California Proposition 24, Repeal of Corporate Tax Breaks (2010)
- 1 Election results
- 2 Tax breaks that would end
- 3 Ballot title and summary
- 4 Statutory changes
- 5 Support
- 6 Opposition
- 7 Editorial opinion
- 8 Polls
- 9 Path to the ballot
- 10 See also
- 11 External links
- 12 Additional reading
- 13 References
The goal of Proposition 24 was to stop several corporate tax breaks that were slated to go into effect in 2010 and 2012. The breaks were approved by the California Governor Arnold Schwarzenegger.
Proposition 24 would have prevented eligible corporations from receiving about $1.3 billion in tax breaks per year.
The tax breaks unsuccessfully targeted by Proposition 24 were agreed to by California lawmakers as part of budget agreements in late 2008 and in what capitol reporter Steve Harmon refers to as "secret negotiations in February." The Silicon Valley Leadership Group, according to the New York Times, "lobbied hard" to get the corporate tax break enacted.
The corporate tax break that would have been repealed by Proposition 24 "let companies choose whether to have their income tax based on the proportion of their total sales occurring in California or on a combination of their sales and their operations...including payrolls and property.
- See also: 2010 ballot measure election results
|Proposition 24 (Corporate Tax Breaks)|
- These are the final results for this election as per the California Secretary of State's statement of election results.
Tax breaks that would end
The targeted tax breaks include:
- The "single-sales factor." This allows multi-state corporations to choose whether they will be taxed on property, payroll or sales.
- Loss carry-backs. This allows corporations that are experiencing losses in California's current economy to get refunds for taxes paid up to two years previously.
- Tax credit-sharing. This allows companies with more tax credits than they can use to distribute the tax credits to affiliates.
California's tax regulators estimate that about 120,000 businesses in the state would have higher taxes, if Proposition 24 is approved by voters.
Ballot title and summary
- Repeals recent legislation that would allow businesses to shift operating losses to prior tax years and that would extend the period permitted to shift operating losses to future tax years.
- Repeals recent legislation that would allow corporations to share tax credits with affiliated corporations.
- Repeals recent legislation that would allow multistate businesses to use a sales-based income calculation, rather than a combination property-, payroll- and sales-based income calculation.
Estimated fiscal impact:
- Increased state revenues of about $1.3 billion each year by 2012-2013 from higher taxes paid by some businesses. Smaller increases in 2010-11 and 2011-2012.
If approved by California's voters, Proposition 24 will both amend and repeal sections of the California Revenue and Taxation Code.
See Text of Proposition 24, the "Repeal Corporate Tax Loopholes Act" (California 2010) for the complete text of all changes that Proposition 24 will make, if it is approved.
The California Teachers Association is the main sponsor of Proposition 24. David Sanchez, president of the union, says, "With our schools being slashed by $17 billion over the past two years and 26,000 teachers potentially facing layoff, now is not the time for the state to be giving tax breaks to large corporations and oil companies...Teachers want big businesses to pay their fair share in these dire times of deep cuts everywhere."
Arguments were submitted to the official California Voter Guide on behalf of a "yes" vote on Proposition 24, as were rebuttals to the arguments provided by Prop 24 opponents. The signers of these arguments were:
- David Sanchez, president, California Teachers Association
- Janis R. Hirohama, president, League of Women Voters of California
- Lenny Goldberg, executive director, California Tax Reform Association
- Rob Kerth, president, North Sacramento Chamber of Commerce
- Martin Hittleman, president, California Federation of Teachers
- Hank Lacayo, president, Congress of California Seniors
Some of the arguments that have been made for a "yes" vote on Proposition 24, including those made by supporters for the California Voter Guide, include:
- The deal that resulted in the corporate tax breaks that would be repealed by Proposition 24 was done behind closed doors.
- Most California businesses don't benefit from the tax break that Prop 24 aims to repeal: "Proposition 24 will end tax loopholes that unfairly benefit less than 2% of California’s businesses that are the wealthiest, multi-state corporations. 98% of California’s businesses, especially small businesses, would get virtually no benefit from the tax breaks."
- The California state budget needs the money that these corporations will be able to keep if the tax breaks stay in place, in order to fund important services: "Proposition 24 will make big corporations pay their fair share and put $1.7 billion back into the treasury for our students, classrooms, police and fire services and health care we really need."
- If corporations don't pay these taxes, then the tax burden to pay for California's state government spending on important services will fall more heavily on individual taxpayers: "These unfair corporate tax loopholes put an even bigger burden on the average individual taxpayer. At the same time the Legislature gave corporations $1.7 billion in tax breaks every year, they RAISED $18 billion in taxes on people like you."
- There's a fairness issue at stake and the corporations who will receive the tax benefit cannot be trusted: "Corporations that are paying to defeat Proposition 24 and keep these loopholes are paying their CEOs over $8.5 billion, and made over $65 billion in profits last year, while at the same time laying off over 100,000 workers."
