Posted 7/3/13 by Common Good
For 30 years, California has operated a program known as "enterprise zones", providing tax incentives for investment in economically suffering areas. According to a report from the Wall Street Journal, Gov. Jerry Brown contends that the incentives are no longer serving their intended purpose:
In 2010, the enterprise-zone program gave out tax breaks totaling $698 million, compared with $136 million 10 years earlier, according to the California Franchise Tax Board—and businesses in San Francisco got a bigger sum than anywhere except Los Angeles, even though the city is one of the state's wealthiest.
Of course, businesses that benefit from the status quo are fighting any attempt to restructure the program:
"Any business that is currently in a zone and getting credits is going to defend it very strongly," said David Neumark, an economist and professor who is the co-author of a paper published in 2009 that focused on California's program. But "if you look at average effects, this program is a waste of money."
When laws outlive their usefulness, they need to be reformed--even if it ruffles special interests' feathers. Read the full report here.