Jackson, Educators Call for More Sunshine, Accountability for Billions in Corporate and Other Tax Incentives

April 16, 2019

SACRAMENTO –Senator Hannah-Beth Jackson (D-Santa Barbara) joined educators today to unveil her Senate Bill 468, which requires evaluation of certain California tax credits and exemptions for their effectiveness as well as economic, social or any other benefits to the state.

Many of California’s nearly 80 tax expenditures have sat on the books for decades without any scrutiny or data to demonstrate they are achieving their public policy goals. According to the Department of Finance, by 2020-21, there will be a $506.4 billion loss in revenues to the General Fund since 2008 from tax expenditures, which also impacts school funding.

Senate Bill 468 will bring transparency and accountability to California’s tax incentive process by creating a mechanism for review of some of California’s most costly tax expenditures. The bill applies to nine corporate and other tax incentives that cost more than $1 billion a year, and include no sunset or metrics for evaluation, with an annual cost to the General Fund of $7.3 billion in 2018-19, and a cost to schools of $2.92 billion.

SB 468 directs the Legislative Analyst’s Office to analyze each tax incentive for its effectiveness and proposes a three year sunset on the expenditures. When and if the tax incentives are renewed, it requires that each include goals and metrics for evaluating effectiveness.

“For too long, California has routinely granted generous tax credits and exemptions, which divert billions of dollars away from the General Fund, without asking whether they deliver economic or social benefits to our state. These are dollars that could be spent in our classrooms, addressing the housing crisis, or combatting wildfires and climate change. By providing transparency and accountability to our state tax incentives, Californians can be sure their taxpayer dollars are being spent prudently, fairly, and wisely,” said Senator Jackson. “It’s time to bring some sunshine to the Golden State.”

In 2016, the California State Auditor released a report, concluding that increased oversight would improve the effectiveness of the state’s current and future tax expenditures. The report questioned whether some of California’s revenue going toward certain tax expenditures is being well spent or if the funds could be better allocated to fulfill the same policy objectives.

Thirty states currently have laws that require regular evaluation of tax incentives. These routine evaluations of tax incentives help ensure public spending is accountable by identifying flaws and recommending improvements to strengthen their effectiveness. In their May 2017 report How States Are Improving Tax Incentives for Jobs and Growth, the Pew Charitable Trusts found that “California is trailing other states because it has not adopted a plan for regular evaluation of tax incentives.” The report recommends adopting a process for regular evaluation, such as those required under SB 468, to determine whether incentives are achieving their goals.

SB 468 will be heard in the Senate Governance and Finance Committee on May 1.

Jackson represents the 19th Senate District, which includes all of Santa Barbara County and western Ventura County.