Smyth, Brown Close Toxic Tax Loophole
The California State Assembly passed the California Jobs First Plan by a two-thirds majority vote 54 -10 Tuesday with bi-partisan cooperation.
That cooperation included 38th District Assemblyman Cameron Smyth.
“Part of our job as California legislators is to do right by California businesses,” said Smyth.
Governor Jerry Brown thanked Democrats and Republicans including Smyth.
“I applaud Speaker Perez and the Democrats for their hard work on this bill. I am also grateful to Assemblyman Nathan Fletcher and Assemblyman Cameron Smyth for putting aside partisan differences and acting as Californians first,” Brown said.
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The broad based tax reform proposal is expected to close a major corporate tax loophole and provide tax relief to small businesses and the middle class.
"What it does is eliminate a toxic tax loophole that favors keeping jobs out of California and penalizing people when they do invest in bricks and mortar or put jobs in the state," Brown said.
“Under our current corporate tax structure, we are providing a perverse incentive for companies to locate their facilities and jobs in other states, while continuing to tap into the California sales market. This proposal creates a mandatory single sales factor, which puts California businesses on a level playing field with their out-of-state competitors,” Smyth said.
In addition to ending the elective single sales factor, under which out-of-state companies can choose from two options when calculating their taxable income, the proposal provides nearly $1 billion in tax relief to small businesses and individual taxpayers.
“Eliminating this loophole is estimated to generate roughly $1 billion in revenue from out-of-state companies, which we’re turning around and putting into the hands of Californians who spend money,” said Smyth.
Beyond closing the loophole, the California Jobs First Plan increases the standard deduction by $1,000.00 for individuals and $2,000.00 for joint filers. That would be a 27 percent increase that Smyth says generally benefits lower and middle income renters.
For businesses there will be a $300 million manufacturing sales tax exemption, providing a 4 percent exemption for start-up firms and a 1 percent exemption for established companies.
“The broad-based tax incentives included in this revenue-neutral package will provide substantial tax relief to the middle class and low income taxpayers, and give small businesses additional tools to stay solvent in these uncertain economic times,” Smyth said.
The bill will lower the corporate and personal income tax rates on the first $50,000 in business income and lowers the minimum Franchise Tax from $800 to $750.
“In recent years we’ve seen Republican governors like Chris Christie (NJ), Rick Perry (TX), and Mitch Daniels (IN) sign legislation implementing the single sales factor. I’m glad that my colleagues in the Assembly have been able to put politics aside and enact long-term tax reform that benefits California businesses,” wrote Smyth.
The bill must still pass the House.