Thursday, August 25, 2011

Jerry Brown's Jobs Plan: Taxes and Green Jobs

It appears that Sacramento's war on economic growth unemployment is well underway now, with Governor Jerry Brown set to outline a plan to get California's sluggish economy going. Brown's plan has two basic pieces, neither of which should surprise observers familiar with his usual approach to solving the state's ills. Unfortunately for Californians weary of watching the governor struggle to get Republican lawmakers to sign on to his ideas, both ideas require two-thirds majority approval from the Legislature.

Part one of his plan involves re-authorizing the state's electricity surcharge. Since 1997, utility consumers in the Golden State have seen this surcharge on their electric bills, and the state has used the $400 million in revenues from it to subsidize energy-efficiency programs and green-power technology development. If we were living on a planet in which people were assumed to respond to economic incentives, one would think that letting the charge expire as scheduled at year's end would be a good thing, putting more money in the pockets of consumers. Unfortunately, we live in California, where it's presumed that no good thing would exist without government fiat. As such, Brown and his fellow Democrats, their cronies in the renewable-energy industry, environmentalists, and organized labor all view the surcharge as critical to their vision of a "green" future. Never mind the green-jobs folly in Spain or the mounting evidence that most of the taxpayer dollars thrown at these technologies have been wasted. This time, doing the same thing really will yield different results!

The second pillar of Brown's plan amounts to shuffling the deck chairs of the state's corporate tax structure. Bringing back one of his tax plans from the spring, he wants to tighten a 2009 corporate tax loophole by requiring multi-state companies to estimate their tax liability by the proportion of sales in California relative to sales outside the Golden State. The proposal is a little arcane, but the takeaway message is that companies building facilities and hiring workers in California would benefit, while some major firms would see their taxes rise substantially. Back in January, Brown estimated that the so-called "single sales factor" would bring in $1 billion in new revenues. Rather than using the revenues against the state's budget deficit, now the governor would use them to offset the effects of a 4% cut in the sales tax rate for manufacturing start-ups, as well as a 3% sales tax cut for other businesses. In addition, Brown would expand employer tax credits to more firms; currently these credits are only available to companies with 20 or fewer employees. The implications of these ideas aren't clear: while the credits and sales-tax cuts for businesses are good ideas, once again it seems that Brown is incapable of doing something good for the state's business climate without offsetting it with something bad.

The catch in both of these things, of course, is one we grew very familiar with in the winter and spring: both involve tax increases, and as such will require Brown to get two Republican votes in each house of the Legislature. Given how the budget fiasco turned out, we wouldn't guess that the power surcharge has any hope of being extended. The corporate tax shifts, on the other hand, may have some life, if the GOP can manage to depict their support as pro-jobs rather than pro-taxes.


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