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Labor's Edge: Views from the California Labor Movement

Workers to State Legislators: Stop the ‘Sweetheart’ Enterprise Zone Deals

by Rebecca Greenberg, California Labor Federation

Each and every California state legislator received a very special Valentine personally delivered by a Teamster yesterday – a box of chocolates with an important message: Stop the Sweetheart Enterprise Zone deals!

The Teamsters know firsthand the negative effects of the wasteful and failed Enterprise Zone program. VWR (a medical distribution company in Brisbane), was recently bought by a private equity firm that told union workers at the company that it was closing the Brisbane operation and moving to Visalia, which is in a Targeted Tax Area, part of the Enterprise Zone program.

VWR refused to allow workers to relocate and offered little severance. The new jobs in Visalia are low-wage with few benefits. The economic impact on Brisbane and the workers employed at VWR is devastating. And because of the Enterprise Zone tax credit, California taxpayers are on the hook to pay for the move and resulting job loss.

As Doug Bloch with Teamsters Joint Council 7 put it:

Tax credits should create jobs, not destroy them. It’s time for the state to end this failure of a program and start investing in real job creation.

Brown has called for elimination of the Enterprise Zones after a series of reports determined that the zones do not fulfill their intent of creating jobs. Instead, they subsidize big, profitable corporations and a burgeoning industry of consultants who exploit the program for their own personal profit, and eliminating it would help the state avoid another nearly $1 billion in cuts to programs Californians depend upon.

It didn’t take long for an army of high-paid lobbyists and various other “consultants” who make their living skimming off the top of a state program to come out of the woodwork and fight the elimination of the program. These consultants make their money by trolling Enterprise Zones for businesses who have not yet claimed their tax handouts. The Enterprise Zone program allows business to go back four years to claim retroactive credits, so they can get a tax credit for a worker they already hired or an employee who has left the job. The consultants help the business claim the credits, even though they have created no new jobs, and then take a cut of the tax break.

The Public Policy Institute of California released a study in 2009 finding that Enterprise Zones have “no statistically significant effect on either employment levels or employment growth rates.” In addition, the California Legislative Analyst’s Office has issued several reports concluding that the Enterprise Zone program does not create jobs, finding that the program is “expensive and not strongly effective.

While state spending on education, public safety and other programs that are a priority for California families have been drastically reduced in recent years, a new report by the California Budget Project shows the opposite to be true for Enterprise Zones. Since the program’s inception, the cost of these giveaways has increased by 35% per year, totaling more than $3.6 billion. Even worse, these tax credits are going primarily to less than one percent of the state’s corporations, those with assets of a $1 billion or more. Major corporations like Wells Fargo, Nordstrom and Levi Strauss are subsidized by the Enterprise Zone program. Even big banks get a cut through a tax deduction on loans.

California Labor Federation Executive Secretary-Treasurer Art Pulaski:

Enterprise Zones are the poster child for wasteful government spending. At a time when the state is considering devastating cuts to higher education and programs that are a lifeline for seniors and people with disabilities, eliminating this wasteful program should be a top priority.

Posted on 02/15/2011Permalink

More posts by Rebecca Band

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