California Gov. Jerry Brown is calling for over $1 billion a year in tax relief
for businesses that create jobs in the state. It would be one part of a three-part
jobs creation program.

“Boosting job growth in California is a top priority, and this proposal is a critical
step in making sure the state does everything it can to support local job creation,”
says Governor Brown.

“This legislation would expand a currently existing job credit to make it more effective
while adding new tax incentives for growth in the manufacturing sector,” says Brown.

The first part of his “California Jobs First” plan reforms and expands an underutilized
tax credit for small businesses worth hundreds of millions of dollars, the governor’s
office says. To date, much of this funding has been left on the table because too many
small businesses were excluded from the credit. The governor’s plan expands eligibility
to small businesses with up to 50 employees (up from 20) and the credit for each new
hire will jump from $3,000 to $4,000. These changes will encourage small businesses
to hire immediately, as the credit will expire at the end of 2013, the governor’s  office predicts.

The second part of the plan would provide over $1 billion in tax relief to businesses
that purchase new manufacturing equipment. The plan exempts start-ups in their first
three years from the state portion of sales tax (3.9375 percent) — and provides an
exemption of 3 percent for all other firms — on manufacturing equipment purchases.

The third part is the application of the Mandatory Single Sales Factor (SSF) to all
businesses in California. This change levels the playing field by eliminating what
Mr. Brown calls “an outrageous and perverse tax incentive that encourages multi-state
businesses to create jobs outside of the state.” This places California-based
businesses at a competitive disadvantage and is a disincentive for out-of-state
businesses to locate jobs here.

The revenues produced by closing this loophole will fund the expansion of the small
business tax credits for new hires and the sales tax exemption for manufacturing
equipment, the governor says.