Third tax measure is under radar 

click to enlarge Jerry Brown - COURTESY PHOTO
  • Courtesy Photo
  • Jerry Brown

Now that ballot propositions for November’s election have been given names, the real campaigning can begin.

Already, a group of folks supporting Gov. Jerry Brown’s tax measure, Proposition 30, has filed to go after a competing tax proposal, Proposition 38, sponsored by Molly Munger, a civil-rights attorney. Anti-tax groups will go after both.

But thus far, these “Munger Games” have left out a third tax proposal on the ballot: Proposition 39.
Companies that conduct business in many states can be taxed in all those states, and each state has a different way of figuring out what fraction of a company’s profits it can draw a line around and tax. Since 1993, California has used a multifactor calculation to tax businesses. It’s based on property, payroll and sales within our state.

The test rewarded companies located outside the state that sold lots of their products within California, as they weren’t getting hit with extra payroll and property taxes, as is the case with companies located here.

As part of a prior state budget agreement, starting in 2011, companies could choose whether to use the multifactor test or just be taxed on the company’s sales within California — the “single sales” factor.

Who would choose the single-sales factor? Companies headquartered here, but which sell most of their products elsewhere, such as Intel. Companies not headquartered here would usually choose the multifactor test.

Prop. 39 would make the single-sales factor the only option for any company conducting business within the state. The multifactor option would be eliminated. According to a 2010 legislative analyst report, Texas, New York, Virginia, Georgia, Massachusetts, Illinois, Michigan and Ohio all use the single-sales factor, and making it mandatory would bring in an extra $1 billion.

So why is Prop. 39 called the “California Clean Energy Jobs Act”? Because it requires $550 million to be set aside in each year’s budget for the next five years — regardless of the amount of revenue from the single-sales factor — to magically create jobs for people to go about making everything in our great state energy efficient. Armies of solar panel installers and Energy Star light bulb twirlers will be the real winners when Nevada companies have to ante up for selling all their wares here.

With voters in no mood for tax increases and the fierce campaign that those out-of-state companies will mount to defeat Prop. 39, look for backers of the proposition to try and sell it as an environmental proposal. It’s the one kind of green Californians might still vote for.

Drink up Capitol

On June 6, the state Senate debated whether to fund the first construction leg of the California high-speed rail project. The appropriation passed by only one vote, but not before a lengthy discussion. The fun thing about an argument over a train is that it lends itself so readily to hackneyed metaphors. The project was called a “fiscal train wreck” and a “runaway train,” and others said we need to “put the brakes on” the plan. Between those references and the elongated pronunciation of “BILLyon dollars,” it was practically a drinking game for our legislators — with one very expensive hangover.

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Melissa Griffin

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