No on Prop. 24

The ini­tia­tive process is the wrong way to ad­dress com­plaints of deal-mak­ing in the Leg­is­la­ture.

Los Angeles Times - - Opinion -

Bud­get deals in 2008 and 2009 in­cluded three cor­po­rate tax breaks de­signed to win sup­port from busi­nesses and their al­lies in Sacra­mento. Now, how­ever, teach­ers unions and other in­ter­est groups are push­ing an ini­tia­tive, Propo­si­tion 24, that would can­cel the tax breaks, rais­ing bil­lions of dol­lars in rev­enue over the com­ing decade. Pro­po­nents of the mea­sure ar­gue that the tax breaks will do lit­tle to cre­ate jobs and that they were sneaked into the bud­get to avoid pub­lic scru­tiny. The ini­tia­tive process, how­ever, is the wrong way to ad­dress those com­plaints. We urge a no vote on Propo­si­tion 24.

One of the tax breaks al­lows mon­ey­los­ing busi­nesses to ob­tain re­funds of taxes paid in the two pre­vi­ous years (if they were profitable), start­ing in 2011. Fed­eral law has a sim­i­lar pro­vi­sion, but in the past Cal­i­for­nia al­lowed busi­nesses to ap­ply losses only against fu­ture years’ taxes. An­other break would let busi­nesses ap­ply tax cred­its to other units within the same cor­po­rate fam­ily, start­ing this year — a mea­sure that’s par­tic­u­larly valu­able to cor­po­ra­tions with sub­sidiaries that qual­ify for re­search and devel­op­ment tax cred­its but don’t have prof­its to off­set. The third would let mul­ti­state busi­nesses trim their taxes here by al­low­ing them to fac­tor in only the sales rev­enue from Cal­i­for­nia, not the value of their prop­erty and pay­roll in the state. If all three of these pro­vi­sions were re­pealed, the state would col­lect an es­ti­mated $1.3 bil­lion more in busi­ness taxes by 2012-13 — more than half of it from mul­ti­state busi­nesses.

As we’ve said re­peat­edly, there’s much to dis­like about the bud­get deals com­ing out of Sacra­mento. But we also rec­og­nize that the po­lit­i­cal and eco­nomic re­al­i­ties in Cal­i­for­nia all but guar­an­tee that any plan ca­pa­ble of be­ing passed by the Leg­is­la­ture will be un­ap­peal­ing in some way to ev­ery­one. If vot­ers pick apart those deals af­ter the fact, reneg­ing on some com­pro­mises but hon­or­ing oth­ers, that will only am­plify the dys­func­tion in the cap­i­tal.

That’s not to say vot­ers shouldn’t play a role in the bud­get. They al­ready do, through the Assem­bly mem­bers and state sen­a­tors they choose ev­ery other Novem­ber, not to men­tion the many pre­vi­ous ini­tia­tives they ap­proved that have carved up so much of the state’s fi­nances.

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. The Times’ en­dorse­ments in the Nov. 2 elec­tion are col­lected upon pub­li­ca­tion at­ion.

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