Corporate Transparency and Accountability

California gives tax subsidies to corporations as an incentive for them to do business and create jobs in the state. Under existing law, it is nearly impossible to track how much of California’s budget is lost to corporate tax subsidies, what companies are getting the subsidies, and if those subsidies are creating jobs. Many of these tax expenditures are permanent and never reviewed. Companies are permitted to take taxpayer money and run – relocating jobs in other states or countries.

At the same time that dollars flow out to corporations, the public sector is being demolished by budget cuts. Our job creation agenda recognizes that growth in the private sector will not jumpstart our economy if the public sector is collapsing under layoffs, wage cuts, and service reductions.

Tough budget times require every public dollar to be reviewed with scrutiny.

• Unified development budget (AB 2564 – Swanson). Corporate tax breaks are not included in the budget, making it difficult to track their true cost. This bill will require that all tax break expenditures are a line item in the budget.
• Sunset and review of all tax breaks (SB 1272 – Wolk). Tax expenditures should be regularly reviewed for their effectiveness. This bill will require all tax credits, when created, to state their intended purpose, be evaluated for their overall effectiveness, and sunset five years from enactment. Effective tax expenditures shall be affirmatively reauthorized by the Legislature.
• Clawbacks (SB 1391 – Yee). Companies that receive tax subsidies and fail to meet the intended purpose and goals required by the Legislature should pay the state back the tax subsidies received, plus a penalty. Clawback provisions, requiring firms to pay the tax credits back, will be created under this bill. A strong penalty structure will require companies to be rigorous in meeting their goals. Companies will report annually on any tax subsidies.
• Corporate tax break database (AB 2666 – Skinner). This bill will create a publically accessible database that would display the names of all applicants for economic development subsidies, their stated intended purposes, the number of jobs created, their wage rates and benefits. Illinois has adopted such database, providing more information to policymakers and the public to assist in holding recipients of tax expenditures accountable to taxpayer goals.