Proposition 39, an Income Tax Increase for Multistate Businesses Initiative, is on the November 6, 2012 ballot in California as an initiated state statute.
If approved, Proposition 39 will:
- Spend $550 million annually for five years from the initiative’s anticipated increase in revenue in order to fund projects that “create energy efficiency and clean energy jobs” in California.
- Require multistate businesses to calculate their California income tax liability based on the percentage of their sales in California.
- Repeal an existing law that gives multistate businesses an option to choose a tax liability formula that provides favorable tax treatment for businesses with property and payroll outside California.
Arguments in favor
The arguments presented in favor of Proposition 39 in the state’s official voter guide include:
- “At the end of the 2009 budget negotiations in Sacramento, in the middle of the night, legislators and lobbyists for out-of-state corporations made a deal—with no public hearings and no debate. They put a loophole into state law that allows out-of-state corporations to manipulate our tax system every single year, and avoid paying their fair share to California. The cost of this loophole: $1 billion per year in lost revenues for California.”
- “Prop. 39 simply closes this loophole. It ends this manipulation of our tax system—and requires that all corporations doing business in California pay taxes determined by their sales here, no matter where they are based.”
- “Prop. 39 levels the playing field, ensuring that multistate companies play by the same rules as California employers.”
- “The current tax loophole lets corporations pay less tax to California if they have fewer employees here—giving companies a reason to send jobs out of state. In fact, the state’s nonpartisan, independent Legislative Analyst has cited studies showing that the tax policy in Prop. 39 will bring California as many as 40,000 jobs. That’s why the independent Legislative Analyst has called for eliminating the present loophole.”
- “Multistate corporations that provide few jobs here are using the loophole to avoid paying their fair share to California, costing the state $1 billion per year in lost revenues. Prop. 39 will clovitally-needed revenues for public services. Because almost half of all new revenue is legally required to go to education, hundreds of millions of dollars per year will be dedicated to schools. Additionally, Prop. 39 will create savings for taxpayers. 39 will use a portion of the revenues from closing the loophole to fund energy efficiency projects at schools and other public buildings. Using proven energy efficiency measures like improving insulation, replacing leaky windows and roofs and adding small-scale solar panel installations will reduce state energy costs—freeing up dollars for essential services like education, police, and fire.”
- “Prop. 39 contains tough financial accountability provisions —including independent annual audits, ongoing review and evaluation by a Citizens Oversight Board, a complete accounting of all funds and expenditures, and full public disclosure.”
The arguments in opposition to Proposition 39 presented in the state’s official voter guide include:
- “Proposition 39 is a massive $1 billion tax increase on California job creators that will result in the loss of thousands of middle class jobs. California’s unemployment rate is already third worst in the country at nearly 11%. Prop. 39 makes our problems worse.”
- “Proposition 39 is a recipe for waste and corruption. It spends up to $22 million on a new bureaucracy and special interest commission. It gives Sacramento politicians a blank check to spend billions without real accountability or taxpayer protections against conflicts of interest.”
- “Here are the facts: a billionaire who CNN called ‘California’s Hedge Fund King’ is bankrolling 39, spending $20 million to influence your vote and buy the election. His political consultants use terms like ‘closing a loophole’ but don’t believe them. Prop. 39 is politics at its worst. California needs reform, not more taxes and wasteful spending.”
- “$2.5 billion that could go to schools, health and welfare, environmental protection or public safety is instead diverted to a new government commission with fat salaries and little accountability. Our state budget deficit today is nearly $16 billion and Prop. 39 makes things worse by wasting money on a new unnecessary bureaucracy. California needs teachers and police officers, not more bureaucrats!”
- “Manufacturing jobs that provide for families are vanishing. Almost two million hard-working Californians are struggling to find any kind of work. The $1 billion Prop. 39 tax increase changes tax laws that have been in effect for more than 40 years and will cost more union and non-union workers their jobs.”
- “You’ve heard it before. Sacramento has a plan to create jobs. We give them money to create a commission of political appointees with an appealing name like Citizens Oversight Board. They get a blank check to spend (or waste) tax dollars. Under Prop. 39, money is spent to give contracts to so-called ‘Green Energy’ programs. Who is likely to get those contracts? Big campaign contributors, that’s who.”
- “California needs reform, not tax increases that eliminate middle class jobs. Prop. 39 raises taxes by $1 billion on California job creators to help fund more government bureaucracy and more bloated pensions. It doesn’t protect against ongoing state budget deficits, high nemployment and continued economic recession. Remember, a billionaire with an agenda is bankrolling 39. It’s up to voters to protect California taxpayers. By voting NO on Prop. 39, you will stop a job-killing $1 billion tax increase on California job creators. You will support middle class California jobs that provide for families and sustain our economy. And you’ll tell Sacramento politicians no more blank checks for more special interest spending on bloated government and pensions.”
Billionaire Thomas Steyer, the founder and co-senior managing partner of Farallon Capital Management, supports Proposition 39.
The arguments in favor of Proposition 39 in the state’s official voter guide were submitted by:
- Jane Warner. Warner is the president of the American Lung Association in California.
- Thomas Steyer.
- Mary Leslie. Leslie is the president of the Los Angeles Business Council.
- Alan Joseph Bankman. Bankman is a professor of tax law at Stanford Law School.
- Ruben Guerra. Guerra is the CEO of the Latin Business Association.
- Jane Skeeter. Skeeter is a small business owner in California.
The arguments against Proposition 39 in the state’s official voter guide were submitted by:
- Jack Stewart. Stewart is the president of the California Manufacturers & Technology Association.
- Lew Uhler. Uhler is the president of the National Tax Limitation Committee.
- Pat Kong Kushida. Kushida is the president of the California Asian Pacific Chamber of Commerce.
- Mike Spence. Spence is the president of the California Taxpayer Protection Committee.
- Robert Ming. Ming is the chairman of Friends for Saving California Jobs.
- Jack Stewart. Stewart is the president of California Manufacturers & Technology Association.
Other opponents include:
- Peter DeMarco, a spokesperson for a coalition of businesses that oppose the initiative, said that if approved, Proposition 39 is “going to drive workers and jobs out of California.”
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