Volume 46 Number 1
It keeps faculty in the classroom
By Sherry Posnick-Goodwin
The Bureau of Economic Analysis recently reported that U.S. corporations are sitting on $1.6 trillion in cash reserves, a record amount.
Nonetheless, California legislators granted corporations a huge tax break last year. At the same time, legislators raised taxes for middle-class Californians by 18 percent.
But taxpayers aren’t the only ones who lost out on the deal. Thousands of teaching positions were eliminated, and for students heading back to school, there are overcrowded classrooms, fewer instructional days due to furloughs, and shortages of basic supplies like paper and pencils. The corporate tax breaks, called a “dead of night deal” by the Sacramento Bee, were made without hearings and public testimony. They don’t even require the creation or protection of one single job in California.
The good news, however, is that voters can repeal the tax breaks before they are scheduled to take effect next year by passing Proposition 24 — the Tax Fairness Act — in the November election.
24 stops tax breaks
Prop. 24, sponsored by CTA, would end $1.3 billion annually in special tax breaks for big corporations. Those funds will help keep the state from making deeper cuts to public education, health care and public safety.
If Prop. 24 passes, it will ensure that a few big corporations pay their fair share of state taxes by repealing three special corporate tax loopholes that were slipped into budget deals last September and again in February behind closed doors. These loopholes, slated to go into effect in 2011, allow corporations to get refunds for taxes in past years by writing off new losses; get tax credits for things like research and development, and cash those credits in to reduce taxes on profits that have nothing to do with these efforts; and use a lower sales-based income formula to reduce taxes, for corporations that do business in other states.
The big corporations that are paying to defeat Prop. 24 and keep these loopholes paid their CEOs more than $8.5 billion in the last few years, and made more than $65 billion in profits last year, while at the same time laying off more than 100,000 workers. Meanwhile, during last year’s budget disaster, the Legislature made $30 billion in cuts that resulted in 16,000 teacher layoffs, hiked college tuition for students, and put 6,500 prisoners back on the street.
Tax breaks are unfair
CTA President David A. Sanchez notes that corporate taxes accounted for 15.4 percent of the general revenue collected by California in 1976. “By 2014, after the breaks take hold, corporations would only account for 9.4 percent of tax collections,” says Sanchez. “To say this would hurt businesses is misleading, because 98 percent of California’s businesses — especially small businesses — would get virtually no benefit from the tax breaks. These tax breaks unfairly benefit less than 2 percent of California’s businesses, and they are the state’s wealthiest multistate and multinational corporations.
“Proposition 24 doesn’t hurt California’s small businesses,” adds Sanchez. “It ensures tax fairness, so that big corporations have to play by the same rules as the rest of us.”
“Speaking of fairness,” comments Jean Ross, executive director of the California Budget Project, a nonprofit think tank that advocates for low- and moderate-income taxpayers, “these tax cuts were slipped into budget deals at the last minute, with no public input, during the worst budget crisis in the state’s history. In a transparent and open process, they never would become law.”
The $1.3 billion in tax breaks to wealthy corporations could be used for better purposes, such as reducing class size in California schools, buying new textbooks for students, and allowing more students to attend college, as well as providing health care to low-income children and seniors.
For more information about The Tax Fairness Act, visit
. To learn how you can become involved in this important campaign, visit