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Who Benefits from Enterprise Zones? Nobody Knows

Bayer's Berkeley plant is in an enterprise zone
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Bayer's Berkeley plant is in an enterprise zone
Information on which companies enjoy tax breaks is kept secret by the state Franchise Tax Board

Gov. Jerry Brown's proposal to eliminate California's enterprise zones has generated a heated debate between business and labor groups.

Business groups say eliminating tax breaks associated with enterprise zones will cause companies to shed workers in the midst of a recession. Organized labor claims the zones drain hundreds of millions of dollars out of the state's coffers every year without stimulating employment. Research from the Legislative Analyst's Office and two well-regarded think tanks back up labor's view.

But neither side knows exactly who is benefitting from the tax breaks companies operating in the state's 42 zones take every year. 

That's because in California, money doled out in the form of corporate tax breaks is exempt from public records laws.

As a result, the zones' top beneficiaries are secret and known only to the bureaucrats at the Franchise Tax Board. 

In fact, it is a misdemeanor for the tax board to release such information to the public.

"California has some of the worst subsidy disclosure laws in the nation," said Phil Mattera, research director of the Washington-based advocacy group Good Jobs First.

In December, Mattera's organization issued a report on subsidy disclosure among all 50 states, giving California a  D-minus. (Illinois and Wisconsin had the best disclosure laws, the group said).

Only one of California's corporate subsidy programs, the relatively small Employment and Training panel, provides any disclosure at all.

Emily Rusch, director of the California Public Interest Research Group said such disclosure is important, "especially in a time when there are significant cuts proposed for a variety of public priorities."

"We want to see which companies are taking advantage on which tax expenditures so we can see which ones are creating jobs we are counting on them to create," she said.

Last year, CalPIRG and the California Labor Federation backed a bill by Assemblywoman Nancy Skinner (D-Berkeley) to require the Franchise Tax Board to publish all information on tax breaks at publicly traded companies on the state's Reporting Transparency in Government website. 

Business groups opposed the measure.

In August, eight organizations, including the California Chamber of Commerce and the California Bankers Association, sent a letter to members of the state Senate detailing their position.

"While we understand the desire to ensure that tax expenditures are effective in achieving their desired goal, making the names of the companies that receive business credits and the amount of those benefits public will not increase the efficacy of any tax expenditure in question," the letter said.

The next month, then-Gov. Arnold Schwarzenegger vetoed the bill.

"I am unclear as to the need for this bill, other than for the sponsor to continue to provoke and alienate businesses attempting to create jobs and economic recovery in California," Schwarzenegger said in his veto message.

Spokespeople in Gov. Jerry Brown's press office would not say whether the new governor would welcome a similar bill this year.

Last week, Assemblywoman Skinner introduced a new bill, AB 318, to put the amounts and recipients of most corporate tax breaks into a searchable, on-line, government database.

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