Los Angeles Business Journal

Job Creation Bills Could Trim Business Taxes

By Howard Fine Thursday, September 8, 2011

With just one day left in the legislative session, Gov. Jerry Brown on Thursday announced he had reached a bipartisan deal on a package of tax bills designed to stimulate job creation in California.

The deal would undo legislation passed two years ago allowing companies to choose the cheapest of two methods in calculating sales taxes owed to the state; instead, the bill requires all companies to pay on the share of sales they have in California. This change is projected to generate an additional $1 billion in state revenues.

But the deal also gives substantial new tax breaks to companies. The biggest is a reduction of sales taxes for purchases of manufacturing equipment, which could save the state’s manufacturers $300 million a year. Start-up manufacturers would receive a reduction of four percentage points, while existing manufacturers would receive a reduction of one percentage point.

The package also includes an exemption of 10 percent of the first $50,000 of business income reported on individuals’ income taxes, which could save small business owners $250 million a year.

The bill must clear both the Assembly and the Senate before the Legislature adjourns Friday night. In the past, Republican lawmakers have rejected similar proposals that involve changing the corporate sales tax formula.