By Jason KUROSU

With increasing unemployment rates statewide and increasing woes over the economy, Gov. Jerry Brown proposed a new jobs creation package on Thursday. The California Jobs First plan hinges on providing tax incentives for businesses while also closing a tax loophole for out-of-state businesses.

The revenue, a projected $1 billion that closing the tax loophole will generate according to the governor, will be used to fund the tax incentives. Out-of-state business which sell goods in California but hire employees from out of the state can use tax formulas which allow them to cut their tax burden in half, California being one of only two states which allows companies to choose which tax formulas they use. Brown would like to see companies use the “single-sales factor” tax formula in determining their tax liability because it would base the liability solely on sales within California.

“This change (to the single-sales factor) levels the playing field by eliminating what Governor Brown called ‘an outrageous and perverse tax incentive that encourages multi-state businesses to create jobs outside of the state.’ This places California-based businesses at a competitive disadvantage and is a disincentive for out-of-state businesses to locate jobs here,” stated a release from the Office of the Governor.

In implementing his plan, Brown hopes to encourage companies to hire within the state by awarding these companies with tax credits if they do hire within the state and increase how much sales tax they pay if they don’t. Companies that hire up to 50 employees within California will receive a jump in their tax credit from $3,000 to $4,000 per hire. The eligibility of the tax credits expires at the end of 2013 and it’s hoped that the temporary nature of the credits will encourage businesses to hire large and soon, boosting employment rates in a state with one of the worst unemployment rates.

The proposal received praise from businesses such as BIOCOM, Boeing, California Healthcare Institute, Genentech, Sun Power and the Valley Industry and Commerce Association. But where Gov. Brown really needs support is from Republican elected officials. Partisan politics have been a strong factor in the struggles to put together a cohesive state budget, with many Republicans unwilling to raise taxes. If Brown can convince Republicans of the virtues of potential sales tax increases in order to create jobs, then his proposal may pass muster.

  Jason Kurosu