SF Chronicle: Governor's job plan passes State Assembly

Jerry Brown's revised jobs plan passes Assembly

Wyatt Buchanan, Chronicle Sacramento Bureau

San Francisco Chronicle September 9, 2011 04:00 AM

 

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Friday, September 9, 2011

Photo by Rich Pedroncelli / AP

Gov Jerry Brown discusses his jobs package alongside backers Art Pulaski (left), Bob Blumenfield and Cameron Smyth.

Sacramento --

Gov. Jerry Brown has revised his job creation plan to include reduced tax rates for businesses and individuals in order to win Republican support for the measure.

But even with the changes, Brown did not appear to have enough support Thursday night to get it through the Legislature. The plan passed the Assembly 54-10 Thursday evening, but its prospects in the Senate look doubtful. The plan would end a corporate tax break approved by the Legislature in 2009 that allows corporations to choose one of two tax formulas by which state taxes are calculated for them. Ending the break would bring $1 billion annually in revenue to the state by requiring all corporations to be taxed based on sales in California.

Brown said that ending the tax break would spur job growth in the state because the current structure includes an option that rewards companies that create jobs in other states by lowering their tax burden. He also said the new tax breaks for individuals would create economic activity.

"It puts money in people's pocket, particularly small business, and not affluent people," Brown said. "They spend every penny they get, and so that's money into the economy."

The plan would save corporations about $300 per year and small-business owners $550, according to the Department of Finance. The standard deduction for taxpayers would increase by $1,000, resulting in a tax break of between $10 and $200, with average taxpayers saving about $50.

The governor, along with Republican and Democratic lawmakers, announced the new plan Thursday at the Capitol, one day before the deadline to pass bills. The proposal will need a two-thirds majority to pass, and while that happened in the Assembly, Brown did not have any Senate Republicans with him at the news conference.

Later in the day, the leader of Senate Republicans called Brown's last-minute push "irresponsible." Neither Republican nor Democratic leaders in the Senate had seen details of the plan before the governor announced it.

But Brown called the agreement "unusual and very important" because of the bipartisan support in the Assembly. A previous plan announced by the governor two weeks ago did not gain traction, and Brown worked with a bipartisan coalition from the Assembly to make changes that could win Republican support. Those changes include eliminating a tax break for employers making new hires and replacing it with the permanent tax breaks.

Getting GOP's support

Assemblyman Nathan Fletcher, R-San Diego, said the new proposal is palatable to Republicans because it is revenue neutral, meaning taxes do not increase, though only Fletcher and one other Republican supported it. The previous plan included a tax break that eventually would have expired.

"What we said is if we can get something that provides real relief to small businesses and working families and is a permanent reduction in the California tax code moving forward, then we can support this," Fletcher said, adding, "I don't understand why it wouldn't get out of the Senate."

Getting that support from Senate Republicans could be a challenge, though. After the governor's announcement, Senate Republican leader Bob Dutton, R-Rancho Cucamonga (San Bernardino County), wrote a letter to the governor asking him to call a special session to focus on changes in regulations and tax law.

"There is nothing more complex than tax reform, and trying to jam through a proposal on the last day of session without transparency or input from the public and tax experts is irresponsible," Dutton wrote.

Seeking more review

State Sen. Sam Blakeslee, R-San Luis Obispo, said he would be open to considering the new proposal, but he echoed Dutton in saying the measure needs more public review.

"I'm a strong advocate for tax reforms, but I get really nervous about deals suddenly showing up in the final closing hours with no opportunity for analysis or review of language," Blakeslee said.

Brown spokesman Gil Duran responded coolly to the Senate Republican request for a special session.
"Mr. Dutton should join his colleagues in the Assembly and help pass this bipartisan jobs plan. Don't talk about tomorrow when you can act today," he said.

The proposal received harsh criticism from advocates for working and low-income families.
Jean Ross, the executive director of the California Budget Project, said the state can't afford to give tax breaks to corporations and said the money should be spent on services instead.

"The deal announced today provides costly tax breaks to businesses at a time when corporate profits are at record levels. Moreover, it does so without requiring recipients of the tax cuts to create a single new job or invest even one additional dollar in California," Ross said.