Holding corporations accountable for job creation claims

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Books like this one detail how corporations rob public treasuries, but myths about tax cuts are still pervasive.

Amid the ongoing state budget impasse and an election season dominated by scapegoating public employee unions for public sector fiscal problems, Sen. Leland Yee (D-SF) today introduced legislation to hold corporations that receive tax breaks accountable for the jobs they claim to create, a bill that was quietly killed earlier this year after being approved by both houses of the Legislature.

Opposition to the bill by corporate interests should puncture the oft-repeated myth that tax breaks spur job creation rather than simply increased corporate profits, a myth that leads everyone from SF Mayor Gavin Newsom to Gov. Arnold Schwarzenegger to push business tax breaks that have hobbled the ability of governments to effectively function.

After intense lobbying against the measure by banks and the California Chamber of Commerce, SB 1391 fell one vote short on the concurrence approval it needed on the last night the Legislature's regular session after some Southern California legislators who had originally voted for it decided to let it die. So Yee has reintroduced the bill as SBx6 20 for consideration during the upcoming special session that the governor called to deal with tax reform, which begins when legislators return to vote on the state budget as soon as this week.

The measure would require corporations that claim job creation tax credits to annually file information with the Franchise Tax Board listing how many full-time positions they offer. If the number of jobs at the company drops over a three-year period – a common occurrence in this era of outsourcing and downsizing – the corporations would be required to pay back taxpayers for their tax breaks.

“It is wrong for California to provide upwards of $14 billion in corporate tax credits without transparency and accountability,” Yee said in a public statement, also adding, “A working mother on CalWORKS or disabled senior receiving in-home supportive services has to jump through numerous bureaucratic hoops to receive minimal life-sustaining benefits, but if you are a Wall Street bank or big corporation looking for scarce tax credits, no one asks any questions.”

Numerous studies and books such as the Great American Jobs Scam have shown how the pervasive argument that cutting business taxes promotes job growth just isn't true, even though it is taken as an article of faith by corporation and business-friendly politicians. But one need only consider the current jobless economic recovery – in which corporate profits have rebounded while unemployment remains stubbornly high – to doubt the Chamber of Commerce messaging.

Yee's Chief of Staff Adam Keigwin tells the Guardian the measure simply makes sense, particularly in the context of a discussion about tax reform: “Here we have found a majority vote solution to a revenue issue and a fairness issue,” he told us. “If we're going to give these tax breaks, fine, but make sure there's accountability.”