- Main article: Donations to California's 2010 ballot propositions
About $14.2 million was contributed to unsuccessful "Yes on 24" campaign committee, which was called "Yes on 24, the Tax Fairness Act Sponsored by the California Teachers Association."
These donations of $100,000 or over were given to the "Yes on 24" campaign committee.
|California Teachers Association||$8,885,786|
|America's Families First||$2,150,000|
|National Education Association||$2,125,000|
|Alliance for a Better California||$385,309|
|California Federation of Teachers||$107,666|
|California School Employees Association||$100,000|
Political consultants who provided paid services to the "Yes on 24" campaign included:
- Philip Dumbrille: $153,978
- Goodwin Simon: $75,000
- Independent Campaigns: $43,055
- Kaufman Campaigns: $77,500
- Kimball Petition Management: $1,587,364
- Olson, Hagel & Fishburn: $19,662
- Peter D. Hart Research Associates: $193,889
A group called "Stop the Jobs Tax" is opposed to the initiative. They say, on their website, "At a time when two million Californians are out of work, the initiative taxes new job creation, hits California employers and small businesses with higher taxes and stifles job growth in our most promising industries. It would lead to fewer jobs and fewer tax revenues."
Allan Zaremberg is the president and CEO of CalChamber, which is California's largest business coalition. He is also the co-chairman of Californians Against Higher Taxes, a group formed in 2004 that opposed California Proposition 56 (2004). Zaremberg is opposed to the initiative, saying, "It's crazy that public employee unions are opposed to creating more private sector jobs, which enhances revenues to all levels of government."
Businesses that have joined the "Stop the Jobs Tax" coalition include:
- Walt Disney
- Cambridge of California, a Gardena furniture manufacturer. The owner of the company says, "We’re barely surviving now as it is, with the economy as tough as it is and the foreign competition. Those tax breaks were our hope for the future. If they hadn’t been enacted, I would already have closed my doors. Take them away, and I’ll probably have to shut down and throw 27 people out of work."
- A full list of opponents is available here
Arguments were submitted to the official California Voter Guide on behalf of a "no" vote on Proposition 22, as were rebuttals to the arguments provided by Prop 24 supporters. The signers of these arguments were:
- Kenneth A. Macias, chair, California Hispanic Chambers of Commerce
- William J. Hume, past vice-president, California State Board of Education
- Dr. Joseph L. Bridges, president, The Seniors Coalition
- Teresa Casazza, president, California Taxpayers Association
- Marian Bergeson, former California Secretary of Education
- Bill La Marr, executive director, California Small Business Alliance
Some of the arguments that have been made for a "no" vote on Proposition 24 include:
- It will cost California 144,000 jobs because businesses who can't afford the tax will go bankrupt or move to another state. California already has 2 million unemployed people, and Prop 24 will just deepen the state's economic devastation.
- John Mullin, owner, Pacific M Painting, says, "Last year, small business bankruptcies in California rose 81%. I own a small business. Proposition 24 is just one more tax burden we can’t afford."
- A national organization says that California already has one of the country's worst tax climates for business, ranking 48 out of the 50 states. The bad tax climate makes it hard for California's businesses to create jobs. Prop 24 will make all this worse.
- Contrary to the assertions of Prop 24 supporters, the higher tax on businesses could have a much broader impact: "Proponents falsely claim it only hits big corporations, but State Franchise Tax Board records show Proposition 24 could impact 120,000 businesses. Small businesses can’t survive more tax increases."
- Terry Maxwell of T.L. Maxwell's Restaurant says, "We are struggling to keep our doors open and keep jobs for our employees and their families. Small businesses can’t afford Proposition 24."
- What California needs is more jobs. A tax on businesses will reduce the ability of businesses to create those jobs: "It taxes job creation in our most promising industries (high tech, biotech, and clean tech) and hits businesses with another $1.7 billion tax increase—more layoffs, more companies and jobs leaving California. 2,000,000 Californians are already out of work. Isn’t that enough?"
- The way Proposition 24 is drafted, it leaves the decisions about how the California state government would spent the money it will get if the tax breaks are repealed to the very state legislators who are responsible for California's budget crisis, and this isn't a good idea: "Proponents failed to include language to guarantee proper expenditure of the tax increase, leaving it up to the same politicians who misspent us into debt."
- Misha Georgevitch, owner of So Cal Surveyors of Simi Valley, says that his business has been struggling since the economic downturn began: "The market is very soft now and there’s no sign it’s going to turn around any time soon. I hope I don’t have to use the net operating loss provision, but if that tax incentive is taken away, I would seriously look at relocating to another part of the country and start over again there."
