Tax breaks costing California $6.3 billion more than expected

A state Senate report finds that "some California tax breaks are acting as blank checks, costing the state billions of dollars more than anticipated when they first were put in place..." From the report:

"How could the costs to the state escalate so far beyond expectations?" the report asks. "One explanation is that those who prepare estimates at the state's tax boards must use economic and demographic data that is already three years old. Economic forecasting is by nature an inexact science. Some tax expenditures have been passed at the last minute to cement deals on the state budget, giving analysts little time to assess the potential impacts on the state treasury. "But other factors play an even larger role. Taxpayers change their behavior to maximize the financial advantage of tax breaks, moving into an enterprise zone, for instance, or figuring out ways to increase reported revenue generated outside of California, reducing their in-state tax burden. Consider this statistic: California accounts for about 12 percent of the national economy. Yet, in 2008 state tax returns, multi-state companies report only 5.4 percent of total national sales in California.

Reducing or even eliminating many of these incentives would seem to make sense, but elected officials are afraid of alienating California businesses. (You also find this at the federal and local levels.) Even now, Gov. Brown is pushing a package of complex tax swaps aimed at boosting the economy. As we noted earlier in the week, patchwork tax fixes seldom do much good. Capitol Alert has more.


More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent Politics stories:
Obama meets with victims of LAX shooting*
Maria Elena Durazo profile names a key name *
President Obama's arrival timed to rush hour (again)
Obama will visit DreamWorks Animation, Magic's home
Some USC students wish they were invited to Bush speech

New at LA Observed
On the Media Page
Go to Media

On the Politics Page
Go to Politics
Arts and culture

Sign up for daily email from LA Observed

Enter your email address:

Delivered by FeedBurner


Advertisement
Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
LA Observed on Twitter and Facebook