On The Money: Tax Breaks Criticized

October 12th 2010

CBS 13

Mike Luery Reporting

Oct 12, 2010 4:18 pm US/Pacific

SACRAMENTO (CBS13) ― Critics are saying California's newly passed budget is loaded with tax breaks that help the wealthy, while hurting the middle class. Supporters say the tax breaks are necessary to generate jobs.

When Governor Arnold Schwarzenegger signed California's 2010-11 budget last Friday, it was a record 100 days late – and included a multi-million dollar tax break for a well connected timber company.

"I always say when you're in a hole the first thing you need to do is stop digging," said Jean Ross, Executive Director of the California Budget Project. Ross is skeptical of the tax break that helps the Humboldt Redwood Company.

The firm will reportedly get a tax break worth up to $30 million. Humboldt Redwood Company rescued a sawmill from bankruptcy two years ago and save two hundred jobs in Scotia, California. The firm was promised tax breaks, which were then repealed by the California legislature. But critics say California cannot afford to be so generous now.

"Don't reduce the money that comes into our tax system at a time when you are cutting funding for public schools," Ross told CBS 13.

And with schools and social programs taking a hit, critics say the legislatures should protect every day Californians and not just the wealthy.

"They changed the tax law on me," said Lennie Goldberg of the California Tax Reform Association.

Goldberg told CBS 13, "I formerly had a child deduction and now I don't have a child deduction. The law changes all the time. People get caught in the middle of that. This is still a very wealthy enterprise."

Legislative leaders from both parties supported the tax break, saying it fixes a flaw in the 2008 budget. They call it a mistake, "…that could have led to the loss of more than 200 jobs in Humboldt County. If not fixed, legislative leaders and the Governor agreed that the intent of that budget was not to retroactively change tax law and bankrupt this company," according to Seth Unger, Communications Director for Republican Assembly Leader Martin Garrick of Carlsbad.

Under the newly signed budget, other corporations will be getting a total of more than $100 million in tax breaks over the next three years. Critics say the money should be going to education and other programs. Supporters say the tax breaks help save jobs and create a much more friendly business climate for California.

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