SB 434 (Hill) Reforms Wasteful Enterprise Zone Program, Requires Tax Dollars Be Tied to Job Creation
Sacramento, CA — Hundreds of California working families rallied at the stae Capitol to demand that legislators stand up for taxpayers by fixing the wasteful Enterprise Zone (EZ) tax break for mega-corporations like Walmart and McDonalds that fails to produce new jobs. Rally attendees called the EZ program and other unaccountable corporate tax giveaways the “corporate gravy train.” The workers and their unions back reforms that would put the EZ program and other special corporate tax carve-outs to the “jobs test” so taxpayers are sure the dollars invested in these programs create the jobs that are promised.
“Taxpayers are sending $700 million per year straight into the pockets of corporate executives without seeing good jobs created in return,” said Art Pulaski, Executive Secretary Treasurer of the California Labor Federation. “It’s time for serious reform of the wasteful enterprise zone program. Every single legislator in California needs to understand that either they’re standing on the side of taxpayers who demand our money is spent wisely, or they’re in the pockets of the special interest lobbyists and CEOs riding the corporate gravy train.”
EZs were originally intended to create jobs in economically distressed areas but they have long since deviated from their purpose to become a tax giveaway to the largest corporations in the state. An overwhelming 61 percent of enterprise zone tax breaks were claimed by corporations with over $1 billion in assets, according to the Franchise Tax Board.
Each year, the state gives away $700 million in EZ tax credits to big, profitable corporations, but doesn’t require that a single new job be produced for that investment of taxpayer dollars. Employers can get tax breaks for simply hiring an employee into an existing position, not growing a new job. To make matters worse, the program encourages unscrupulous companies to eliminate good jobs, pack up and move to another part of the state, and get a fat tax bonus for hiring workers at low wages.
The Public Policy Institute of California released a study in 2009 finding that Enterprise Zones have "no statistically significant effect on either employment levels or employment growth rates." In addition, the California Legislative Analyst's Office has issued several reports concluding that Enterprise Zones do not create jobs, finding the program is "expensive and not strongly effective."
"The Enterprise Program has evolved into a handout for large corporations without creating new jobs," said Sen. Jerry Hill (D – San Mateo). "In a survey conducted by the state, nearly half of businesses report that the EZ hiring credit "never" or "rarely" influenced their hiring decisions. The program has shifted away from its mission to help small businesses create jobs in underserved parts of the state and now nearly all of the tax credits (91 percent) are claimed by corporations with assets of $10 million or more. Corporations with less than $1 million in assets claimed only 1 percent of Enterprise Zone tax credits."
Hill has authored SB 434, legislation that would bring accountability and transparency to the EZ program. The California Labor Federation and a coalition of partners including the California Federation of Teachers, the Service Employees International Union - California, the American Federation of Federal, State, County and Municipal Employees, and Western Center on Law and Poverty, have come together to support SB 434’s commonsense reforms to make the enterprise zone program transparent and accountable to taxpayers. These reforms will:
- Expose which corporations are driving the train and where they money goes. The EZ program is a prime example of how corporate lobbyists can write secret tax giveaways into tax code and shield the identities of the companies taking our tax dollars. That’s a recipe for fraud and abuse. SB 434 would create a public database of companies that get EZ tax breaks and how many jobs were created so the Legislature can evaluate performance.
- Put the brakes on waste. Under the SB 434, employers could only claim a credit for net new job creation in the state, ending the wasteful boondoggle that allowed companies to get fat breaks without creating good jobs.
- Reward companies that create good jobs. SB 434’s reforms include wage standards that will ensure that taxpayer dollars are directed to the creation of middle-class jobs instead of instead of rewarding low-wage corporations like Wal-Mart.
Pulaski remarked that the effort to reform the Enterprise Zone program is part of a larger, long-term effort on the part of workers and their unions to fix the tax code so that it reflects the interests of middle-class Californians, not the special interests of corporate CEOs and their lobbyists.
“Our campaign has a simple principle: Every single corporate tax break must be put to the jobs test. Either these tax breaks create good jobs, or we reform or eliminate them,” he said. “Big corporations have had a free ride on our dime for too long. It’s time to derail the corporate gravy train.”