Brown proposes new efforts to spur job creation

SACRAMENTO
August 25, 2011 11:44am

California Gov. Jerry Brown is calling for over $1 billion a year in tax relief for businesses that create jobs in the state. It would be one part of a three-part jobs creation program.

“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,” says Mr. Brown.

California’s July unemployment was 12.0 percent, up a fraction of a percent from June. Every county in the Central Valley was higher than that, from Yolo County’s 12.2 percent to Yuba County’s 19.3 percent.

“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,” says Mr. Brown.

The first part of his “California Jobs First” plan reforms and expands an underutilized tax credit for small businesses worth hundreds of millions of dollars, the governor’s office says. 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 governor’s office predicts.

The second part of the plan would provide 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 third part is the application of the Mandatory Single Sales Factor (SSF) to all businesses in California. This change levels the playing field by eliminating what Mr. Brown calls “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, the governor says.