- Greg Hines, a lobbyist for the California Manufacturers and Technology Association, says, "When an initiative comes forward that threatens to take away something you had counted on, it adds to uncertainty and deters future investment. And that means the loss of potential jobs and revenues for the state."
- Main article: Donations to California's 2010 ballot propositions
"No on 24, Stop the Jobs Tax" was the primary campaign committee working for a "no" vote on Proposition 24. This group raised $15.4 million.
Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce, had predicted that raising the tens of millions of dollars that opponents believed would be needed to communicate their views on Proposition 24 was a do-able task. He said, "Businesses are very angry with this initiative and the way it’s been described by its proponents as ‘closing tax loopholes,’ They’re angry enough that I guarantee you they will open their wallets to defeat this."
These donations of $100,000 or over were contributed to "No on 24, Stop the Jobs Tax."
|Johnson & Johnson||$775,000|
Political consultants who provided paid services to the "No on 24" campaign included:
- Baselice & Associates: $104,190
- Goddard Clausen Strategic Advocacy: $290,000
- KP Public Affairs: $70,000
- M4 Strategies: $84,500
- The Murray Group: $25,000
- Nielsen, Merksamer, Parrinello, Mueller & Naylor: $210,522
- The Rose Institute (dead link): $90,000
- Wendy Warfield & Associates: $120,000
- Woodward & McDowell: $290,000
"Yes on 24"
- Ventura County Star: "The bottom line: A new tax loophole or two won’t spur businesses to launch major investments in California; businesses do so only reluctantly because of the regulatory stranglehold in the state. And further tax cuts and loss of revenue will worsen conditions in the Golden State, making this state less appealing to those who want to live, work and do business here."
"No on 24"
- Bakersfield Californian: "Why 'no'? Because business needs regulatory certainty in order to plan, grow and prosper. Turning back these cuts now will throw that process into turmoil, and it will hurt the state's already sketchy image in the business world."
- Contra Costa Times: "Reneging on promises of a few tax breaks during a protracted economic turndown would be a grave mistake in a state with one of the highest jobless rates in the nation. Voters should soundly reject Proposition 24 with a no vote in November."
- Long Beach Press Telegram: "The tax law changes were essential elements in reaching budget agreements in 2008 and 2009 and should be honored. Moreover, the tax breaks come at a time when businesses and the jobs they create are needed more than ever in a state with an unemployment rate higher than 12 percent."
- Los Angeles Daily News: "…California businesses have been anticipating the savings – which may be the relief many small- and medium-size companies need to stay open during the continued economic slump. To pull the rug out now is unfair…The tax breaks themselves aren’t unreasonable. In fact, the 10 largest U.S. states, including most of our western neighbor states, have at least one of the contested tax provisions. (Except Nevada, of course, which has no income tax.)"
- Los Angeles Times: "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."
- Mercury News: "Proposition 24 goes too far, repealing tax policies that are flawed but fixable. Voters should reject the initiative, and the Legislature should get to work fixing those flaws."
- Oakland Tribune: "Unfortunately, there is a measure on the November ballot, Proposition 24, that seeks to undo the promises that were made during complex budget negotiations. The initiative would disadvantage struggling state businesses."
- Orange County Register: "Proposition 24: Guaranteed job killer – It’s the wrong fix to address California’s budget woes by increasing taxes on employers. The result would be to put the brakes on any hiring, push more businesses to leave the state for more favorable environments; and translate into even more job losses and higher unemployment for Californians. Proposition 24 would extract more money from small businesses and employers of all sizes in the Golden State without addressing the systemic spending problems in Sacramento."
- Sacramento Bee: "Repealing tax breaks that corporations have been expecting for two years could force them to make some grim decisions about operating in California. Those decisions could further damage the state’s crippled economy."
- San Bernardino Sun: "To pull the rug out now is unfair. More importantly, it sends two terrible messages to the people who invest and create jobs in California: Nothing is certain, and just because we promise you something, it doesn't mean you'll get it."
- San Diego Union-Tribune: "Vote no on Proposition 24 to end job exodus – California unemployment has been above 12 percent for more than a year, the worst numbers since the Depression… A list of departing businesses compiled by Irvine consultant Joseph Vranich shows as many firms left California in the first half of 2010 as all of 2009."
- San Gabriel Valley Tribune: "But now is not the time to burden California companies with over a billion dollars in additional taxes that they would be forced to pass on to ... us, the taxpayers. You don't have to be a shill for Howard Jarvis to call this proposal a job killer. It is a job killer."
- Santa Rosa Press Democrat: "Simply put, the ballot box is a lousy vehicle for setting tax policy, and this initiative comes loaded with unwanted and unintended consequences."
- Torrance Daily Breeze: "The three tax-law changes from those budget deals…are both fair and economically smart…These tax changes, particularly the one concerning credits, can give a much-needed boost to California business and the creation of jobs. California has the highest business taxes in the West and ranks near the bottom of the 50 states in business climate."
