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Governor Jerry Brown held a press conference this past Thursday to announce a new proposal intended to spur job growth in California.
Governor Brown is proposing a three-part California Jobs First plan that would offer over $1 billion a year in tax relief for businesses that create jobs in the state.
“Boosting job growth in California is a top priority, and this proposal is a critical step in making sure the state does everything it can to support local job creation,” said Brown. “Our state has added 116,000 jobs since January, but we must do more to build economic momentum. This legislation would expand a currently existing job credit to make it more effective while adding new tax incentives for growth in the manufacturing sector.”
The first part of the California Jobs First plan reforms and expands an underutilized tax credit for small businesses worth hundreds of millions of dollars. To date, much of this funding has been left on the table because too many small businesses were excluded from the credit. The Governor’s plan expands eligibility to small businesses with up to 50 employees (up from 20) and the credit for each new hire will jump from $3,000 to $4,000. These changes will encourage small businesses to hire immediately, as the credit will expire at the end of 2013.
The second part of the California Jobs First plan will give California’s economy an immediate shot in the arm by providing over $1 billion in tax relief to businesses that purchase new manufacturing equipment. The plan exempts start-ups in their first three years from the state portion of sales tax (3.9375 percent)—and provides an exemption of 3 percent for all other firms— on manufacturing equipment purchases. The exemptions will drive innovation, investment and growth by targeting many of California’s most dynamic industries, including manufacturing, biopharmaceuticals, clean energy and software.
The backbone of the California Jobs First plan is the application of the Mandatory Single Sales Factor (SSF) to all businesses in California. This change levels the playing field by eliminating what Governor Brown called “an outrageous and perverse tax incentive that encourages multi-state businesses to create jobs outside of the state.” This places California-based businesses at a competitive disadvantage and is a disincentive for out-of-state businesses to locate jobs here. The revenues produced by closing this loophole will fund the expansion of the small business tax credits for new hires and the sales tax exemption for manufacturing equipment.
“Job creation is essential to our economic recovery and future budget stability,” said Senate Pro-Tem Darrell Steinberg. “Our tax laws should reflect that reality, rather than provide incentives for companies to increase their profits within California by investing and creating jobs outside of California.”
“Democrats in the Legislature fought hard all Spring and Summer to enact the Governor’s budget proposals to close the Single Sales Factor loophole and to generate in-state jobs – but the efforts fell short when no Republicans would step forward to support a compromise that would help California businesses,” said Speaker John A. Pérez. “It’s time to enact this common-sense plan that puts California’s economy and our jobs ahead of out-of-state tax loopholes.”
Governor Brown’s proposal drew immediate praise from California job creators.
“As a company with several major manufacturing sites in this state, Boeing applauds the governor’s initiative to support manufacturing in California,” said Jeff Sweet, Director of California Government Relations for the Boeing Company. “He understands the need for consistency and certainty to spur investment and job growth, and is seeking solutions that will help accomplish that goal.”
"The package proposed by the Governor will make California more competitive with other states and provide a foundation upon which we can rebuild California's job base,” said Joe Panetta, President and CEO, BIOCOM, “Governor Brown is to be commended for putting the strength of his office into these efforts.”