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Posts Tagged ‘governor’

Brown’s Budget Shows Anti Business Sentiment By Increasing Regulations Aimed At Limiting Employer Access To Enterprise Zone Credits

Thursday, January 10th, 2013 | Enterprise Zones, Legislation, Tax News


Governor Brown released his 2013-2014 budget today which seeks to make it more difficult for businesses to utilize the Enterprise Zone credits.  At least a step up from last year when Brown proposed to eliminate the EZ program altogether, this year’s approach is more subtle.  Brown seeks to limit retroactive vouchering to one year, despite significant evidence and testimony that most of the businesses for which the credit is intended cannot process all their employee paperwork so quickly, i.e. the small businesses.  It seems that everyone but Brown recognizes that small businesses are the engine that runs California’s job market.  By making it more difficult for them, Brown is doing a disservice to the job market and to a large part of his constituency.

Brown also wants to require “third party” verification of employee residence in a TEA.  Assuming he means driver’s licenses instead of I-9s, again many of the lower income workers have no such third party verification and would thus be excluded from the credit.  The immediate result would be reduced hiring of those without California issued identification a result that I suspect Brown’s backers haven’t fully thought through yet.  Under Brown’s budget, there is a higher level of identification required for a tax credit than the law currently requires to allow someone to vote.  Perhaps an intended distinction….

Below is the full text of the Budget section discussing the Enterprise Zone:

Enterprise Zone Regulatory Reform

The Budget includes savings relating to new regulations for the Enterprise Zone program.  The proposed regulations will accomplish the following reforms:

Limit retrovouchering by requiring all voucher applications to be made within one year of the date of hire.

Require third party verification of employee residence within a Targeted Employment Area.

Streamline the vouchering process for hiring veterans and recipients of public assistance.

Create stricter zone audit procedures and audit failure procedures.

These regulatory reforms will primarily affect Corporation Tax revenue, but will also have an impact on Personal Income Tax revenue. The regulations, in total, are expected to increase General Fund revenue by $10 million in 2012‑13 and $50 million in 2013‑14. The Administration will be pursuing further Enterprise Zone reform through legislation.


Democrats Gain Supermajority in Both Legislative Houses

Wednesday, November 7th, 2012 | Enterprise Zones, Legislation, Tax News


The Sacramento Bee is reporting that the Democrats have gained a two thirds majority in both legislative houses.  Consequently, they can raise taxes without any Republican opposition.  What this means for the EZs is yet to be seen.  There are some bright spots.  First, many Democratic legislators have EZs in their districts and they have come out in favor of continuing the program.  Second, given that Prop 30 passed, it is yet to be seen how aggressively the democrats will pursue further tax hikes, particularly employment related credits, in a still sensitive economy.  Stay tuned….

Enterprise Zones the One Bright Spot in an Otherwise Tough California Business Climate

Tuesday, March 27th, 2012 | Enterprise Zones, Tax News


In a recent survey, ”almost three-fourths (73%) of California firms that do business in multiple states say it is harder doing business in the Golden State than in other states, according to the 2012 business climate survey of the California Foundation for Commerce and Education.  That finding is higher than in 2011 (57%) or in 2010 (63%). The study of 699 businesses is sponsored by the California Chamber of Commerce. No one in the 2012 survey said California is an easier place to do business.”

Respondents are “overwhelmingly unimpressed by California’s state government. Only 2% could name a state action in the past year that helped make it easier to run their business.  Among the action named were enterprise zone tax credits, worker’s compensation reform and minimum-wage increase failed.”

Read the full OC Register article.

