Transcript End the Corporate Gravy Train! Reform Enterprise Zones

Reform Enterprise Zones
Corporate profits are skyrocketing
Source: Federal Reserve Economic Data, 12-20-2012.
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Corporations are paying less in taxes
Source: Center on Budget and Policy Prioirities .
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What is the Corporate Gravy Train?
Corporate tax breaks allow companies to get out of
paying the taxes they owe on their profits.
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Who’s riding the corporate gravy train?
These S&P 500 companies paid less than
a 5% tax rate.
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Who’s riding the corporate gravy train?
These S&P 500 companies got a tax REFUND.
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How do we stop the
corporate gravy train wreck?
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California spends billions of dollars every year on
corporate tax breaks.
Few have any legislative review, sunset dates,
accountability or transparency.
It only takes a majority vote to create a tax break – but it
takes two-thirds to reform, reduce or eliminate tax
breaks.
We have to end them one by one.
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Enterprise Zones: The Worst
Tax Break
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The Legislature created Enterprise Zones (EZs) in
1984 to create jobs in economically distressed areas.
Businesses that locate in EZs are eligible for special
tax breaks for doing business in the Zone.
California can designate up to 42 EZs and currently
there are 40 zones across the state.
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Am I in an Enterprise Zone? Probably.
Watsonville and Antelope Valley Zones expired in 2012 and were not re-designated.
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How do EZs work?
EZs provide business with generous tax breaks:
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Hiring Credits – Up to $37,440 for qualified new hires;
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Sales tax credit for equipment purchases;
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Banks can receive a net interest deduction;
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Unused tax credits can be applied to future tax years;
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Preference points on state contracts;
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Many generous local matching credits.
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The EZ program just keeps growing
EZs are growing by 35% annually and cost
$700 million this year
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EZs are devouring the state budget!
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Are EZs worth the cost?
The best independent research shows that EZs have
failed to create jobs.
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The Public Policy Institute of California’s comprehensive
study in 2009 found that EZs failed to increase
employment.
In 2010, the non-partisan Legislative Analyst Office
called for eliminating the EZs because “they are
expensive and not strongly effective.”
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Who gets EZ credits?
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Corporations with assets of $1 billion or more claimed
61 percent of EZ tax credits.
The vast majority of hiring tax break vouchers were
claimed by businesses in the Los Angeles/Hollywood
and San Francisco zones, not by businesses in the
highest unemployment areas.
Retailers and fast food businesses, such as Wal-mart
and Taco Bell, claimed more than 40 percent of credits.
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EZ Job Standards
EZs have no job standards.
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EZ hiring credits are only given for wages up to $12 an
hour. There’s no incentive to pay workers more, because
there’s no additional credit.
The credit is larger the first year and shrinks over
subsequent years, rewarding employers with high
turnover.
Companies get credits for new hire, not new jobs
created.
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EZ Tax Consultants
EZs have spawned a cottage industry of tax consultants
who troll zones for clients. They look through hiring records
and get companies tax refunds – then take a cut in
contingency fees.
From Zone Credit Consulting:
“Many of these incentives are retroactive in nature. Zone Credit
Consulting can offset tax you may have paid in 2006 or 2007!
Our contingent fee arrangement guarantees that you pay ONLY
for results.”
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EZs are bad for union members
Teamster members employed at VWR and
Blue Linx know first hand the devastation
of the EZ program. Workers at both
companies lost their jobs when their
employers left town to chase EZ tax
credits in other parts of the state.
Because the credits are for new hires,
both companies refused to let workers
follow their jobs to the new facilities. The
companies opened up non-union work
sites in Ezs, paying the new workers half
as much as they did to Teamster
members.
And guess who paid for it? Me, you and
the workers at VWR and Blue Linx.
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VWR Workers on EZs
“It’s a shame that
our taxes take away
our jobs to move
them somewhere
else for lower
wages. How is that
creating jobs?”
~ Joan Beighley
Worker, VWR
“Enterprise Zones serve
as the milking cow
of big corporations,
tax consultants and
lobbyists who rake in
millions of millions of
dollars of taxpayer
money.”
~ Donald “Don” Dugyawi
“Enterprise Zones
are killing our state.
It needs to be
stopped. My tax
dollars are paying
to have me lose my
job.”
~ GianCarlo Ricci
Worker, VWR
Worker, VWR
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Challenges to EZ Reform
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California Enterprise Zones are in the districts of 54
Assembly members and 35 Senators. That means
80% of state legislators have EZs in their districts.
Any vote to reform EZs requires a two-thirds
supermajority.
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Real Reform for EZs
The California Labor Federation is sponsoring SB 434 (Hill)
for real EZ reform, which will
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Eliminate retroactive credits: Credits can only be for
current employees who were just hired.
Require job creation: Employers must create net new
jobs in the state to claim the hiring credit, and must allow
employees to transfer.
Ensure quality job standards: Employers must pay at
least $16 an hour and meet retention standards to claim
the credit.
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Real Reform for EZs
The California Labor Federation is sponsoring SB 434 (Hill)
for real EZ reform, which will
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Cap, sunset and review: Cap the cost of the
program and sunset it.
Ensure transparency: Create a public database of
companies that get EZ tax breaks and how many
jobs they created.
Regulate tax consultants: Prohibit contingency fee
arrangements with tax consultants that drive up the
cost of the program with excessive claims.
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End the Corporate Gravy Train!
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EZs are just the first battle in the war to end the
corporate gravy train and invest in California again.
We fought to have a supermajority in both houses of
the legislature. NOW IS THE TIME TO USE IT!
California’s economy is fragile – every taxpayer
dollar should create jobs and economic recovery.
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The Campaign to End the Gravy Train
To win, we must engage, educate and activate our
members!
th at Legislative
 Rally in Sacramento on April 16
Conference
 District visits and press events
 Visits with Assemblymembers and Senators
 Op-eds, Letters to Editor, newsletter articles, etc.
 Toolkit on the way!
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QUESTIONS?
For more information, contact Sara Flocks
[email protected]
Thank you!
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