Business Update with Mark Lacter

What the heck are enterprise zones?

In a nutshell, they are specific areas within a city, county or state that are targeted for economic revitalizing. Businesses that go into these zones are promised various kinds of tax credits, and they're usually announced with great fanfare from elected officials who promise they'll help boost the economy. But they usually don't, certainly not in any major way. Not only that, they cost the state around $500 million a year, money that could probably go towards more worthwhile purposes. But they sound so good. Listen to what L.A. Mayor Antonio Villaraigosa said about the creation of an enterprise zone near LAX:

"The Westside of Los Angeles is a major economic engine for the city of Los Angeles," Villaraigosa said. "This expansion means business owners will have the tools and incentives to create jobs in all Los Angeles communities."

From last year's Public Policy Institute of California report on enterprise zones:

"Our main finding is that enterprise zones have no statistically significant effect on either employment levels or employment growth rates."

Jed Kolko, the study's co-author, said, "The state can ill afford to continue the enterprise-zone program without clearer evidence of its benefits or a well-defined plan to make it more effective." Previous studies have turned up much the same conclusion. You'll be hearing lots of chatter about enterprise zones and other bits of governmental flim-flam that purport to create jobs. If only it were that easy. Columnist Dan Walters says there's been some discussion by Senate President Pro Tem Darrell Steinberg about adjusting the way these credits are set up, although there's little indication that the governor is interested. He was at the LAX shindig with Villaraigosa.

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