Proposed Tax Break Criticized

Senate Leader Bill Lockyer (D-Hayward) on Thursday called a major tax break proposal by Assembly Speaker Willie Brown (D-San Francisco), aimed at inducing corporations such as Taco Bell to keep their headquarters in California, nothing more than a public subsidy to highly paid business executives.

“If we are going to start subsidizing the highest-paid people in the state of California, I think it is fair to begin to regulate the salaries and perks of those people,” Lockyer said.

Lockyer took aim at a newly proposed bill by Brown, a fellow Democrat, that would grant a 6% investment tax credit to major companies that locate or expand their headquarters in California instead of moving to other states.

Brown said through a spokeswoman that his plan resulted in part from the recent disclosure that Taco Bell Corp. is considering shifting its headquarters and 1,000-worker payroll from Orange County to Texas.

Brown’s spokeswoman, Darolyn Davis, refused to comment directly on Lockyer’s criticism. She described Brown’s measure as a product of the Speaker’s economic summit last year and part of his “one step at a time” program to improve the state’s economy.

Lockyer blistered the bill during an informal session with reporters.

Under the Brown measure, businesses that constructed new headquarters buildings would be eligible to receive a five-year tax credit for costs involving real and personal property, construction and wages of employees. If companies fell below certain minimum levels for number of employees, they would lose the tax break.

Lockyer said the bill would provide an estimated $6-million tax credit for Taco Bell and as much as $1 billion if other affected corporations also qualified. He warned that the loss of tax revenue would translate into further reductions in money available for education and health programs.

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Considered a legislative expert on tax issues, Lockyer said he found it distressing that the proposed tax credit represented a “subsidy of CEOs’ salaries.” But he said the notion of government regulation of business executive compensation must be raised “when you begin to subsidize people who get paid tens of millions of dollars.”

“I’m more interested in creating jobs on the bottom end of the ladder rather than at the top end,” Lockyer said.