Dark of Night Tax Deal To See the Light of Day

Late last week, press reports noted that an initiative to repeal the September 2008 and February 2009 “dark-of-night” tax deals would be going forward. We’ve since independently confirmed reports that the California Teachers Association plans to gather signatures to restore California’s corporate tax laws to where they were prior to the midnight mischief.

A June 2009 CBP Brief documents the impact of the massive tax breaks that would go to a handful of the state’s largest and most profitable corporations under the two sets of changes. Repeal of these tax breaks would increase revenues by an estimated $600 million in 2010-11, rising to $1.7 billion in 2011-12, the first year the dark-of-night tax breaks would be fully in effect. While that wouldn’t solve the state’s budget woes, the additional money would provide much needed funds that could be used to offset spending reductions in the Governor’s Proposed Budget. In 2010-11, for example, the additional $600 million would be enough to “buy out” the Governor’s proposed reductions to CalWORKs’ cash assistance grants, reimbursement rates for child care providers, the Healthy Families Program, and programs that provide assistance to legal immigrants. The $1.7 billion cost of the tax breaks at full implementation approximately equals the combined savings from the Governor’s proposed 2010-11 cut to funding for schools and community colleges and student aid plus the state’s savings from elimination of the Healthy Families Program.

We’ve said it before and we’ll say it here again before a new budget is inked into law. Budgets are about values and choices. And this one offers voters a particularly stark choice. And last, but not least, regardless of the ultimate outcome on election day, should the proposed measure qualify for the ballot, these tax breaks may get the one thing they didn’t get prior to enactment: A public hearing. That’s because the Legislature is required to hold a hearing on measures headed to the voters.

–Jean Ross

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