Corporate profits are skyrocketing sf/tng39521cwa/afl-cio 2 Source: Federal Reserve Economic Data, 12-20-2012.
Corporations are paying less in taxes sf/tng39521cwa/afl-cio 3 Source: Center on Budget and Policy Prioirities.
What is the Corporate Gravy Train? Corporate tax breaks allow companies to get out of paying the taxes they owe on their profits. sf/tng39521cwa/afl-cio 4
Who’s riding the corporate gravy train? These S&P 500 companies paid less than a 5% tax rate. sf/tng39521cwa/afl-cio 5
Who’s riding the corporate gravy train? These S&P 500 companies got a tax REFUND. sf/tng39521cwa/afl-cio 6
How do we stop the corporate gravy train wreck? California spends billions of dollars every year on corporate tax breaks. Few have any legislative review, sunset dates, accountability or transparency. It only takes a majority vote to create a tax break – but it takes two-thirds to reform, reduce or eliminate tax breaks. We have to end them one by one. sf/tng39521cwa/afl-cio 7
Enterprise Zones: The Worst Tax Break The Legislature created Enterprise Zones (EZs) in 1984 to create jobs in economically distressed areas. Businesses that locate in EZs are eligible for special tax breaks for doing business in the Zone. California can designate up to 42 EZs and currently there are 40 zones across the state. sf/tng39521cwa/afl-cio 8
Am I in an Enterprise Zone? Probably. sf/tng39521cwa/afl-cio 9 Watsonville and Antelope Valley Zones expired in 2012 and were not re-designated.
How do EZs work? EZs provide business with generous tax breaks: Hiring Credits – Up to $37,440 for qualified new hires; Sales tax credit for equipment purchases; Banks can receive a net interest deduction; Unused tax credits can be applied to future tax years; Preference points on state contracts; Many generous local matching credits. sf/tng39521cwa/afl-cio 10
The EZ program just keeps growing EZs are growing by 35% annually and cost $700 million this year sf/tng39521cwa/afl-cio 11
EZs are devouring the state budget! sf/tng39521cwa/afl-cio 12
Are EZs worth the cost? The best independent research shows that EZs have failed to create jobs. The Public Policy Institute of California’s comprehensive study in 2009 found that EZs failed to increase employment. In 2010, the non-partisan Legislative Analyst Office called for eliminating the EZs because “they are expensive and not strongly effective.” sf/tng39521cwa/afl-cio 13
Who gets EZ credits? Corporations with assets of $1 billion or more claimed 61 percent of EZ tax credits. The vast majority of hiring tax break vouchers were claimed by businesses in the Los Angeles/Hollywood and San Francisco zones, not by businesses in the highest unemployment areas. Retailers and fast food businesses, such as Wal-mart and Taco Bell, claimed more than 40 percent of credits. sf/tng39521cwa/afl-cio 14
EZ Job Standards EZs have no job standards. EZ hiring credits are only given for wages up to $12 an hour. There’s no incentive to pay workers more, because there’s no additional credit. The credit is larger the first year and shrinks over subsequent years, rewarding employers with high turnover. Companies get credits for new hire, not new jobs created. sf/tng39521cwa/afl-cio 15
EZ Tax Consultants EZs have spawned a cottage industry of tax consultants who troll zones for clients. They look through hiring records and get companies tax refunds – then take a cut in contingency fees. From Zone Credit Consulting: “Many of these incentives are retroactive in nature. Zone Credit Consulting can offset tax you may have paid in 2006 or 2007! Our contingent fee arrangement guarantees that you pay ONLY for results.” sf/tng39521cwa/afl-cio 16
EZs are bad for union members sf/tng39521cwa/afl-cio 17 Teamster members employed at VWR and Blue Linx know first hand the devastation of the EZ program. Workers at both companies lost their jobs when their employers left town to chase EZ tax credits in other parts of the state. Because the credits are for new hires, both companies refused to let workers follow their jobs to the new facilities. The companies opened up non-union work sites in Ezs, paying the new workers half as much as they did to Teamster members. And guess who paid for it? Me, you and the workers at VWR and Blue Linx.
VWR Workers on EZs sf/tng39521cwa/afl-cio 18 “It’s a shame that our taxes take away our jobs to move them somewhere else for lower wages. How is that creating jobs?” ~ Joan Beighley Worker, VWR “Enterprise Zones serve as the milking cow of big corporations, tax consultants and lobbyists who rake in millions of dollars of taxpayer money.” ~ Donald “Don” Dugyawi Worker, VWR “Enterprise Zones are killing our state. It needs to be stopped. My tax dollars are paying to have me lose my job.” ~ GianCarlo Ricci Worker, VWR
Challenges to EZ Reform California Enterprise Zones are in the districts of 54 Assembly members and 35 Senators. That means 80% of state legislators have EZs in their districts. Any vote to reform EZs requires a two-thirds supermajority. sf/tng39521cwa/afl-cio 19
Real Reform for EZs The California Labor Federation is sponsoring SB 434 (Hill) for real EZ reform, which will Eliminate retroactive credits: Credits can only be for current employees who were just hired. Require job creation: Employers must create net new jobs in the state to claim the hiring credit, and must allow employees to transfer. Ensure quality job standards: Employers must pay at least $16 an hour and meet retention standards to claim the credit. sf/tng39521cwa/afl-cio 20
Real Reform for EZs The California Labor Federation is sponsoring SB 434 (Hill) for real EZ reform, which will Cap, sunset and review: Cap the cost of the program and sunset it. Ensure transparency: Create a public database of companies that get EZ tax breaks and how many jobs they created. Regulate tax consultants: Prohibit contingency fee arrangements with tax consultants that drive up the cost of the program with excessive claims. sf/tng39521cwa/afl-cio 21
End the Corporate Gravy Train! EZs are just the first battle in the war to end the corporate gravy train and invest in California again. We fought to have a supermajority in both houses of the legislature. NOW IS THE TIME TO USE IT! California’s economy is fragile – every taxpayer dollar should create jobs and economic recovery. sf/tng39521cwa/afl-cio 22
The Campaign to End the Gravy Train To win, we must engage, educate and activate our members! Rally in Sacramento on April 16 th at Legislative Conference District visits and press events Visits with Assemblymembers and Senators Op-eds, Letters to Editor, newsletter articles, etc. Toolkit on the way! sf/tng39521cwa/afl-cio 23
QUESTIONS? sf/tng39521cwa/afl-cio 24 For more information, contact Sara Flocks firstname.lastname@example.org Thank you!