Law Proposed to Stop Enterprise Zone Tax Giveaways

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April 1, 2013 in Labor & Economy

State Senator Jerry Hill

Imagine a system that gives companies enormous tax breaks for firing workers – and then forces those jobless workers to pay for those tax breaks themselves.

It might sound outrageous, but in California, that’s the reality. Just ask Joan Beighley, who worked at VWR in Brisbane for 14 years before her job was eliminated when her employer decided to take advantage of the state’s wasteful “enterprise zone” (EZ) corporate tax giveaway program. Thanks to this flawed program, VWR is able to collect up to $37,000 for each worker the company fired and replaced when they shut down their Brisbane facility and relocated to Visalia – even though no new jobs were created, and the jobs in Visalia pay a fraction of what the Brisbane workers earned for the same work.

The VWR move cost the city of Brisbane more than $2 million a year, while the company took in a windfall $1.5 million, thanks to enterprise zone tax credits. And guess who’s footing the bill? That’s right, it’s the laid off workers – and the rest of us taxpayers – who end up paying for those hefty corporate tax breaks.

Joan:

My tax dollars went towards taking my job away. We had good wages, we had good benefits, we had health care. Along with 200 of my co-workers, I no longer have a job, because of the enterprise zone program … It needs reform. It needs to create living wage jobs with benefits, and what’s it’s doing is destroying good living-wage jobs, and it’s turning them into poverty-wage jobs in California. That’s not good for the workers of California. We need to support our families, California needs to boost the economy, and [EZs] are not going to boost the economy if they’re creating poverty wages. It’s sad that we lost our jobs, and we’re fighting hard to stop this from happening to other victims out there.

The enterprise zone program is a boondoggle of epic proportions. Instead of incentivizing companies to create new jobs in areas that need them the most, the EZ program actually rewards companies that move jobs from one part of the state to the other – and they’re taking hundreds of millions of dollars out of our economy to do it. In fact, the EZ program is costing our state nearly $700 million a year – and it’s growing by 30 percent every year. And in the most shocking loophole of all, companies can collect the tax credit retroactively for workers they fired and hired years ago.

It’s time to boot these greedy companies off their corporate gravy train, and 2013 is shaping up to be the year when we will finally be able to curb these abuses and restore some fairness to our tax system.

[Last week] State Senator Jerry Hill unveiled his new legislation to fix the enterprise zone system at a press conference outside the old VWR facility in Brisbane. The location held significant meaning for the laid-off workers in attendance, many of whom worked at that facility for several decades.

Senator Hill:

The California Enterprise Zone program has cost the state over $4 billion dollars, and it has cost these workers their livelihood. We all stood here two years ago in effort to prevent VWR from relocating from Brisbane to Visalia. Since then, over 200 local VWR workers have lost their jobs. As taxpayers, these same workers helped fund the enterprise zone credit that helped pay for their replacements.

Senator Hill’s legislation would curb the worst abuses of the program by requiring employers to create net new jobs with good wages and benefits in order to be eligible, so the practice of hiring-and-firing would no longer allow companies to collect the EZ tax credit. Senator Hill’s bill would also eliminate retroactive vouchers so businesses can’t collect the credit on workers they hired or fired years ago, and would ensure transparency so we know which companies are collecting the credits. Additionally, the bill would regulate the lobbyists and consultants that troll the Zones, cap the cost of the program and establish a sunset date when the whole program would need to be reviewed.

Senator Hill:

My hope is that these changes will put end to the abuses we’re seen over the years. It’s too late for the workers here today who’ve lost their jobs, but my goal is to make things right for the future.

California Labor Federation Executive Secretary-Treasurer Art Pulaski joined Senator Hill at the press conference, where he lambasted VWR’s decision to forsake their Brisbane workforce to collect enterprise zone tax credits:

Just a few months ago, VWR was a bustling business with over 200 workers. They got paid well, and they were the largest source of sales tax revenue the city of Brisbane had. This was once a bustling business – and now it’s a bust. It’s a bust because it upended people’s lives. It’s damaged the city of Brisbane, and there’s no way to know how the city will recover. VWR is the company that abandoned Brisbane and created a path of destruction in its wake… they threw away these jobs, they threw away the city of Brisbane, and we’re here to say, we’ve got to stop this, we’ve got to stop the destruction of jobs and ruination of cities across California!

(Rebecca Greenberg Band has served as California Labor Federation Communications Organizer since 2007. Her post first appeared on Labor’s Edge and is republished with permission.)

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  • brady westwater

    I am opposed to enterprise zone law for one reason. It accomplishes… nothing. It is – as you right say – a boondoggle. With the mobility of workers and the checkerboard drawing of the zones, it does not accomplish the goal of bringing jobs to workers in need of jobs – and it doesn’t help the state’s biggest problem. The fact that California’s anti-business climate is driving businesses out of state – and – even more critically in the long run – keeping them from coming here in the first place.

    And while I disagree with most business subsidies, there are times when California needs to step up and project its major industries. Right now New York is replacing LA as the city with the most hour TV shows – and now sit-coms are also leaving – as is the Tonight Show & the MTV video awards – and increasingly, feature films. Now, until recently, too many pundits were claiming none of that made any difference since we still had all the post-production work, scoring, visual affects, etc. – but now some of those industries are now leaving even faster than overall filming.

    California’s problem is that Sacramento can no longer judge programs based on what works for the state – but only upon who supports them or opposes them.

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