Assemblyman Cameron Smyth, R-Santa Clarita, joined Gov. Jerry Brown and a bipartisan group of legislators Thursday to promote a broad-based tax reform proposal that will close a major corporate tax loophole and provide tax relief to small businesses and the middle class.
“Part of our job as California legislators is to do right by California businesses,” said Smyth. “Under our current corporate tax structure, we are providing a perverse incentive for companies to locate their facilities and jobs in other states, while continuing to tap into the California sales market. This proposal creates a mandatory single sales factor, which puts California businesses on a level playing field with their out-of-state competitors.”
In addition to ending the elective single sales factor, under which out-of-state companies can choose from two options when calculating their taxable income, the proposal provides nearly $1 billion in tax relief to small businesses and individual taxpayers.
“Eliminating this loophole is estimated to generate roughly $1 billion in revenue from out-of-state companies, which we’re turning around and putting into the hands of Californians who spend money,” said Smyth. “The broad-based tax incentives included in this revenue-neutral package will provide substantial tax relief to the middle class and low income taxpayers, and give small businesses additional tools to stay solvent in these uncertain economic times.”
The proposal released today:
* Establishes a mandatory single sales factor, which will bring California about $900 million in the first full year, and $1 billion annually in the future
* Increases the Standard Deduction by $1,000 for individuals and $2,000 for joint filers – a 27% increase that generally benefits lower and middle income renters
* Provides $300 million for a manufacturing sales tax exemption, providing a 4% exemption for start-up firms and a 1% exemption for established companies
* Lowers the Corporate and Personal Income Tax rates on the first $50,000 in business income
* Lowers the Minimum Franchise Tax from $800 to $750
“With this plan, California will join a growing number of states in protecting the businesses that choose to invest within our borders,” said Smyth. “In recent years we’ve seen Republican governors like Chris Christie (NJ), Rick Perry (TX), and Mitch Daniels (IN) sign legislation implementing the single sales factor. I’m glad that my colleagues in the Assembly have been able to put politics aside and enact long-term tax reform that benefits California businesses.”
Assemblyman Cameron Smyth represents the 38th Assembly District, which includes the cities of Los Angeles, Santa Clarita, Simi Valley and Glendale.