Amid COVID19 Budget Deficit, Jackson Bill to Bring Sunshine and Accountability to Corporate and Other Tax Breaks Advances

May 21, 2020

SACRAMENTO –As California lawmakers consider difficult cuts to address the $54 billion budget deficit resulting from the coronavirus, Senator Hannah-Beth Jackson (D-Santa Barbara)’s Senate Bill 956 to bring oversight and accountability to billions of dollars in certain corporate and other tax breaks passed the Senate Governance and Finance Committee today on a 4 to 2 vote.

Senate Bill 956 would require evaluation of certain California tax credits and exemptions for their effectiveness as well as economic, social or any other benefits to the state. These tax credits and exemptions, also known as tax expenditures, are provisions in the tax code that reduce the amount of tax collected in exchange for an intended public policy objective. Many of California’s nearly 80 tax expenditures have been on the books for decades without any scrutiny or data to demonstrate they are achieving their public policy goals.

If the tax expenditures investigated under this bill are found to no longer deliver such benefits to the state, the Legislature could consider altering or repealing them.

“As California considers deep and difficult cuts to our state budget to address the economic impacts of the coronavirus pandemic, we should have full knowledge of all of our options, including decades-old tax credits and incentives. Every dollar of a tax expenditure that does not generate its cost in new revenue takes about 40 cents out of California’s classrooms via Prop. 98 and reduces the amount of funding available for critical public services. Now more than ever, we need to bring transparency and accountability to these tax breaks,” said Senator Jackson.

Senate Bill 956 creates a mechanism for review of some of California’s most costly tax breaks. The bill applies to eight corporate and other tax incentive programs that have no metrics of efficacy associated with them, no sunsetting provision, and result in revenue losses of greater than $1 billion each over 10 years. 

The bill requests the University of California to analyze these tax expenditures to determine if they are achieving the goals the Legislature intended.  Once the UC completes the analysis, its findings are presented to a nonpartisan board comprised of the State Controller, the Legislative Analyst, the State Auditor, the Director of Finance, or their designees, and a representative with the state tax and fee administration. The board, having considered information from stakeholders and the public regarding the UC’s analysis, would then make a recommendation to the Legislature as to whether the tax expenditure at issue is meeting the purposes for which it was established, or whether it is not and should be altered, continued or repealed.

Senate Bill 956 is supported by a broad coalition of educators including the California Teachers Association and the California School Boards Association, as well as California Professional Firefighters.