Governor Brown Outlines Plan for Good Jobs

In How Enterprise Zones Are Killing the California Dream, Frying Pan investigative reporter Gary Cohn looked at the impact of the controversial program, including workers who lost their jobs while their former employers received tax breaks for hiring lower-paid replacements. He also reported on two strip clubs revealed to have benefited from the secretive program. Other media have picked up the story as well, building momentum for an overhaul. A more detailed overview of the Governor’s plan can be found here. The following post first appeared in the blog Labor’s Edge. 

To some politicians, economic development means giving hundreds of millions of taxpayer dollars to strip clubs, fast food joints and retail giants like Walmart. Gov. Brown, thankfully, has a better idea. Today, the Governor announced a broad coalition of labor, business and others in support of his good jobs plan that will flip the broken enterprise zone program into real incentives for creating quality, middle-class jobs.

Gov. Brown:

California’s 30-year-old Enterprise Zone program is not enterprising, it’s wasteful. It’s inefficient and not giving taxpayers the biggest bang for their buck. There’s a better way and it will help encourage manufacturing in California.

Study after study has shown that the enterprise zone program is a waste of taxpayer dollars. The California Labor Federation has been sounding the alarm on this broken program for several years, and now there’s strong momentum for reform.

California Labor Federation leader Art Pulaski:

The Governor’s plan wisely targets our tax dollars to good jobs that build the middle class and strengthen communities. California workers stand with the Governor in his efforts to create good jobs that will spur our state’s economic growth.

The Governor’s plan directs tax credits to businesses that are actually creating new, quality jobs — something the broken enterprise zone program has failed miserably in achieving. The Governor outlined his program today in a release to media:

The Governor’s plan, proposed in the May Revision, builds on the framework of existing, targeted programs by redirecting approximately $750 million annually from the current flawed Enterprise Zone program to three new economic development programs:

Sales tax exemption: A statewide sales tax exemption on manufacturing equipment or research and development equipment purchases by firms engaged in manufacturing or biotechnology research and development. The proposal is estimated to provide sales tax exemptions worth over $400 million annually.

Hiring credit: A hiring credit targeted to businesses located in areas with the highest unemployment rate and poverty. This credit will be available for the hiring of long-term unemployed workers, unemployed veterans and people receiving the federal earned income tax credit. The credit will only be allowed to taxpayers who have a net increase in jobs. The proposal is expected to provide approximately $100 million annually in hiring credits.

Investment incentive: The California Competes Credit based on specified criteria including the number of jobs to be created or retained and a set job retention period. This component of the proposal is expected to provide between $100 million and $200 million per year in tax credits.