10 Things You Should Know About Prop 24

by: Randy Lyman

Sun Oct 03, 2010 at 15:04:45 PM PDT

Five ballot measures on the November ballot could bring great changes to the state budget and the way revenues are raised in California: Propositions 21, 22, 24, 25 and 26. Proposition 24 would repeal $1.3 billion worth of corporate tax breaks enacted under Gov. Arnold Schwarzenegger.

SEIU California and the California Labor Federation support Prop 24. Meg Whitman is against it.

According to a recent analysis by the non-partisan California Budget Project, the tax breaks that Proposition 24 would repeal, if

fully implemented, will cost the state $1.3 billion or more per year. ... These tax breaks are distinguished by their cost, by the fact that they were approved at a time when the state faced enormous and ongoing budget shortfalls, and by the fact the [sic] most of the benefits would go to a tiny handful of corporations that will receive large tax breaks.

These tax breaks are the price exacted for passing a state budget under Schwarzenegger, the ransom for not massacring a roomful of public services entirely. Now, corporations can pick and choose how they're taxed each year ("SSF apportionment"), even changing their mind each year depending on what's most convenient for minimizing their tax bill. They can also transfer tax credits and carry back net operating losses (NOL), and take advantage of all three of these tax breaks at the same time.

The CBP report runs 12 pages (14 with footnotes), but here are a few highlights of what will happen under the Schwarzenegger corporate tax breaks unless Prop 24 is passed by voters. Read this, then get out your own 1040 for last year and see how well yours compares:

2) One-third of the total revenue loss -- $420 million -- would go to 210 "double dippers" (corporations claiming both SSF and NOL). Ten corporations (0.001  of the total) would get combined tax breaks exceeding $20 million, the average tax cut being $24.8 million per year.

3) More than one-quarter (28%) of NOL benefits would go to firms claiming more than $100 million in deductions, offsetting the tax on $1.1 billion in profits.

4) 80 percent of the benefits of SSF apportionment will go to corporations making more than $1 billion per year, or 0.1 percent of all California corporations.

5) 95 percent of the benefits of double-dipping ($399 million) would go to just 79 corporations grossing more than $1 billion a year.

6) "Most of the corporations that have advocated for California to adopt SSF apportionment have also supported efforts at the federal level ... [so that] the profits of particular corporations would no longer be subject to tax in particular states. ... Taken together, SSF and [federal law] would significant increase the share of corporate profits that are not subject to tax in any state."

7) "The interaction between NOL carrybacks and the state's school spending guarantee is particularly perverse. NOL carrybacks would reduce revenues that supported a level of school spending used to calculate the spending guarantee for the next fiscal year. ... The magnitude of the revenue loss attributable to carrybacks -- over $500 million at full implementation -- is significant."

8) While "profits reported for state tax purposes have increased significantly, ... corporate tax payments as a percentage of corporate profits have fallen by nearly half since 1981."

9) Despite claims by corporate advocates,

"state and local tax cuts and incentives are not effective for stimulating economic activity or creating jobs in a cost-efficient manner. On the contrary, by forcing reductions in public services, tax cuts and incentives may retard economic and employment growth."

10) When your kids' schools can't afford to buy books or repair crumbling classrooms, when you can't get decent health care because the clinics and hospitals you could afford have died of budget cuts, when you don't feel safe walking down the street because your city can no longer afford police or animal control officers, when you wait hours/days/weeks for appointments at the DMV or any other public office ...

... remember that this is the California that Meg Whitman wants for you: where we will literally pay with our lives so that the state's richest corporations can grown even richer.

Download the full report from the California Budget Project.