Proposition 39 is gradually becoming a topic of hot debate. Proposition 39 will take off the ability of companies in California to choose between 2 methods for calculating their taxable income. This will force companies to use sales as the only criteria for calculation.
This will have a huge impact on the revenue generation in legislative offices of California. Approximately $1 billion will be collected in revenue from each California Legislative Analyst’s Office. $500-$550 million dollars from this revenue will be allocated for clean energy and other energy related projects in the next 5 years.
Proposition 39 2012 will also close the loophole in the tax system which allows large out-of-state corporations to pay lower taxes than what is implied on California based corporations. This system which costs tax payers in California more than $1 billion a year also creates an incentive for companies to shift jobs from the state. This is an unacceptable scenario considering the huge unemployment rate which has been affecting the city of California recently.
Proposition 39 will fix this flaw and will ensure that the money stays in California and more job opportunities are created subsequently. Moreover the money saved by the implementation of Proposition 39 will be used to fund clean energy construction jobs. Therefore this new proposition comes as a ‘win win’ situation for residents of California.
The higher revenue from taxes will also increase funding for education in the state. This proposition will imply a corresponding increase in the amount allocated for funding education by Proposition 98.The school funding will see an increase in $200-$500million for the first 5 years. By the year 2018 up to $1 billion will be allocated for funding education in the state of California.
The existing loophole which favored out of state corporations came into being through a midnight deal by the Legislature. Over the years, several attempts had been made to rectify the flaw. However the opposition from Big Tobacco and other big corporations failed the three previous attempts made by the Legislature to fix the issue.
The positive motives of the proposition have gathered tremendous support for itself. Proposition 39 is in accordance with the top most priorities of voters-Jobs and Education. Funding for clean energy construction jobs will be applicable for a period of 5 years after which the revenue gained by the state of California by enacting the proposition will go to the general fund of the state. Governor and Legislature will have the liberty to choose the areas for which the money will be used.
An important fact to be considered is that the passing of Proposition 39 will immediately restore millions of dollars to schools in the city of California. This proposition will also hugely benefit construction workers who are facing the harsh effects of the recession. Critics who oppose the Proposition 39 are of the opinion that moving to a single sales factor calculation might impose a tax burden on some companies.
Although it has to be pointed out that apart from a few huge players in the scene, a lot of small corporations will see a reduction in tax burden. Only those companies which have small percentages of payroll or high percentage of sales in the state will receive higher tax bills.