We all know that California’s budget is in bad shape. It ended the year with a cash deficit of $9.6 billion dollars, papered over with internal borrowing and accounting sleight-of- hand. And we know that Governor Jerry Brown is counting on voters approving a tax hike come November.
And we all know about the big scandal with California’s parks. How California had a $54 million surplus in a “special-purpose fund” in the parks department while the state was saying it would have to close parks. And how some cities and counties that helped keep parks open want their money back.
It turns out the state actually has about 560 of these special funds, supported with fees you pay to do things like enter a park or register your car. Usually these funds pay for everything from mental health to highway repairs, but California’s been using the money as a slush fund to pay for absolute essentials like universities and prisons. In fact, California now owes $4.3 billion back to these special funds.
But there’s another available slush fund just waiting to be tapped. See, national corporations like Kimberly-Clark, Chrysler, General Motors, and International Paper could be paying a lot more in California taxes to help plug our gap. They make zillions of dollars off of us Californians. But according to California’s Legislative Analyst’s Office, a 2009 tax loophole here in California has cost the state tens of thousands of jobs and more than a $1 billion a year in lost tax revenue. That’s forced Californians to pick up the tab as budgets starve.
The loophole needs closing. Essentially, it lets big corporations choose the most favorable formula to calculate their corporate state taxes. If corporations want to, they can use a formula that equally weights property, payroll, and sales. And pay less by making sure they have little property or payroll in the state. That means depriving Californians of jobs while paying less in taxes. Sweet.
There’s pending state legislation and a ballot initiative to close this loophole by making companies pay on the basis of sales only. These companies have launched a counteroffensive to closing the loophole. They call themselves “California Employers Against Higher Taxes” and their slogan is “Jobs not Taxes.” Both, of course, are pure deception.
It’s time for California to look itself in the eye. According to the campaign backing Proposition 39 to choke off the loophole, these companies have sold more than $42 million dollars of goods and services to California state agencies from toilet paper to cars in recent years. And that’s just the tip of the iceberg, since the campaign study doesn’t include contracts that the state negotiates on behalf of cities, universities, and other government agencies. What is the state doing buying janitorial supplies from Kimberly Clark or International Paper or cars from Chrysler and GM when corporate conduct on paying their fair share of taxes isn’t worth the toilet paper you flush?
These corporations are happy to sell to the California state government, and to you and me, while evading taxes. They’re masters at that. We’ve looked at some of their federal tax evasion too. This way they don’t just help deprive California of good schools and services, but the whole nation. Wake up, California, and close that loophole.