Balancing California’s Budget Should Start With Rescinding Tax Breaks That Have Not Created Promised Jobs

Robert B. Engel
Robert B. Engel is the chief spokesperson for the Free & Fair Markets Initiative.

As California continues to confront an economic challenge without modern precedent, lawmakers have the near-impossible task of balancing the budget. They should start by revisiting lucrative tax breaks tied to job creation that have potentially failed to live up to their promise. Deals that have, in fact, fallen short should be immediately rescinded, providing much-needed revenue for the state and putting California back on the path to economic recovery.  

With both a significant decline in revenues and a rapid rise in unemployment, California budget shortfalls are expected to reach $9.7 billion by year’s end as states nationwide grapple with lasting damage that experts estimate could top $555 billion. With the clock ticking on how the state will balance its budgets in the years to come, lawmakers must urgently explore realistic and prudent possibilities for ensuring financial solvency by any means.

Revisiting the deals California made with Amazon in recent years would be a fitting place to start. California is just one of the dozens of states and municipalities that have met Amazon’s demands to build new facilities, offering millions of dollars in lucrative tax breaks on the promise of job creation and driving economic growth. In California, Amazon has been offered seven subsidies totaling at least $45 million, including the most recent deal that would provide $3 million to a Kern County distribution center.

 As California begins to rebuild, the state needs proven job creators that can accelerate economic growth and create employment opportunities for all Californians. Unfortunately, Amazon has consistently failed to live up to its attractive promises. Despite the fanfare that typically accompany these deals, experts have found that Amazon fulfillment centers consistently fail to create net job growth and will eventually lead to job losses in other industries that have long been part of the community. Just recently, an Amazon delivery-service-provider laid off almost 500 workers in California — a clear indication that Amazon facilities do not necessarily lead to long-term job growth.  

At the same time, Amazon has been proven in recent months to be willing to agree to construction plans without being offered an array of generous financial incentives. For instance, the company just announced plans for a nearly 4 million square foot distribution center at the site of the Michigan State Fairgrounds in Detroit — all without any subsidies or tax breaks for the project. This should serve as a clear indication to lawmakers that these incentives from states have provided unnecessary benefits for the company at a time when every penny counts.

 And while state governments continue to suffer, Amazon doubled its profits during the most damaging months of the pandemic, and appears poised to emerge stronger than ever. With so many local businesses facing a daunting road to recovery, lawmakers need to be focusing on getting more into the hands of business owners in our communities, rather than one of America’s richest corporations. Simply put, this is a company that does not need any more help.

Given the current economic challenges faced by California and the questions surrounding the benefits that come with Amazon’s expansion in local communities, continuing down the road with subsidies and tax breaks will only make matters worse for all of those in California. 

As the state considers ways to balance its budget, there should be serious consideration given to re-examining the subsidies that California has offered Amazon begin renegotiating the terms of any past agreements with the company.

 

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