Council Endorses Legislation To Amend Tax Code

Council Endorses Legislation To Amend Tax Code
By Jennifer Gentile/Staff Writer
TheReporter.Com

After a vote Tuesday night, the Vacaville City Council stands behind a bill designed to make California economically competitive with other states.

At the Solano County Mayors Conference last week, Andrea Jackson, associate director for State Government Affairs with Genentech, explained that the state tax code causes businesses to look outside California for expansion opportunities. The way the apportionment formula is structured, she explained, causes businesses to endure a greater tax burden the more operations and jobs they have in the state relative to their sales.

As a result, Jackson said that companies are building facilities in other states. For example, Genentech is planning a $250 million plant in Oregon, and Intel has decided to locate a $3 billion plant in Arizona.

Legislation authored by Assemblywoman Fiona Ma, D-San Francisco, is a proposal to amend the code, and, according to supporters, make California more competitive for employment growth and business expansion. AB 1591 is under consideration by the Assembly Revenue and Taxation Committee.

"By allowing companies to choose between the current formula and alternative formulas that give more weight to sales, California could reward those committed to our state's economy without penalizing companies that choose not to invest in California," according to an AB 1591 fact sheet Jackson distributed at the mayor's conference.

The bill is backed by organizations like the California Chamber of Commerce. And, by a unanimous vote Tuesday night, the Vacaville City Council made its position known.

"We support it wholeheartedly," said Councilman Chuck Dimmick. "We're tired of seeing businesses leave California."

Using Genentech as an example, Dimmick said, "Their California tax bill will be reduced by building in Oregon, which doesn't make any sense." Although the state Analyst's Office has determined that the bill would cost the state money, Dimmick said, "Our position is that it is at least revenue-neutral."

"They don't look at the spin-off benefits," he said, noting that by losing jobs and business expansion, the state is losing people who would be buying homes and paying taxes in California.

Councilman Curtis Hunt said the decision was a virtual "no-brainer when we realized that there are actually incentives for a business to move out of the state."

"I think it closes a loophole," Hunt said, adding, "the state needs to do everything it can to be business-friendly and align itself with those principles."

Gary Tatum, president of the local chamber of commerce, said his organization is of the same mind as the council on the issue.

"It's something we do support, and we hope everyone would, obviously," Tatum said. "We're very pleased that council took that action."

Jennifer Gentile can be reached at vacaville@thereporter.com.