BILL ANALYSIS
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THIRD READING
Bill No: SB 1272
Author: Wolk (D), et al
Amended: 4/21/10
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 3-2, 4/14/10
AYES: Wolk, Alquist, Padilla
NOES: Walters, Ashburn
SENATE APPROPRIATIONS COMMITTEE : 6-3, 5/3/10
AYES: Kehoe, Corbett, Leno, Price, Wolk, Yee
NOES: Cox, Walters, Wyland
NO VOTE RECORDED: Alquist, Denham
SUBJECT : Tax credits
SOURCE : California Labor Federation
DIGEST : This bill, for taxable years beginning on or
after January 1, 2011, requires any bill that authorizes a
personal income or corporation tax credit to contain, among
other provisions, (1) specified goals, purposes, and
objectives that the tax credit will achieve, (2) detailed
performance indicators to measure whether the tax credit is
meeting those goals, purposes, and objectives, and (3) a
requirement that the tax credit cease to be operative seven
years after its enactment date, as specified.
ANALYSIS : Existing law provides various tax credits
designed to provide incentives for taxpayers that incur
CONTINUED
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certain expenses, such as child adoption, or to influence
behavior, including business practices and decisions, such
as research and development credits and Geographically
Targeted Economic Development Area credits. The
Legislature typically enacts such tax incentives to
encourage taxpayers to do something they would otherwise
not do.
This bill provides that any bill that enacts a credit
against the Personal Income Tax Law or Corporation Tax Law
for taxable years beginning on or after January 1, 2011,
contain:
1. Specific goals, purposes, and objectives that the tax
credit will achieve.
2. Detailed performance indicators for the Legislature to
use when measuring whether the tax credit met its
specific goals, purposes, and objectives.
3. Data collection requirements to enable the Legislature
to determine whether the tax credit is meeting or
failing to meet its detailed performance indicators.
The requirements shall include specific data, including
baseline data, to be collected and remitted in each year
the credit is effective for the Legislature to measure
the change in performance indicators, and the specific
taxpayers, state agencies, or other entities required to
collect and remit data.
4. A seven-year sunset.
This bill also makes findings regarding tax preferences
generally and their current fiscal impact on federal and
state governments.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/5/10)
California Labor Federation (source)
American Federation of State, County and Municipal
Employees, AFL-CIO
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California Nurses Association
California Professional Firefighters
Service Employees International Union, Local 1000
Western Center on Law and Poverty
OPPOSITION : (Verified 5/5/10)
Cal-Tax
California Aerospace Technology Association
California Chamber of Commerce
California Manufacturers and Technology Association
TechAmerica
ARGUMENTS IN SUPPORT : According to the author, "Today's
public finance system in California requires major reform.
While I have pursued changing our budgeting system to apply
performance measurements for spending programs, I am trying
to do the same with SB 1272, which applies a
performance-based methodology to future tax expenditures
enacted by the state. There is no good reason not to
evaluate tax expenditure programs with the same rigor that
we use when judging spending decisions, especially when
California's tax preference portfolio now exceeds $41
billion, equal to half of our total revenue. While we
cannot change existing tax preferences, we can at least
start keeping better track of future tax preferences."
ARGUMENTS IN OPPOSITION : The opponents of the bill state
that they are "opposed to this bill because it would create
uncertainty regarding long-term tax planning. When
businesses choose to locate in a sate, apart from factors
such as availability of a skilled workforce,
infrastructure, regulatory environment, and tax structure,
businesses evaluate whether they can rely on these factors
to remain relatively stable and consistent in the long
term. For example, if a state currently has a skilled
workforce, but high school drop-out rates are escalating,
it is unlikely that a skilled workforce will be available
in the future. Similarly, businesses evaluate whether they
can rely on the existence of current tax incentives ten
years from now. There is no question that the state should
consider the effectiveness of tax policies, as well as
programmatic expenditures, to ensure that all
budget-related items are cost-effective. However, a 7-year
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sunset on all tax credits will have the adverse effect of
creating uncertainty with respect to the future of the
state's tax structure."
DLW:mw 5/5/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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