State Tax Break Is Proposed for Aerospace Firms
It seems like there’s no tax break too small for a big company to lobby for.
Lockheed Martin Corp., Boeing Co. and Aerojet General Corp. are backing a bill by Assemblyman Abel Maldonado (R-Santa Maria) that would expand a state and local sales tax exemption designed to encourage space launches from California.
Maldonado claims his bill would reduce taxes by $1.6 million a year. That’s small change for an aerospace giant like Lockheed, which had revenue of $31.8 billion last year -- and for a state like California, which is facing a $14-billion deficit.
But the small amount involved hasn’t stopped critics from attacking Maldonado’s bill as a giveaway.
“This is money for nothing,” groused Lenny Goldberg, president of the California Tax Reform Assn.
The current tax break covers materials used to build rockets and satellites launched into space from California. Maldonado’s bill would extend it to launch pads, rocket transport vehicles and other ground-based equipment.
The bill, heard for the first time Monday by the Assembly Revenue and Taxation Committee, would discourage aerospace companies from moving launch operations from California to foreign countries or other states, said Maldonado, who hauled a rocket engine to the steps of the Capitol to publicize his bill.
Maldonado said 43% of the world’s satellites were made in California but only 20% were launched from within the state. California’s historical advantages as a launch site are being challenged by Florida, with its facilities at Cape Canaveral, and Alaska, where the state government is subsidizing construction of a commercial satellite base on Kodiak Island, Maldonado said. And France and Russia are expanding the European Space Agency’s launch facility in French Guiana in South America.
Maldonado claims his bill could generate an estimated $53 million a year of high-paying jobs. That estimate is based on employment being generated at Vandenberg Air Force Base by a Lockheed Martin project to renovate a launch-pad complex for Atlas V rockets, Lockheed spokeswoman Stacy Rue said. She conceded, however, that the lack of such a proposed tax exemption was “not a factor” in Lockheed’s decision to successfully bid for the Santa Barbara County job.
The Maldonado bill, if it becomes law, would provide tax breaks for ground operations for Lockheed and Sea Launch, a Long Beach-based international consortium that includes Boeing and Russian, Norwegian and Ukrainian companies. Sea Launch uses a floating platform to fire communications satellites into equatorial orbits.
Critics of the bill contend that it’s California’s natural advantages -- weather and location, not tax breaks -- that draw satellite launching business. Aerospace companies are trying to use the original 1993 space-related tax exemption to pick up a relatively modest tax windfall, said Goldberg of the tax reform group, a liberal-leaning research and advocacy organization.
Maldonado’s bill is one of several tax breaks being proposed by lawmakers this year, despite the state’s shaky financial situation. The California Chamber of Commerce wants to restore a manufacturers’ tax credit that expired last year, while Bay Area and San Diego legislators are leading a drive for tax credits for the biotech industry.
“In this [economic] situation, if people are going to come in for tax breaks, there had better be some gross injustices,” Goldberg said.
Gov. Arnold Schwarzenegger has no position on the Maldonado bill. However, it and all proposed tax breaks would be “evaluated on their merits for job creation,” spokesman H.D. Palmer said.
A committee vote on the Maldonado bill is set for April 19, when the revenue and taxation panel is scheduled to consider measures that might have an effect on the governor’s proposed 2004-05 budget.