Brown’s Budget Claims It Will Reform Enterprise Zone Program

Thursday, January 5th, 2012 | Enterprise Zones, Legislation, Tax News


Brown’s budget released today only hints at future reform measures to the Enterprise Zone program.  Perhaps after getting rid of RDAs, the unions are a bit gunshy about outwardly attempting getting rid of another vehicle that has anything to do with jobs while the economy struggles.  Here is what the budget said about Enterprise Zones:

“The resulting stability from a balanced budget will give businesses the certainty and the reassurance they need to invest in California. In addition, the Administration will propose legislation to reform the enterprise zone program and move to a mandatory single sales factor for apportioning multistate business income. Such changes will allow the state to afford investments in manufacturing, business incentives, and other tax relief.”

SBVEZ Exceeds Number of Vouchers Filed Last Year in Half the Time

Thursday, July 21st, 2011 | Enterprise Zones, Tax News


From today’s Highland Community News:

The San Bernardino Valley Enterprise Zone (SBVEZ) announced the businesses utilizing the zone have filed more than 2,000 hiring tax credit vouchers since Jan. 2011. The number of vouchers filed this year will soon exceed the total number of vouchers filed in 2010, in just half the time.

Last year, approximately 2,300 vouchers were filed by 182 businesses. This year more than 145 businesses have already taken advantage of the incentive. The zone has seen a significant jump in activity from businesses, suggesting that number of vouchers filed in 2011 will double the number filed last year.

“Each year we seem to double the number of vouchers filed from the previous year, and having already reached 2,000 vouchers is a good sign we will do it again this year,” said Wendy Clements, SBVEZ zone manager. “The continued growth of the program locally shows that our efforts to educate employers about the zone are paying off.”

The hiring tax credit is the most commonly used program incentive, which grants employers a tax deduction for providing a job to a local disadvantaged worker who faces barriers to employment. Common barriers include long-periods of unemployment, receipt of public assistance, lack of skills and education, and having a disability or a criminal history.

The 2,000 vouchers filed so far this year are estimated to produce $75 million in tax savings for these businesses during the five-year period they can claim the credit for a single employee. Reports also show that these cost savings have contributed to the creation of 14 new jobs and the retention of 1,998 existing jobs in the zone.

Designated in 2006, the SBVEZ includes the city of Colton, city of San Bernardino and unincorporated portions of San Bernardino County.

Governor Brown and Democratic Leaders Announce Majority Vote Budget Deal

Monday, June 27th, 2011 | Enterprise Zones, Tax News

The key words are “majority vote” which mean that Brown was unable to garner the two thirds vote necessary to eliminate or “reform” the EZ program out of existence.  The following is from the Sacramento Bee:

Gov. Jerry Brown and Democratic legislative leaders announced today that they have reached an agreement on a new majority-vote budget plan.

“We’ve had some tough discussions, but I can tell you that the Democrats in both the Senate and the Assembly have now joined with the administration and myself and we have a very good plan going forward with the budget,” Brown said at a press conference in his office this afternoon.

The proposal, outlined in this post, assumes that the state will bring in an additional $4 billion in revenues in the upcoming fiscal year, based in part on higher-than-expected revenue figures in recent months. If those revenues fail to materialize, steeper cuts to programs including K-12 schools, higher education, public safety programs and In-Home Supportive Services would occur later in the year.

“We have severe trigger cuts that will be triggered and go into effect (without the projected revenues),” Brown said. “And those are real.”

May Budget Revision Significantly Reduces Credit to Businesses

Monday, May 16th, 2011 | Enterprise Zones, Tax News


The Governor’s May budget revision significantly reduces the credit available to businesses.    Essentially, the credit will be reduced to $5,000 per employee.  Below is the section that discusses Enterprise Zones.

