IRVINE, CA — As budget talks begin to bridge an estimated $19.2 billion deficit, Orange County Business Council (OCBC) encourages state leaders to develop a budget conducive to economic growth and jobs stimulation.
During budget discussions, one incentive potentially on the chopping block is the legislature’s 2009 decision to allow a single sales factor formula, which puts a greater weight on sales revenues for businesses. This one change in California’s business tax code would create 144,000 new jobs and increase state revenues by $411 million annually, according to a recent study conducted by USC.
The study, authored by Marshall School of Business professor Charles W. Swenson, Ph.D, concluded that changing the state’s apportionment formula will result in significant economic growth and job creation by encouraging companies to locate jobs and facilities in California. In addition, the study put to rest the myth that the change will only benefit business.
“A return to the old formula will be a step back on California’s road to economic recovery,” stated Lucy Dunn, OCBC President and CEO. “Withdrawing this incentive now would significantly impact California’s efforts to rebound from the recession and further devastate California’s already lagging business climate.”
“At a time when Orange County has lost almost 15,000 jobs in the last year, the impact of such a program on Orange County would be the creation of 14,000 jobs and an increase of $35-40 million in state revenues from Orange County,” stated Dr. Wallace Walrod, Vice President of Economic Development and Research for OCBC.
During budget negotiations last year, the Governor and legislature approved several economic stimulus measures to encourage private investment and job creation in California. The single sales factor, embodied in SB 3×15, was one such measure. Passed with bipartisan support, the measure is scheduled to go into effect in 2011.
The solution to California’s perennial budget problems is not to stifle business by removing the meager incentives available, which will simply exacerbate the existing and structural crises by fueling more job losses and fewer tax revenues. Government cannot fix our economic problems through legislative fiat, but our legislative leaders can grow California’s economic pie by creating an environment that is conducive to creating jobs.