Cross-posted at CalWatchDog.com

It’s not so unusual to hear people making disparaging comments about
one another at the Capitol. However, it was shocking to hear the
executive director of the California Budget Project call the research
of Professor Charles Swenson, PhD, the "most error ridden, sloppy piece
of research I’ve ever seen in my life," when she referred to his
analysis of Proposition 24.

Ross testified in favor of passing Proposition 24 the initiative
that seeks to stop several business tax breaks slated to go into effect
in 2010 and 2012. The three tax policies Proposition 24 would reverse
were passed last year by the legislature.

Joining Ross in the YES on Prop 24
campaign, Peter Fisher, an economist and professor of Urban and
Regional Planning with the University of Iowa, gave a overview of the
effect of corporate taxes on the state budget. "Corporate taxes are
only about one-sixth of all state taxes," said Fisher, explaining that
the tax breaks "couldn’t have that much effect" for businesses.

Ross criticized Swenson for not looking at employment trends, and said his study "was not a peer reviewed study."

Ross referred to a CBP budget brief titled "Proposition 24: Should
the state reverse recent business tax breaks to move the budget toward
balance?" The title of the document explains the content: Ross believes
that the recent tax breaks need to be reversed in order to shore up the
state budget deficit.

Ross’ argument for reversing the business tax breaks is that
California would be the only state allowing them, and "It’s not the
norm across the nation." Ross said that few companies would actually
benefit; mostly large corporations would receive any break.

Ross said, "Nine companies would receive a $20 million tax break;
six companies would get more than $10 million, and $240 million would
go to just 14 companies. Most of the money would go to very large
corporations."

The final panelist for the YES campaign was Eric Heins, a
fourth-grade teacher and California Teachers Association board member.
He ran for vice president of the CTA, and his bio on the CTA Web site
lists widespread CTA activism.

Heins was critical of the "tax loophole" that would cause "$17
billion in cuts for education" if passed.  Heins said that if the tax
cuts were reversed, 25,000 public sector jobs would be saved. Everybody
should be paying their fair share."

Sen. Elaine Alquist, D-Santa Clara told the panelists that in her
district (Silicon Valley), "people in the high-tech industry say they
have to leave the state or grow business out of state. These companies
pay the taxes that support education, and social services."

Assemblyman Mike Gatto, D-Burbank asked, "Do we suffer from a perception problem?"

Ross said that in her world travels, the farther away she gets from California, the state’s perception gets better.

Gatto asked, "What does this do as a message to business? Does this
send the message that during this time that California is taking a step
that’s hostile to business?"

Heins said, "It’s a matter of basic fairness. It really says we are
allowing corporations unfair breaks. Somebody’s got to pick up the
slack."

Fisher said, "The market will eventually sort things out."

The second panel representing the NO on Prop 25 campaign, included
Swenson, Tim Valderrama, the executive director of TechNet and William
Carter, a small business owner of the same name, and chairman of the
board of the National Association of the Remodeling Industry.

Swenson explained, "The three tax policies Proposition 24 would
reverse, are sound policies that are in place and working in other
states. I have a PhD in accounting and economics. I’ve been with USC
for 24 years and was on the Cal Tech faculty prior." He commented on
Ross’ disparaging comments and said, "In 27 years I’ve never been the
subject of such a personal attack before." Swenson said that his work
was reviewed by colleagues, corroborated by the Rose Institute at
Claremont McKenna College, and that he was asked by the opponents of
Prop 24 to do the study.

"Taxes are important. State and local taxes are about 15 percent of
a firm’s total tax bill. 1 percent is corporate income tax," Swenson
said. "Taxes really do matter."

"When firms relocate here, they spend money and hire people," said
Swenson. "I like to work in facts. The Rose Institute corroborated my
findings in the single sales factor apportionment. 10 of the largest
states competitive with California have credit sharing or Net Operating
Loss carry back. We stand to lose 300,000 jobs and $1 billion in
revenue if these tax breaks are reversed."

Valderrama told the panel that if Prop 24 passes, "It would make us
the only state without tax benefits." He told the committee how
Genentech recently expanded business, but in Oregon solely because of
the single sales factor apportionment.

William Carter shared with the committee that he has suffered a 70
percent drop in his business this year, and insisted that Prop 24 would
hurt small businesses as well. "Prop 24 would increase income taxes on
businesses trying to expand here. It is my desperate hope that Prop 24
is defeated."

Andrea Jackson with Genentech testified briefly that her company
expanded in Oregon because of the single sales tax. Jackson said that
Genentech saved so much money by choosing to expand in Oregon, the tax
liability went down in California so substantially, it paid for the
expansion. Jackson said Genentech wants to expand in South San
Francisco, "but we needs 10-year plan they can rely on."

The NO on Prop 24 campaign states, "At a time when two million
Californians are out of work, Prop. 24 taxes new job creation, hits
California employers and small businesses with higher taxes and stifles
job growth in our most promising industries. It would lead to fewer
jobs and fewer tax revenues. ??It’s a giant step backward on
California’s road to recovery."

The YES on Prop 24 says, "Join this important effort to repeal
special tax breaks for big corporations that don’t create or save a
single job in California. A Yes vote on Proposition 24 prevents $1.3
billion in budget cuts to schools and public safety, and saves
thousands of much needed jobs."

The joint informational hearing about the initiative was held by the
Senate and Assembly committees on Revenue and Taxation, and is
mandatory before the November election.