With soaring unemployment and increased competition from other states around the nation, California needs to make some drastic changes to how it deals with local businesses. Greg O’Sullivan from Redding.com, has proposed three ‘radical’ changes that he believes that California needs to make in order to attract new corporate and job growth:

1. Temporarily lower corporate income tax rates by 50 percent.

Thirty-four states have lower corporate tax rates compared to California. For example, we could lower the rate by half to companies that are willing to invest in new facilities and equipment in California over the next five years. The result would be a staggering increase in personal income taxes, sales and local property taxes. It’s a little like the “Big Box Theory” of merchandising, where profits are derived from volume. The new jobs, investment and increased economic activity are certain to far exceed the unrealized corporate taxes from collecting the full 8.8 percent from our existing employers that are fleeing the state or closing due to out-of-state competition.

2. Exempt manufacturing facilities from prevailing wage rates.

What if just one of our California gubernatorial candidates stood up and said we will suspend the prevailing wage rule to any manufacturing company that invests in new facilities and receives a public investment, inducement or incentive? The way it works presently is that if the city of Redding offers free land at Stillwater Business Park to a manufacturer to build a facility, prevailing wage rates are triggered, increasing labor costs by an estimated 20 percent. Nevermind that the actual manufacturing facility is built with private sector capital and that the Stillwater infrastructure was already subject to prevailing wages. Don’t get me wrong, when it comes to a genuine “public works” project where the majority of the project is tied directly to public funding, the prevailing wage rule should apply. Case in point: stimulus-funded projects.

3. Recognize the value of California enterprise zones.

Forty-two California enterprise zones are located throughout the state. Communities like Shasta County received these designations from the state through a competitive process. While zones have similar goals for improving the economic vitality of their communities, each is unique in the local incentives and special assistance it provides to the businesses located within the zone boundaries. Each year, the Legislature holds hearings on whether to continue the enterprise zone program. Most of us who compete for job-creation projects with other states know that the EZ program is the only real incentive offered by California. I agree that California can ill afford to waste money on programs that do not work. However, the state’s enterprise zone program has proven to deliver measurable benefits. Last year participating local companies hired more than 1,600 employees to receive an estimated $19 million in hiring tax credits. These same companies plow the tax savings back in their businesses in the form of new equipment, facilities and, of course, jobs. Reducing or eliminating the enterprise zone program would be extremely shortsighted. Even discussing it at a state level sends the message of uncertainty to existing or new companies considering California for future business investment.

Tags: business growth, california government, california taxes, job growth, unemployment

This entry was posted on Wednesday, April 14th, 2010 at 4:30 am and is filed under Tax News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.