Two million Californians are out of work. Our unemployment rate is higher than 46 other states, the highest it’s been since the Great Depression. States across the country have updated tax laws to attract and grow businesses and jobs. We finally did the same, but an initiative aimed at the November ballot repeals those updates.
The Jobs Tax Initiative would literally tax new job creation, hit California employers and small businesses with $2 billion in higher taxes, and stifle job growth in our most promising industries. In short: More small businesses closing shop, more employers expanding into other states, fewer jobs and fewer long-term tax revenues to fund vital public services. Here are some effects the bill would have.
Tax new job creation, send more jobs out of California. With the recent state tax update, multi-state corporations can have their state income tax based on their in-state sales. But the Jobs Tax Initiative would take us back to an outdated formula that increases their taxes every time they create a new job here, or invest in new facilities here. In a nationwide trend, 24 states have moved away from that type of jobs tax, because it penalizes job growth and incentivizes companies to expand into other states, taking good jobs and tax revenues with them.
Tax small businesses (and their employees) out of business. More than half of the state’s private sector jobs are created by small businesses. Last year, small business bankruptcies in California rose 81 percent. To help them survive the recession, federal tax laws were recently updated to let small businesses carry back net operating losses five years. The recent state tax update allows businesses two years. The Jobs Tax Initiative takes away that lifeline altogether. It would force more small businesses to close shop, causing even more layoffs.
Stifle job growth in some of California’s most promising industries. We’re counting on our high-tech, clean technology, biotechnology and other innovative, high-growth industries to help pull California out of the recession and provide tomorrow’s high-paying jobs. But the initiative would tax them for each new job they create here, prohibit them from using earned research and development tax credits, and limit their ability to level out their losses over their natural business cycles. We can’t afford to stifle the growth of these industries or lose their jobs and revenues to other states.
Reduce long-term revenues for schools and other public services. The Jobs Tax Initiative throws roadblock after roadblock in front of the state’s economic recovery and threatens decades of vital service cuts. The slower our recovery, the fewer long-term tax revenues we’ll have to fund our schools, hospitals and roads.
Proponents are relying on a popular “close corporate loopholes” slogan to sell their initiative, but the initiative doesn’t close a single loophole. It closes the door on job opportunities at a time we can least afford it.
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