Tax Fairness Act causing serious debate

by MIKE PERRAULT, Desert Sun

Proposition 24 proponents say they support the measure because it would repeal three business tax breaks, keeping about $1.3 billion in state coffers and preventing further cuts to education and other important state programs.

‘Certainly we’re experiencing some very challenging and difficult times right now, not just in California but the entire country,’ said David Sanchez, president of the California Teachers Association, a key backer of Prop. 24.

‘We also recognize the fact that right now is not the time to be giving corporate tax breaks or to allow big businesses not to pay their fair share of taxes.’

In March, the CTA submitted more than 800,000 signatures to place the repeal measure on the November ballot. Other supports include the California Nurses Association, Consumer Federation of California, California Tax Reform Association and Congress of California Seniors.

Opponents, which include hundreds of businesses and business groups statewide, defend the tax breaks. They say Prop. 24 would repeal updated tax laws designed to attract and grow businesses and jobs. They claim the initiative would cost California jobs and be an obstacle to the state’s economic recovery.

Among local groups opposing the measure are the Desert Hot Springs Chamber, the Palm Desert Chamber, the Palm Spring Chamber and the Inland Empire Economic Partnership.

‘It would undo a lot of tax updates that were designed to help businesses survive during the tough times that we’ve experienced,’ said Bob Elsner, interim chief executive officer of the Palm Springs Chamber of Commerce.

But Richard Stapler, a spokesman for the Prop. 24 campaign, said the measure is an important way to give voters a say on three tax breaks passed through the state Legislature during the budget crisis in 2008 and 2009.

Stapler said Prop. 24, also known as the ‘Tax Fairness Act,’ ensures that corporations pay their fair share of state taxes by repealing special corporate tax ‘loopholes’ that were handed out to big corporations without any requirements to create jobs.

Businesses worried

The tax breaks, which would all kick in next year, include:

‘ Allowing businesses to shift operating losses to prior tax years when they made money so they can apply for retroactive refunds. That break also extends the length of time a business can shift operating losses into future tax years from 10 years to 20.

‘ Allowing ‘tax-credit sharing’ for corporations, which enables companies to share tax credits with subsidiaries, such as their affiliated research and development companies.

‘ The ‘single-sales factor,’ which allows corporations that operate in numerous states to choose whether they will be taxed on their total sales across California or on a combination of their sales and their operations ‘ including payrolls and property.

For Michael Lombardo, repealing such tax incentives would pose potential problems in the future and mean a loss of revenue for his 2-year-old company Prints Charming, a Palm Springs firm that helps businesses get their printing done as cost-effectively as possible

‘It really scares me,’ Lombardo said. ‘Why even try to (build this business) on my own. First and foremost, I’m a family man. And I’d like to be able to hire other family men.’

Lombardo is among many business owners statewide who, along with numerous local chambers of commerce, have joined a coalition called Stop the Jobs Tax Initiative.

Opponents of Prop. 24 said state tax regulators estimate as many as 120,000 businesses across California could lose the tax breaks if voters approve the initiative.

Bill LaMarr, executive director of the Anaheim-based California Small Business Alliance, said many of his organization’s members were planning to use the net operating loss and tax credit-sharing provisions.

And Terry Kenske, owner of Fontana-based Dalton Trucking, said Prop. 24 would limit his company’s ability to carry over huge income losses the company has experienced. Dalton had to lay off 42 employees over the past two years.

But Sanchez said the nearly $1.3 billion to be saved annually is critical after state schools have seen their budgets slashed by $17 billion over the past two years and with 26,000 teachers possibly facing layoffs.

Sanchez noted the tax breaks were approved despite no hearings, ‘in secret.’

‘We have to look at every way of bringing in additional revenues into the state,’ he said.