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Bill Would End Tax Breaks for Companies Who Lay Off Workers

Jerry Hill in Sacramento July 24, 2009
Jerry Hill in Sacramento July 24, 2009
Pro-Business group says the proposed legislation would force companies to leave the state

The owners of a Brisbane medical supply warehouse would not be allowed to claim tax breaks for creating new jobs in Visalia if they lay off their Bay Area workforce, under new legislation introduced Friday by state Assemblyman Jerry Hill (D-San Mateo).

"Companies should not be allowed to fire employees in one part of the state and hire new employees in another part and claim a tax credit," said Hill, whose district includes the Brisbane facility, which is owned by Pennsylvania-based VWR International.

VWR, which has operated in the Bay Area since the Gold Rush, broke ground on a new warehouse in the Central Valley town of Visalia in January and plans to shutter the Brisbane facility early next year.

Union leaders an Democratic politicians have criticized the move in part because VWR will be able to claim a $37,000 tax credit for each worker it hires in Visalia, even though it is laying off a similar number of workers in Brisbane.

The credits would be doled out because the Visalia facility is in an enterprise zone (officially the Tulare Targeted Tax Area) designed to stimululate job creation.

In an e-mail, company spokeswoman Valerie Collado said "tax credits were not a consideration" in the decision to move the warehouse to Visalia. Collado said the new location will make it easier for VWR to deliver its products to labs and biotech companies throughout California.

"If lawmakers decide tomorrow to abolish tax credits, VWR is still building and opening its new distribution center in Visalia," she said.

Critics of enterprise zones say VWR's response shows why they should be abolished -- a move proposed in January by Gov. Jerry Brown. 

"The best research shows that these types of tax subsidies generally go to businesses to do what they would have done anyhow," said Jean Ross, executive director of the non-partisan California Budget Project, which in February released a report titled "California's Enterprise Zone Program: No Bang for the Buck."

Brown’s finance department estimates that removing the tax breaks associated with the state's 42 enterprise zones could earn the state $343 million this fiscal year and $581 million in the next one, money the governor argued could be better spent on schools, heath care, or law enforcement.

The effort has stalled, with business resisting the change.

"With so many people unemployed, why would you want to discourage companies from investing in California," said Roger Salazar, spokesman for the business-backed group Communities to Save Enterprise Zones.

Salazar called VWR "a scapegoat" for the zone's opponents and said the group opposed even Hill's more narrowly-tailored legislation.

"It's going to apply to everybody," Salazar said. "You may end up giving some companies no choice than to leave the state for Arizona or Nevada or another state that has these incentives."

Hill said he believed his bill stands a good chance of passing both houses of the legislature.

"Short-sighted and narrow thinking doesn’t create good ecnomic development, nor does it create new jobs," he said.

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