A Taxing Day In Senate Committee

Katy Grimes: Sitting through 10 different tax-related bills this morning in a Senate committee was taxing enough. But witnessing the level of legislative misunderstanding of what helps and hinders businesses was even more so.

In the the Senate Governance and Finance Committee, Republican Sen. Bill Emmerson, (Hemet) introduced SB 156, a bill that would expand the Jobs Tax Credit to more employers. And why? Because not enough California employers have availed themselves of the $400 million made available by the Legislature.

The Franchise Tax Board reported that only $40 million has been dispersed so far, since the 2009 budget alloted the funds.

What many do not understand is that it takes far more than a $3,000 tax credit for employers to commit to hiring more employees… maybe more like $20,000 to $50,000 reasons.

Employers don’t make hiring decisions based on tax credits. And in California, it’s the stringent  regulatory and high tax environment that employers currently base hiring decisions on.

Bill analysis explained, “In 2009, $400 million was set aside in the budget to allow small businesses with 20 or fewer employees to earn a $3,000 tax credit for every new employee hired.”

SB 156 would increase the size of the employers allowed to apply for the tax credit from those which employ fewer than 20 employees, to employers with 50 or fewer employees.

The state is actually trying to give $400 million away and has few takers. Shouldn’t that be the first clue that this may not be the best business stimulating incentive?

There were no supporters of the bill at the hearing.

Lenny Goldberg with the California Tax Reform Association voiced his opposition to the bill. “I’m an employer and won’t hire for a tax credit,” said Goldberg. He acknowledged that it costs employers at least $20,000, up to $60,000 or more to hire a new employee.

And still the bill passed out of the committee 9-0. Can’t lawmakers come up with a better, more “stimulating” use of $400 milion for California business owners?

Obsiously no one thought to consult with small business owners before creating the fund, or crafting this legislation.

MAR. 23, 2011