California Eliminating ‘Wasteful’ Enterprise Zones

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 Enterprise zones — which were created to offer tax breaks for companies creating jobs in economically depressed areas of the state — are on the way out in California, to be replaced by a range of more targeted incentives. The current program came under scrutiny for soaring costs and the proliferation of businesses that legislators said did not need the generous tax credits they were collecting.

The cost in lost tax revenue “skyrocketed” since its inception in 1984, according to an economic analysis by the California Budget Project, an independent think tank in Sacramento. From a start of just $675,000, it grew steadily, and shot past the $700 million mark three years ago.

That is one reason the Legislature voted last week to eliminate the program, and replace it with new statewide business incentives. These include a $400 million annual tax credit to manufacturing and biotechnology firms, up to $100 million in rewards for businesses that relocate to California and $200 million in tax breaks for hiring the long-term unemployed, earned-income tax credit recipients and veterans.

Enterprise zones started as a targeted way to bolster economically underdeveloped areas by offering hiring incentives to businesses.

But in the nearly three decades of the program’s life, the 13 original enterprise zones have become 40 and include some of the wealthiest areas in the state. The hiring tax credits are now nearly $38,000 per employee, spread over five years.

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