Currently, companies conducting business in California can potentially increase profits by keeping their headquarters outside of the Golden State. By remaining out-of-state, corporations such as General Motors, International Paper, Kimberly-Clark, and Chrysler are able to avoid paying California taxes on their income.
This trend or loophole has arguably cost the state of California over $1 billion annually in lost tax revenue. A new proposition on this November’s ballot is designed to make up for this loss. If passed, Proposition 39, an “Income Tax Increase for Multistate Businesses Initiative,” would require out-of-state businesses to pay taxes on income made in California and earmark those tax dollars to pay for state projects that “create energy efficiency and clean energy jobs.”
Those in favor of Prop. 39 say that the current loophole encourages companies to send jobs out of state. Opponents say a tax increase would give companies another reason to not invest or hire. New Jersey, Illinois, and Texas have similar laws already, but does that mean that it is appropriate for California to tax out-of-state businesses? How would this measure impact California’s business climate? Would it discourage some companies from conducting business in the state at all?
Kevin de Leon, co-chairman of the YES on Prop. 39 campaign, Democratic state senator representing California’s 22nd Senate district (Los Angeles, Alhambra, East Los Angeles, Florence-Graham, Maywood, San Marino, South Pasadena, Vernon, and Walnut Park)
Mike Spence, president, California taxpayer protection committee; Republican who signed the statewide ballot arguments