EDITORIAL: Reforming enterprise zones should be California priority

June 13, 2013 

California taxpayers should not be expected to subsidize card rooms and strip joints, legal though these businesses are.

But that's what's happening, as The Sacramento Bee's Richard Chang pointed out in a front-page story last week. The story illustrated the need to end the $750 million-a-year enterprise zone tax break, as Gov. Jerry Brown and some legislators want.

Originally championed by thoughtful conservatives such as the late U.S. Rep. Jack Kemp, enterprise zones were intended to encourage businesses to hire unemployed people in impoverished inner cities.

In California, however, the enterprise zone concept has been twisted into a profoundly dumb policy. California allows businesses to retroactively claim credits, receiving as much as $37,000 per employee for hiring decisions made years earlier. Consultants visit businesses in enterprise zones and show them how to capitalize on the state's stupidity.

Zone backers refuse to identify businesses that get the credits, claiming privacy is at stake. For Chang's story, however, the Sacramento Employment and Training Agency did provide a list of recipients.

FedEx obtained 1,382 tax vouchers since 2010, making it the zone's largest recipient. AutoZone, a car parts retailer, ranked second with 159. We doubt either company would abandon the huge California market if there were no tax credits.

We also doubt that Capitol Casino would load up the U-Haul and move to Nevada if it didn't receive credits for hiring cooks, servers and card dealers, or that Gold Club Centerfolds and Deja Vu Showgirls would relocate to, say, Texas without credits they receive.

Brown wants to replace enterprise zones with $750 million in tax breaks that might actually encourage businesses to expand in California and hire people. Sen. Jerry Hill, D-San Mateo, is carrying Senate Bill 434, which would significantly reshape the program.

Lobbying to keep the enterprise zones is intense. The question for legislators is simple: Will they make thoughtful changes to help businesses provide good jobs to people in need, or will they buckle to an interest group and maintain a truly dumb tax break?

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