Fremont-based Solyndra announced yesterday that it was closing its doors, filing for bankruptcy, and laying off 1,100 workers with no severance package. The headlines would have been just one more grim reminder of the harsh impact of the Great Recession on the state’s workers and their families except for one thing. Solyndra was the largest single beneficiary of a sales tax exemption for “clean tech” equipment approved by the Legislature last year as part of negotiations over mid-year budget reductions. In fact, Solyndra accounts for a full $24.4 million of the $30.2 million in tax exemptions claimed as of August 1, 2011.
Some rumors suggest that the tax break was specifically designed to meet the firm’s needs. Solyndra also received a $535 million federal loan guarantee.
We’ve previously written about firms that promise jobs in exchange for tax breaks only to lay off workers once the tax breaks have been won. These tax cuts divert funds from education and other public services, contributing to a loss of public sector jobs that threatens a struggling recovery. As the Solyndra experience demonstrates, this practice results in a lose-lose situation: public services are reduced, public sector jobs are lost, and the promised private sector jobs fail to materialize or are short-lived.
Our hearts go out to Solyndra’s laid off workforce who will have little to celebrate this Labor Day. As the legislative session draws to a close, lawmakers should keep experiences such as this in mind as they consider other proposals, such as Amazon’s offer to drop its efforts to send a measure repealing California’s new use tax law to the ballot and locate distribution center jobs in the state in exchange for a delay in the law’s implementation. Now’s the time to end payoffs for layoffs.
— Jean Ross