The Business section of today’s LA Times contains a damning column by Michael Hiltzik on our perennial state budget deficit:
I believe we can all agree on the root cause of the state’s $20-billion budget gap.
It’s welfare: all those millions of taxpayer dollars going to recipients who line up for their government handouts instead of competing in the marketplace on a level playing field like the rest of us, who don’t pay their fair share of taxes and who get protected by a politically powerful lobby.
Yes, I’m talking about the business community.
He then gets into specifics, starting with the recent film subsidy program:
The state budget is rife with industry goodies. For example, there’s the Hollywood subsidy, currently pegged at $100 million a year in tax credits.
The rationale for this welfare program is to keep productions from fleeing to other states, taking California jobs with them. But you could go blind looking for an independent study, as opposed to studies funded by the state film commissions handing out the dough, showing that such programs produce more in overall benefits than they cost.
Quite the contrary — according to Governing magazine, New Mexico, which had aggressively courted producers with $40 million in tax rebates, concluded in 2008 that for every dollar it spent, it received 14.4 cents in return.
Ouch. Our “Film Santa Clarita” incentive program was enacted on the premise that we would get more than we give. Do we?
Hiltzik then commits white collar blasphemy and attacks the third rail of corporate welfare: the Enterprise Zone:
The biggest state incentives are attached to enterprise zones, which cost as much as $500 million a year in forgone taxes. Businesses locating within any of 42 designated zones across the state can apply for tax credits and other bounties for hiring unemployed or low-income workers.
But there’s a vigorous debate over whether the program increases employment. A study published last year by the Public Policy Institute of California found “no statistically significant effect on employment” from the program.
Double-ouch. This blog has debated the benefits of E-Z credits at least three times this year alone.
And if that wasn’t enough, Hiltzik says there’s still plenty of taxing left to do on CA businesses:
Despite this state’s reputation for being tough on business, other states rely far more on business taxes than we do. According to a survey by the accounting firm Ernst & Young, California ranked 35th in terms of business’ share of state and local taxes in 2007. (That is, in 33 other states and the District of Columbia, business carried a higher burden relative to individual taxpayers than in California.) Measured by business taxes as a percentage of gross state product, California ranked 32nd.
Hiltzik doesn’t reconcile his statements with the avalanche of companies that have fled California. But I appreciate the article for raising questions about our budgetary priorities at the City and State level beyond education, pensions and illegal immigrants.
Side note: where is the Tea Party on this conversation? I wasn’t able to find a single reference on the SCV Tea Party website commenting on local, state or federal tax credits for business, but plenty deriding HCR, financial reform and the rest. Maybe I just missed it.
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Maybe the Tea Party was out having tea. BTW, has Sarah Palin become the TP’s (un)official spokesperson? If so, there gonna need a lotta cash to keep that lipsticked mercenary pig happy.
That’s hardly a “damning column.” I would call Hiltzik’s piece a sad failure. He’s talking about a $2oB budget gap, but his blame is directed at comparatively tiny programs.
*$100M in film credits = 0.5% of budget gap
*$500M in enterprise zone spending = 2.5% of budget gap
*$1B for no severance tax on oil = 5% of budget gap
And he claims we’re getting scant returns on these investments based on two studies: one from New Mexico for the film tax credits, and one from a San-Fran-based think tank for the enterprise zone spending. So, at best, he explains 8% of the budget gap, and gives no consideration to how these tax breaks might help businesses.
I’m all for businesses making it on their own (i.e., without gov’t hand-outs), but this article makes a pretty lame case.
Why is it that once things start getting cut everyone does this… Everything needs to be looked at, including the wasteful spending in our military budge which is ignored!
Soldiers don’t need $300 toilet seats.