No on Prop. 24


Budget deals in 2008 and 2009 included three corporate tax breaks designed to win support from businesses and their allies in Sacramento. Now, however, teachers unions and other interest groups are pushing an initiative, Proposition 24, that would cancel the tax breaks, raising billions of dollars in revenue over the coming decade. Proponents of the measure argue that the tax breaks will do little to create jobs and that they were sneaked into the budget to avoid public scrutiny. The initiative process, however, is the wrong way to address those complaints. We urge a no vote on Proposition 24.

One of the tax breaks allows money-losing businesses to obtain refunds of taxes paid in the two previous years (if they were profitable), starting in 2011. Federal law has a similar provision, but in the past California allowed businesses to apply losses only against future years’ taxes. Another break would let businesses apply tax credits to other units within the same corporate family, starting this year — a measure that’s particularly valuable to corporations with subsidiaries that qualify for research and development tax credits but don’t have profits to offset. The third would let multistate businesses trim their taxes here by allowing them to factor in only the sales revenue from California, not the value of their property and payroll in the state. If all three of these provisions were repealed, the state would collect an estimated $1.3 billion more in business taxes by 2012-13 — more than half of it from multistate businesses.

As we’ve said repeatedly, there’s much to dislike about the budget deals coming out of Sacramento. But we also recognize that the political and economic realities in California all but guarantee that any plan capable of being passed by the Legislature will be unappealing in some way to everyone. If voters pick apart those deals after the fact, reneging on some compromises but honoring others, that will only amplify the dysfunction in the capital.


That’s not to say voters shouldn’t play a role in the budget. They already do, through the Assembly members and state senators they choose every other November, not to mention the many previous initiatives that have carved up so much of the state’s finances.

The issue here is whether these three tax breaks are such bad policy that voters should overrule lawmakers and cancel them. They’re not. Instead, proponents of Proposition 24 are seeking to micromanage the state budget in an effort to generate more revenue for more spending. That kind of meddling makes the difficult job of developing a state budget even harder, and voters should reject it.

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