(July 20, 2010) California Chamber of Commerce-opposed “job killer” bill that creates uncertainty for California employers making long-term investment decisions in California passed an Assembly policy committee last month.

SB 1272 (Wolk; D-Davis) creates uncertainty for California employers making long-term investment decisions by requiring all future-enacted investment incentives to sunset after seven years.

The 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, tax structure, and 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. A seven-year sunset on all tax credits, however, will have the adverse effect of creating uncertainty about the future of the state’s tax structure, discouraging investment in California when it is most needed.

Key Vote

SB 1272 passed the Assembly Revenue and Taxation Committee on a party-line vote of 6-3 on June 28:

Ayes: Portantino (D-La Cañada Flintridge), Beall (D-San Jose), C. Calderon (D-Montebello), Coto (D-San Jose), Fuentes (D-Sylmar), Gatto (D-Los Angeles.

Noes: DeVore (R-Irvine), Harkey (R-Dana Point), Nestande (R-Palm Desert).

Staff Contact: Mira Guertin