Gov. Jerry Brown’s California Jobs First bill, SB116, failed in the Senate last Friday after gaining no republican votes, despite Brown’s announcement of a bipartisan agreement the day before.

The bill revolved around setting California’s corporation-tax apportionment to mandate the use of the Single Sales Factor formula, which measures the ratio of California sales to overall sales.

California companies with jobs in- and out-of-state could choose between the single sales factor formula or the four factor formula since 2009, allowing businesses to control the amount of taxes they paid.

“In-state businesses do not have this luxury,” said Assemblyman Cameron Smyth, R-Santa Clarita. “This created a perverse incentive to relocate out of state.”

Smyth and Assemblyman Nathan Flethcer, R-San Diego, worked with Brown to pass AB40X, the bill that would reach the senate as SB116, in the assembly.
SB 116 needed a majority vote to pass the senate but only recorded 22-15 in favor of the bill, with three votes not recorded.

“It’s unbelievable that so many politicians in Sacramento would choose to protect cigarette makers and out-of-state corporations to the detriment of California jobs,” said Brown in a statement on his website.

The bill was designed to end that corporate tax loophole, said Amy Thoma, deputy chief of staff of Fletcher’s offices.

Start-up manufacturing companies could have received an almost 4 percent decrease in the state sales and use taxes, encouraging businesses to relocate to in-state, as stated in the bill.

California Jobs First plan would have raised about $1 billion in annual revenue between 2012 and 2014, according to the bill’s author Sen. Kevin de León, D-Los Angeles.

This could be a familiar sight to some Golden State residents, because California residents voted on tax-apportion policy in 2009,  said  Sen. Lou Correa, D-Orange County.

“The policy preserved tax benefits for manufacturing companies,” Correa said. “Why would Brown go and undo it?”

Correa voted against the bill, because he said it was not the right solution and would hurt his constituents who work out-of-state union jobs.

Republicans voted down the bill, claiming it was rushed into the last day of the legislative session.

“Every element of the bill was well vetted and publicly debated,” said Greg Hayes, of de León’s office.  “To claim that it was sprung on anyone is a false claim. The main points were done in January.”

The republican caucus said it is open to reform, and we hope that’s true so we can pursue it next year, Hayes added.