- See also: Polls, 2010 ballot measures
|Date of Poll||Pollster||In favor||Opposed||Undecided||Number polled|
|September 19-26, 2010||PPIC||35%||35%||30%||2,004|
|October 10-17, 2010||PPIC||31%||38%||31%||2,002|
Path to the ballot
- See also: California signature requirements
433,971 signatures were required to qualify 09-0058 for the November 2 ballot. Signatures were submitted in early May 2010 and election officials had until June 24 to determine whether enough of the submitted signatures are valid.
Signatures to qualify the measure for the ballot were collected by Kimball Petition Management at a cost of $1,587,363.
- Official voter guide for Proposition 24 (dead link)
- Ballot title, summary and analysis in the California Voter Guide
- Arguments and rebuttals in the California Voter Guide
- League of Women Voters overview of Proposition 24
- California Voter Foundation guide to Proposition 24
- Institute of Governmental Studies overview of Proposition 24
- See also: 2010 ballot measure campaign websites
- Yes on Proposition 24
- Yes on Proposition 24 on Facebook
- Yes on Proposition 24 on Twitter
- Campaign finance reports for "Yes on 24, the Tax Fairness Act" committee
- Campaign finance reports for "California Alliance Action Fund: A Committee Sponsored by Social Justice Organizations for Propositions 24, 25 and Against Propositions 23, 26"
- See also: 2010 ballot measure campaign websites
- Stop the Jobs Tax, opposition website
- Stop Prop 24 on Facebook
- Stop Prop 24 on Twitter
- Campaign finance reports for "No on 24, Stop the Jobs Tax" campaign committee
- Campaign finance reports for California Healthcare Institute Issues Committee
- Campaign finance reports for "Silicon Valley Leadership Group's Save California Jobs Now - No on Proposition 23 and No on Proposition 24, and Yes on Santa Clara County Measure B"
- Millions in political contributions move in late-night transactions
- Study calls Prop 24 a job-killer
- Will Prop 24 Move Hollywood to Las Vegas?
- John Howard Capitol Weekly, "Tax, labor groups target corporate loopholes," July 10, 2009
- Mercury News, "Early steps taken in what could be a pitched battle over corporate tax loopholes," July 13, 2009
- New York Times, "To-Do List Grows for Leadership Group," January 2, 2010
- Orange County Business Journal, "Measure Challenging State Business Tax Breaks Qualifies for November Ballot," June 25, 2010
- Los Angeles Business Journal, "Biz Groups Stand Guard Over Tax Breaks," July 5, 2010
- San Mateo County Times, "California teachers union pushes measure to rein in corporate tax breaks," May 12, 2010
- Arguments for and against Proposition 24 from the official California Voter's Guide
- California Progress Report, "Backing Ballot Measures On The Budget," July 20, 2010
- Donations of $5,000 or more to the "Yes on 24" campaign committee
- Stop The Job Tax website
- Sacramento Bee, "Get serious, Proposition 24 poses threat to workers," July 18, 2010
- Donations of $5,000 or more to the "No on 24" campaign committee
- Ventura County Star, "Yes on Proposition 24," September 8, 2010
- Bakersfield Californian, "Don't rush tax law: Vote no on Proposition 24," October 8, 2010
- Contra Costa Times, "Contra Costa Times editorial: We recommend a no vote on Proposition 24, keep tax breaks for businesses," September 9, 2010
- Long Beach Press Telegram, "No on Proposition 24," September 14, 2010
- Los Angeles Daily News, "No on Proposition 24: Repealing promised tax breaks sends a bad signal to California businesses," September 22, 2010
- Los Angeles Times, "No on 24," September 29, 2010
- Mercury News, "Mercury News editorial: Vote no on Proposition 24," October 3, 2010
- Oakland Tribune, "Oakland Tribune editorial: We recommend a no vote on Proposition 24, keep tax breaks for businesses," September 9, 2010
- Orange County Register, "Editorial: Proposition 24: Guaranteed job killer," September 17, 2010
- Sacramento Bee, "No on Prop 24 -- rollback of tax breaks goes too far," September 21, 2010
- San Bernardino Sun, "Don't renege on tax promises," October 12, 2010
- San Diego Union-Tribune, "Vote no on Proposition 24 to end job exodus," September 23, 2010
- San Gabriel Valley Tribune, "Our View: No on Proposition 24 - it's a job killer," October 5, 2010
- Santa Rosa Press Democrat, "No on 24," October 16, 2010
- Torrance Daily Breeze, "No on Proposition 24," September 16, 2010
- Sacramento Bee, "CTA seeking to repeal corporate tax benefits via initiative," February 5, 2010
- Fox and Hounds Daily, "Money Starts to Flow for Initiatives," February 10, 2010
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