California voters approved an initiative to undo a tax break for out-of-state corporations and send more money to state coffers.
The initiative will close a provision in the tax code that allows multistate corporations to choose between two tax formulas. The loophole dates to a late-hour, 2009 budget deal pushed by Republican lawmakers so they would put up enough votes in the state Legislature to pass a temporary tax increase that has since expired.
Supporters of Proposition 39 say allowing multistate businesses to pick and choose tax formulas favors out-of-state companies that have little property and payroll in California.
Opponents, including the California Manufacturers and Technology Association, say businesses will be less likely to invest or expand hiring in the state.
The Yes on Prop. 39 campaign was funded mostly by nearly $30 million from billionaire hedge fund manager Tom Steyer, who calls it an issue of tax fairness. Steyer, founder of Farallon Capital Management, said Californians are getting a chance to close a loophole that Gov. Jerry Brown and Democratic state lawmakers weren't able to close through the Legislature.
"I view this as a very old-fashioned proposition in the sense that the citizens of California are getting a chance to close a loophole that their Legislature, even with sincere genuine efforts, hasn't been able to close," Steyer said in a recent interview.
There was no formal opposition campaign, and the idea behind the initiative is supported by many California-based companies. Some business and anti-tax groups argued that repealing the tax break would make California less business friendly, at least for out-of-state companies.
Under existing tax law, California allows multistate companies to choose between two formulas — one based on their portion of sales in California or one calculated on payroll, property and sales. Out-of-state companies can choose the latter, greatly reducing their tax bill if they have little or no assets in the state.
Proposition 39 would change the law so all businesses — from California-based Intel and Apple to Detroit automakers General Motors Co. and Chrysler — follow the same formula based on the percentage of their sales that are apportioned to the state. The Franchise Tax Board has estimated the change would raise about $1 billion a year.
The tax formula, known as single-sales factor, is used by many other states, including Michigan, New Jersey and Texas. The Legislative Analyst's Office has said that moving to the single-sales factor could result in up to 40,000 more jobs in California.
The $1 billion in additional revenue will be split between the state general fund and energy efficiency programs for the first five years, and would go entirely into the general fund after that.
California will toughen its penalties for human trafficking and its monitoring of sex offenders under an initiative approved Tuesday.
Prison sentences for human trafficking will more than double under Proposition 35, which imposes life sentences for the sex-trafficking of children. It also requires sex offenders to provide email addresses and other Internet identifiers to law enforcement.
The initiative was mainly funded by former Facebook Chief Privacy Officer Chris Kelly, who lost a bid for state attorney general in 2010.
It was supported by many law enforcement groups, although its opponents say it is written too broadly.
Its definition of human trafficking includes distributing obscene materials depicting children. Prosecutors would no longer have to prove force was used in cases involving minors.
Despite spending tens of millions of dollars, civil rights lawyer Molly Munger’s Prop. 38 was declared defeated early on with roughly 75 percent of no votes on the education measure.
Munger released a statement on the results.
“Thank you to the many thousands of volunteers, community activities and many others who worked so hard and selflessly on behalf of Proposition 38. This year you helped raise awareness dramatically about the importance of increasing taxes to support public education. In the fight for Proposition 38, a powerful coalition has begun coming together and a strong movement has been formed. As we continue this fight, we can and will build on all the good work that has been done. Transformational change takes time and we are committed to staying the course until our state truly does tackle this school-funding crisis.
The nation's harshest three strikes law has been reformed to allow for shorter sentences for some offenders.
Proposition 36 passed 68 percent to 32 percent Tuesday with 26 percent of precincts reporting. An offender's third felony conviction now must be a serious or violent crime to mandate an automatic sentence of 25 years to life in prison.
Previously, any felony conviction — even for a relatively minor offense — triggered the automatic sentence for an offender with two previous felony convictions for serious or violent crimes.
Opponents argued the law needed no alteration and was meant to punish California's habitual offenders.
Supporters argue the state will save millions a year by cutting down on the number of parole hearings and shortening long prison sentences.
As word spread that the TV networks had called the presidential election for the incumbent, drivers along Crenshaw Boulevard began honking their horns and shouting from their car windows.
One woman, Flora Stewart, stood at the corner of Crenshaw and Vernon Avenue waving a large copy of the Obama family's official White House portrait - what she called "a beautiful picture of a beautiful family.
"To become the President of the United States, not only do you need the support of your community, you need the support of your family. And I just think that what they had to sacrifice and give up for the last four years, I think it's tremendous."
Amid the celebratory noise, Stewart reflected on the significance of the president's re-election after a bitter, often negative campaign against Republican challenger Mitt Romney.