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Prop 39: Closing a Corporate Tax Loophole and Bringing Jobs Back to California

By Rebecca Band, California Labor Federation

Why does California reward ultra-rich companies that move jobs out of the state? 

We’ll tell you why. In 2009, during secret, behind-closed-doors budget negotiations, a handful of state legislators and Gov. Schwarzenegger snuck in a colossal but little-known corporate tax giveaway into the budget in the dead of night. This loophole, known as the “elective single sales factor,” gives corporations the option to reduce the taxes they pay to California by keeping jobs and investment in other states – giving companies a huge incentive to hire outside of California. The loophole has already cost the state tens of thousands of jobs, and the only ones who are benefitting from it are California’s richest corporations. In fact, 80% of the benefits from this loophole go to the 0.1% of California corporations with gross incomes over $1 billion.

It’s high time we end the practice of shelling out taxpayer money to ultra-profitable companies that kill California jobs. Fortunately, there’s Proposition 39, the California Clean Energy Jobs Act, on the ballot this November. Prop 39 would eliminate this wasteful corporate tax loophole that rewards companies who move jobs and operations out-of-state. Closing the loophole also eliminates the unfair advantage out-of-state corporations have over businesses that operate exclusively in California.

This morning, the California Labor Federation announced its official endorsement of Prop 39 at a press conference with Prop 39 Chairman Tom Steyer in Los Angeles. According to Steyer:

Proposition 39 will create tens of thousands of California jobs at a time when our state so badly needs them. It will close an unfair tax loophole that now gives companies a huge incentive to fire California workers and hire in other states. The California Labor Federation's support reinforces the fact that Proposition 39 is a win for California workers and families, and for our economy as a whole.

California Labor Federation Executive-Secretary Treasurer Art Pulaski:

Voting ‘Yes’ on Prop 39 is a no-brainer for anyone who cares about growing our economy through the creation of good jobs. It’s about time we shut down this wasteful corporate tax loophole and use those resources to start investing in California again.

And we can be sure that the funds saved by closing the loophole will go directly to investing in California’s future, because Prop 39 dedicates half of the revenues for the first five years to job-creating energy efficiency and clean energy programs, putting workers in hard-hit industries like construction back to work immediately.

Robbie Hunter, executive secretary of the Los Angeles/Orange Counties Building & Construction Trades Council:

By voting Yes on Proposition 39, voters will move the California economy forward and create thousands of needed green jobs, and the dignity that comes along with a job, for California's hardworking tradespeople. Historically, it is construction jobs like these that have led the nation out of recessions.  We can't depend on the federal government to fix California's economy - we need to do it ourselves, Proposition 39 is a step in this direction.

And if you’re wondering what happens to the rest of the revenue, you’ll be happy to know it will go directly to the state’s general fund, which means more money for essential public services, like schools, and a smaller budget deficit – something our state legislature has been unable to accomplish.

California Sen. Kevin DeLeon (D-Los Angeles), co-chairman of the Yes on Proposition 39 Campaign:

The initiative process was designed to give the voters of California the power to enact law when the Legislature doesn't. Unfortunately, despite my best efforts and the best efforts of the Assembly Speaker, it's been impossible to close this tax loophole. Now it is up to the voters to right a wrong.

Learn more about Prop 39.