small business that adds full-time workers, including those that were going to expand without the state's help. If a company is succeeding and growing on its own, why should the state subsidize it?

If corporate tax cuts created jobs, the United States would have something like 102% employment. Yet Democrats continue to go along with so-called jobs plans that rely on more and more tax cuts to create jobs, instead of making the kind of investments in infrastructure and education that we know actually create jobs. That this was not Jerry Brown's first choice for what to do with $1 billion is to his credit. And these tax breaks don't appear as ill-conceived as the vast majority of so-called job-creating tax breaks. But don't call it a jobs plan when there's little evidence it will put people back to work.