By Patrick Glendening, Staff Columnist
Support and opposition for Proposition 24 — the “California Corporate Loophole Repeal Initiative” or the “Tax Fairness Act” — both focus on the proposition’s influence on job creation. Both sides argue their stances promote job growth in California, so it may be difficult to tell who is twisting the facts. Whichever side of the debate voters choose, this proposition is incredibly important to all Californians entering the workforce in the near future. If Proposition 24 is approved, it will repeal three tax break laws for California businesses approved two years ago.
The first law introduced is called “the single sales factor.” This legislation permits corporations to choose how they’ll be taxed — either on their total sales in California or a mixture between sales, payroll and business property. By deciding the method by which they will be taxed, companies are empowered to choose the lowest possible tax rate.
The second piece of legislation, called “loss carry backs,” would allow corporations facing losses to get a refund on taxes paid in the last two years. This law ensures corporations will be refunded for losses since the three laws were proposed.
The final proposed law, called “tax credit sharing,” enables successful companies to share unused tax credits with smaller affiliated companies. Large companies that own or associate with smaller businesses will be able to support them if they are either just starting up or struggling in the current economic climate.
Remember, a “yes” vote on Proposition 24 is an effort to repeal these three tax breaks, not enforce them.
Supporters of Proposition 24 argue that the proposition will cut $1.3 billion in “tax giveaways” to large corporations and that the tax laws don’t give corporations incentive to keep jobs in California. Supporters also claim more than 98 percent of California businesses won’t benefit from the three laws, arguing corporations shouldn’t get tax breaks when public school systems are receiving drastic cuts.
Opposition states the proposition would hurt small businesses the most, not corporations. The number of bankruptcies declared by small businesses rose by 81 percent last year: The three tax break laws will help lower this percentage. Opponents believe California needs the three tax breaks to stimulate business growth and compete with other states, which have recently updated their tax laws.
While business tax isn’t the most transparent topic of debate on our November ballot, the outcome of Proposition 24 will have a substantial impact on California’s economy and our job market. Take the time to make an informed decision.
