$420 MILLION IN SUBSIDIES TO ONE CONTRATOR, BUT NOT ANOTHER ************************************************************************* OFFER MADE WITHOUT SUBSIDIES, WOULD CREATE MORE JOBS ************************************************************************* VPA SAN DIEGO COUNTY ENCOURAGES LAW MAKERS IN CALIFORNIA TO LOWER TAX RATES, TO MAKE THE STATE MORE BUSINESS FRIENDLY THERE IS NO NEED FOR GOVERNMENT SUBSIDIES, IF THE STATE DOES THIS TAXPAYER MONEY IS ALREADY BEING USED FOR THESE PROJECTS, SO TAX PAYERS SHOULD NOT BE BURDENED FURTHER TO SUPPLY SUBSIDIES ************************************************************************** SACRAMENTO — The Senate Appropriations Committee voted 6-0 on Thursday to provide a $420 million subsidy to a defense contractor even though Sen. Kevin de Leon, D-Los Angeles, complained that it was a “jam job” and compared the experience to buying a used car from a salesman who is hiding information. He vowed not to let it happen again. The real question is why the committee — Democrats and Republicans alike — let it happen at all. (And it later was approved by the full Senate and Assembly, and sent to the governor.) The legislation, AB 2389, would provide a 15-year tax credit for a subcontracting company that builds a new strategic bomber for the Air Force. But senators were unclear what the financial impact would be and were kept in the dark about crucial aspects of the proposal, promoted heavily by the Jerry Brown administration. The word “subcontracting” is crucial, given that there are only two bidders — Northrop Grumman and Boeing, which uses Lockheed Martin as a subcontractor. The bill is written specifically to provide a boost to the Boeing/Lockheed Martin bid, which promises 1,100 new jobs in California if it gets the nod from the Department of Defense. At the hearing, a Northrop Grumman official argued that if the Legislature passes this tax break that it gives its competing contractor a leg up in the bidding process. Sen. Alex Padilla, D-Los Angeles, said they shouldnt be picking one contractor over another one. Northrop Grumman already provides 25,000 jobs in California — and said that if it gets the contract it will provide 1,500 more. And that’s without any subsidy. (Then again, Northrop Grumman recently boasted about a subsidy it is getting to expand some operations in Florida.) California doesn’t know which bid defense officials will take for this project. The state could be offering nearly a half-billion-dollars in promised subsidies that sways the bid to a company that promises 1,100 new defense jobs. Without the subsidy, the other company might win the bid — and provide more jobs without any cost to California taxpayers (beyond the cost in federal taxes that pay for this new military expense). This is a big roll-of-the-dice in a state that has been looking for ways to trim minor expenses to fund its many spending priorities. The Governor’s Office of Business and Economic Development, known as GO-Biz, admits that there are widely varying formulas for determining what the economic impact of the new jobs will be if the Boeing deal wins the day. Meanwhile, Sen. Ricardo Lara, D-Los Angeles, complained that the Senate was only given four days to look at this 18-page bill. And right before the vote was expected, senators said that they have not been given a copy of GO-Biz’s economic analysis. One GO-Biz official joked that senators need a manual to be walked through the analysis, and then the committee took a short recess to review the spreadsheets. Legislators came back and voted “aye,” although they said they will expedite a bill in August that will make subsidies available to “contractors,” also. But the matter is shrouded in secrecy. The analysis is off limits to the public. And the Lockheed Martin spokesman referred to the “classified nature of this proposal,” as he refused to answer questions from Sen. Ted Gaines, R-Roseville. This fast-track process is troubling, but so is the idea that subsidies are the best way to boost job creation. Gaines recently went to Austin to tout his bill that would provide breaks to the electric car company, Tesla, to encourage it to build its factory in California rather than in Texas. Businesses that leave California often say they are fleeing a tough tax and regulatory climate. They often take special deals from other states, but they mainly are lured by a better overall business climate. Yet California legislators from both parties often seem focused on breaks for particular companies, rather than better policies for everyone. And legislators are willing to vote for these “incentive packages” even when they’ve only had a few minutes to review the details. They had to take a risk because of an impending deadline, senators said. But legislators should take their time and do their research — they should be driven less by Department of Defense bidding deadlines and more by the interests of taxpayers.
Posted on: Fri, 04 Jul 2014 03:15:37 +0000
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