Wednesday, August 31, 2011

California Lawmakers to Tackle Unemployment By Removing Incentives to Hire

If you were tempted to feel optimistic about California's chances of emerging from recession any time soon, you probably won't want to read this report over at Cal Watchdog. Never mind that private businesses are fleeing the state by the dozens, or that the much bally-hooed green-energy revolution is collapsing with a bang: the Legislature is poised to pass a bill, SB 508, that would slash the tax credits that many businesses are counting on in their long-term plans for operating in California.

The bill has two basic components: one is a set of bureaucratic requirements for defining and measuring the effectiveness of a given tax credit; the other is a requirement that all credits expire after ten years. The latter provision is what has the business community in an uproar, both they're both pretty bad. The new documentation will lead to the creation of very specific tax credit plans, which in Sacramento is another way of letting the Legislature meddle in the economy and attempt to use tax law to pick winners and losers (or both, as it's done with green energy). But the sunset requirement will make it harder for businesses to make long-term plans to stay in California. Which is exactly the outcome you'd like to see, given the 12% unemployment rate and the fact that over a quarter of the state's population is officially out of the labor force. Of course, Democrats in the Legislature don't see things that way. In their minds, the $47 billion in tax credits that businesses received in 2008-09 is money that belongs by right to the state, and they want it back. Which should make you more pessimistic than anything else for the future.

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