Thursday, December 09, 2010

Grounds For Cynicism

Michael Hiltzig begins his latest column this way:

Dear California voters:

Are you feeling rooked yet?

Nice hook, eh?

The column has to do with the recent announcement by biotech giant Genentech that it was laying off 840 of its California employees. Now, this announcement wouldn't necessarily be terribly shocking except for its timing: it came just two weeks after the defeat of Proposition 24 on the California ballot, one which Genentech worked hard to defeat:

The latest debate over corporate taxes was tied to Proposition 24 on last month's ballot. The initiative was aimed at repealing three corporate tax breaks quietly enacted during state budget negotiations in 2008 and 2009. Taken together, the breaks will eventually cost the state $1.3 billion a year, according to the California Budget Project.

The opposition to Proposition 24 came from a number of California-based corporations determined to preserve the tax cuts. Genentech was the largest contributor to the No on 24 campaign, at $1.6 million.

The argument was, of course, that denying large corporations such a tax break would lead to cutbacks and layoffs. Well, given the state's current unemployment picture, such an argument was pretty persuasive, except for one thing: Genentech had to have had the layoffs planned before the election. The company intended to cut the jobs regardless of the outcome of the election, but wanted those tax breaks anyway.

Those tax breaks had been passed in 2008 and 2009 as part of the torturous budget process the state went through each year because of the super majority rule the state had. The GOP argued that such a break was necessary to dispel the image that California was business unfriendly, an image that is far from accurate, as Hiltzig points out. The state is right in the middle with respect to corporate taxation with such "friendly" states as Texas and Alaska far ahead of California in the dollars it collects from businesses. The image is underserved, but it's one California businesses just love to foster so that it can get the kind of deals it annually gets from the legislature.

So Genentech got to have its cake and eat it, too. California, on the other hand, lost 840 jobs and will lose $1.6 billion dollars in revenues. Our owners just showed us some real eleven dimensional chess.

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