Tax Cut Proposals On State Level No Guarantee For Jobs

Tax Cut Proposals On State Level No Guarantee For Jobs: "The quality of a state's labor market is another significant factor for businesses as they choose where to locate, in some cases mitigating the level of taxes they will have to pay."

..."As much as Nevada talks about getting California business because of their low taxes, their population would need a substantial amount of retooling," said Kim Reuben, a senior fellow at the Tax Policy Center in Washington. 'Nevada has survived largely on growth, a place where people without much education could get relatively good jobs in construction and casinos. California is a place that has great intellectual institutions and will always attract talent and overcome its taxes.'

But Kail Padgitt, an economist with the conservative Tax Foundation, said a state's tax burden might not have affected its performance during the recession but certainly will affect the pace of its recovery.

'When the economy starts to pick up, that's where you're going to see more the impact of taxes,' Padgitt said. 'Where businesses are going to expand operations, where new investments are going to be made – a lot of these companies want to know what their taxes are going to be.'

How much the lure of lower taxes acts as an incentive for businesses seeking to relocate or expand remains an open question.

In late 2008 and early 2009, California lawmakers and then-Republican Gov. Arnold Schwarzenegger approved a series of corporate tax breaks that was estimated to save businesses about $1.3 billion a year. At the time, Schwarzenegger and GOP lawmakers promoted the tax cuts and credits as a way to create jobs, but there is little evidence they have done so.

California's unemployment rate rose in December to 12.5 percent and has remained above 12 percent for a year and a half. The questionable connection between corporate tax policy and job creation prompted a Democratic state lawmaker to call for legislation that would force companies to prove they were using tax breaks to boost employment.

'The bill is not to deny them those tax credits. I want to give them those tax credits because they make a rather credible argument why they need them,' state Sen. Leland Yee said. 'All I'm asking is for them to prove it.'