Tax Credit Confession


Friday May 3rd, 2013   •   Posted by K. Lloyd Billingsley at 1:50pm PDT   •  

taxessignThe Tax and Revenue Committee of the California Assembly will soon hear AB 927 authored by Assemblyman Al Muratsuchi. The measure allows various tax credits against the taxes imposed by the Personal Income Tax Law and the Corporation Tax Law:

This bill would, under both laws, for taxable years beginning on or after January 1, 2014, allow a credit to a qualified employer, as defined, in an amount equal to $3,000 for each net increase in qualified full-time employee hired during the taxable year by a qualified employer, and an additional $1,000 per qualified full-time employee hired during the taxable year by a qualified employer if the qualified full-time employee is a veteran or an additional $2,000 per qualified full-time employee hired during the taxable year by a qualified employer if the qualified full-time employee is a
service-connected disabled veteran, as provided. This bill would limit the total amount of credit allowed to a qualified employer to an amount not to exceed $5,000,000 for all taxable years. This bill would cap the total amount of credit which may be allowed under those provisions for any calendar year to $35,000,000. This bill would take effect immediately as a tax levy.

At this writing there are no published analyses of the bill, and how it would work remains uncertain. Still, the measure does carry educational value. For example, the offer of a tax credit for companies to hire employees is a confession that employers are not currently doing much hiring. California’s unemployment rate is now 9.4 percent, the third-highest jobless rate in the country. The true rate is doubtless much higher.

In an attempt to boost hiring incentives, Assemblyman Muratsuchi offers a tax credit. So AB 927 could also be construed as a confession that California’s current corporate and income taxes are too high. As a result of Proposition 30, California is now the highest-tax state in the nation.

California also deploys a regulatory regime that has become more onerous under AB 32, the state’s Global Warming Solutions Act. AB 927 offers employers no regulatory relief of any kind. One notes that governor Jerry Brown wants to ease environmental regulations for the costly high-speed rail project he favors. But whether he would favor the tax credits of AB 927 remains uncertain.




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