Reform Enterprise Zones — The purpose of enterprise zones is to encourage economic activity for particular geographic regions. However, there are two significant failings in the way the current tax incentives are structured. First, the Enterprise Zone hiring credit encourages the hiring of employees. It does not encourage the creation of new jobs. A business that lays off five employees and hires one at $50,000 per year, gets the same credit as a business that expands its number of employees and hires an employee at $50,000 per year. In fact, if the employee in the first case meets one of the vouchering criteria — they live in the area — and the employee in the second case meets none of the vouchering criteria, the firm in the first case will receive a credit while the employer in the second case will not. Enterprise Zone programs should reward employers for creating new jobs. Second, employers can benefit from Enterprise Zone credits even when it is demonstrable that the existence of the credit had nothing to do with the fact that they have hired a new employee. This is evident by the existence of a phenomenon referred to as “retro-vouchering”. “Retro-vouchering” typically occurs when a private tax consultant makes contact with a business located in the zone and offers that business their services, on a contingency-fee basis, to determine if any of the employees hired by this firm within the last several years qualifies to be vouchered for the hiring credit. When this happens, clearly the hiring firm did not act based on the Enterprise Zone hiring credit as they were not even aware of the credit when they did the hiring.

Instead of repealing state tax benefits for Enterprise Zones, the May Revision proposes to reform Enterprise Zone hiring credits so that credits are only available to firms which actually increase their level of employment. Taxpayers would be eligible for a $5,000 credit for each incremental full-time equivalent employee that they hire. These credits would only be allowed if claimed on the taxpayer’s original return. Additionally, the May Revision proposal would not allow any new vouchers to be granted for tax years prior to 2011 when the application for that voucher was made more than 30 days after the date that the employee first begins employment. Additionally, to ensure that credits are creating incentives for relatively profitable, tax-paying businesses, the Enterprise Zone credits will be limited to a five-year carry-forward period.

Assembly GOP Issues Budget Ahead of Governor’s Plan

Thursday, May 12th, 2011 | Enterprise Zones, Tax News


From the Sacramento Bee just now:

Assembly Republicans issued their own budget proposal a few days ahead of the Governor’s May revised budget.  There is no mention of Enterprise Zones in the Republican proposal.

Read the full article.

Senate Republicans’ Demand List Includes Preservation of Enterprise Zones

Monday, March 28th, 2011 | Enterprise Zones, Tax News


The Senate Republicans made public their list of 53 demands in exchange for their vote to allow Jerry Brown to put the tax extensions on the June ballot.  Preservation of the EZ is on the list.  Assembly speaker John Perez said that the parties are now “farther apart” than they were before the list.

Governor Brown Has Ways to Make You NOT Talk

Wednesday, February 23rd, 2011 | Enterprise Zones, Legislation, Tax News


California’s budget problems dominate today’s political arena.   Without question, the biggest systemic problem draining the budget is one that most politicians are afraid to even approach.  Of course it’s the pension system.  No one seems willing to call out the patent iniquity in the public versus private workforce.  Jerry Brown on Friday did his part to quell the opposition to true pension reform by removing someone who championed for reform.

Gov. Jerry Brown has removed a California State Teachers’ Retirement System board appointee who helped author a controversial study that criticized the state’s largest public pension funds.

Brown’s predecessor, Arnold Schwarzenegger, appointed Cameron Percyto the CalSTRS board on Dec. 30. As a graduate student at Stanford, Percy was part of a team that wrote, “Going For Broke: Reforming California’s Public Employee Pension Systems. “Schwarzenegger often referenced the report’s highly disputed claim that California’s Big Three pension systems — including CalSTRS — faced a collective $500 billion in unfunded liabilities.

Brown’s spokesman said coldly: “These appointees served at the pleasure of the governor and their services were no longer required.”  Read the full story here.

When Brown took over, there was some hope that given the slim chance of a second term, Brown would make the tough decisions and try to change the systemic problems facing California.  Instead, he’s using the Unions to fund the ballot initiative and hasn’t touched them in his proposed budget while at the same time trying to eliminate the Enterprise Program which is proven to stimulate job creation.  By wedding himself to the Unions early on, he’s tainted his ability to make it seem as if his proposed budget is anything other than the usual pandering to the union lobbyists.  It’s unfortunate for Brown’s legacy and for California, it may be very costly as well especially if the unions are able to drive business out of the state by eliminating the Enterprise Zone Program.

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