(April 29, 2010) A California Chamber of Commerce-opposed bill that creates uncertainty for California employers making long-term investment decisions in California will be considered by a Senate policy committee next week.

SB 1272 (Wolk; D-Davis) requires all future-enacted investment incentives to sunset after seven years, and requires each statute to provide detailed requirements for evaluating their effectiveness, potentially leading to the creation of conflicting oversight regimes.

CalChamber opposes the bill because it would create uncertainty regarding long-term tax planning. When choosing to locate in a state, employers balance factors such as the availability of a skilled workforce, infrastructure, regulatory environment, and tax structure, whether they can rely on these factors to remain relatively stable and consistent in the long term. For example, if a state currently has a skilled workforce, but high school dropout rates are escalating, it is unlikely that a skilled workforce will be available in the future.  Similarly, businesses evaluate whether they can rely on the existence of current tax incentives 10 years from now.

There is no question that the state should consider the effectiveness of tax policies, as well as programmatic expenditures, to ensure that all budget-related items are cost-effective. However, a seven-year sunset on all tax credits will have the adverse effect of creating uncertainty with respect to the future of the state’s tax structure, discouraging investment in California when we need it most.

Action Needed

The CalChamber is encouraging members of the business community to contact members of Senate Appropriations and urge them to oppose SB 1272.

Staff Contact: Mira Guertin