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Neon Tommy - Annenberg digital news

Enterprise Zones Dealt Untimely Blow By New Study

Dan Watson |
February 7, 2011 | 11:07 p.m. PST

Staff Reporter

Sacramento began Monday its examination of enterprise zones--lower-income areas throughout California in which businesses get tax credits for setting up shop and hiring local workers.

And like a last-second punch before the final bell, another study struck a damning blow to the program— on the day the scorecard went before the judges.

As two state assembly committees heard arguments for and against the zones Monday, a study from the California Budget Project (CBP) was released to the public.

The report, titled “California’s Enterprise Zone Program: No Bang for the Buck," says that big businesses are the biggest beneficiaries of the tax credits.

The study, which follows a similar one done by Jed Kolko and the Public Policy Institute of California, found the following:

  • Seven of 10 zone tax break dollars are claimed by corporations with assests of $1 billion or more.
  • From 1986 to 2008, the cost of zone tax credits and deductions increased from $675,000 to $465.5 million.
  • The program has failed to focus growth to distressed communities
  • The program, on average, has no impact on job or business creation.

Similar finds came in Kolko’s report in 2009.

Ever since Gov. Jerry Brown proposed to eliminate the program, designed to encourage economic growth in depressed areas through tax credits, the business world has been at odds with some politicians.

Despite a conflicting study USC professor Charles Swenson helped author along with three other researchers, the statistics are starting to pile up in opposition to the zones.

The newest study’s main revelation that statistical evidence shows money goes to large corporations is counter to what Blake Christian, a Long Beach CPA, told Neon Tommy in a story last month about conflicting studies muddling the true effectiveness of the zones.

When Christian’s firm did a study of 350 businesses in Long Beach that had used enterprise zones, he found that 325 of those companies had less than 100 employees, Christian said.

“It’s economic suicide,” he said. “You will send out a chilling message to businesses that are here and send out a very, very bad message to out-of-state and foreign companies that want to move here.”

According to Brown, eliminating enterprise zones would free up $924 million to local governments.

To reach Dan Watson, click here. Follow him on Twitter @danwatson7.



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