For California Businesses, Even Tax Breaks Are Torture

Susan Shelley

Columnist and member of the editorial board of the Southern California News Group, and the author of the book, “How Trump Won.”


California has a terrible reputation of being unfriendly to business, but that’s just because some people don’t have a sense of humor.

If you love comedy, check out the website of the Governor’s Office of Business and Economic Development (GO-Biz) at www.business.ca.gov.

There you’ll find all the incentives, programs and helpful information that the state of California has created to help businesses grow and stay in California. There’s not much, but brevity is the soul of wit.

The state offers advice on “Setting up a Facility,” under the category of “Start a Business.” Here, in its entirety, is the section titled, “Acquiring Office Manufacturing Equipment”:

“Office furnishings can be rented or bought through businesses that deal primarily with office occupants. These companies are easy to locate through local telephone Yellow Pages under ‘office furniture and equipment, dealers or rental.’ Companies that sell telephone and computer systems, copy, fax and mail machines and other technical equipment can also be located through the Yellow Pages. Companies selling other office supplies such as pens, paper, tape and staples can be found through the Yellow Pages listed under ‘office supplies’ or ‘stationers,’ or through catalog sales.”

Daunted by the task of shopping for office furnishings? The state suggests a business incubator program.

It doesn’t have one, unfortunately. But “universities, cities or counties, ethnic or industry associations, or private companies” run business incubators, and “generally they offer an individual office, cubicle or at least a desk for the businessperson.”

Let’s just pray they have a copy of the Yellow Pages.

The bureaucrats at the Department of Business Friendliness don’t just sit around all day fielding inquiries on where to buy fax machines. They also administer the California Competes Tax Credit, a program that allows businesses to plead for the chance to keep a little more of the money they earned.

During the current fiscal year, these tax credits will total about $200 million statewide, which is probably less than we’re spending on the latest new watercolors of the bullet train. Those paintings should be hanging in the Louvre for what they’ve cost us.

So, how does a business qualify for the California Competes tax credit and how much money can it save on taxes?

There doesn’t seem to be a clear answer. “Tax credit agreements will be negotiated,” the website states.

The negotiating is done by the governor’s appointees at GO-Biz, then approved by the California Competes Tax Credit Committee.

The CCTC committee is made up of the state treasurer, the director of the Department of Finance, the director of GO-Biz, one person appointed by the Assembly Speaker, and one person appointed by the Senate Rules Committee.

They meet several times a year to consider applications, and the minutes of their meetings are fun reading if you’re a fan of the Inquisition.

One after another, company representatives are brought before the committee to be grilled about their application for a tax credit.

The questions are harsh. Why are your wages so low? Do you provide health benefits? What does your company do? Why do you need this money? What are you doing to get more women on the production floor? Do you have a training program? Will you hire through an employment agency? What is your outreach plan to achieve a diverse workforce?

This kind of thing caused the committee to get a visit from the legal counsel for California Competes, who explained at their meeting last November that under the law, “the sole function of the committee is to approve or reject the agreements” recommended by GO-Biz.

The lawyer said the committee has no authority to collect demographic data, like race and gender, about an applicant’s workforce. The committee also has no authority to require the applicant to collect and turn over that demographic data, and no authority to “promulgate regulations” about diverse work forces.

But that didn’t sit well with the political appointee from the Assembly, who hired an attorney independently and insisted that the intent of the legislature was to use the California Competes tax credits to pursue other “underlying goals.” The interrogations will continue, the committee member made clear, because even if there’s no legal authority for action, “Simply asking the questions sends a message.”

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