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Paying attention to manufacturing in California

Posted by Dorothy Rothrock, President on July 5, 2013

It’s about time manufacturing got a little love in the Golden State.  You would think that creating high-wage jobs, making multi-million dollar investments for innovative new products and providing huge multiplier effects in the broader economy would have justified a sales tax exemption on manufacturing equipment before now.  Nearly every other state has this.  For more than a decade CMTA has argued that manufacturing investment is the engine of the economy – and letting the manufacturing investment tax credit lapse in 2003 was a big mistake.  Yet a dozen bills introduced since 2003 failed to reinstate the credit.  California has suffered declining investments and manufacturing jobs as a result.   
This week, at long last, lawmakers passed a bill package including a sales tax exemption for manufacturing equipment.  Did they suddenly come to their senses on the importance of manufacturing and agree that this and perhaps other policies should be adopted to help manufacturers?  It is a nice thought, but we shouldn’t count on it. We must keep educating legislators and pushing for improvements to make California a better place for manufacturing.  There is much more work to be done. 
Let’s make this the first of many positive changes to turn California into a powerhouse for manufacturing investment and job growth.  Every manufacturer should start by thanking your local legislators for the vote last week.  Let them know that the exemption will help, but remind them about your many other challenges in the state.  Invite them to visit your facilities to meet your employees and tell them about your contributions to the community.  CMTA will continue to be a resource to you and champion for your interests in Sacramento. 

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Manufacturing sales tax exemption bills move forward

Posted by Gino DiCaro, VP, Communications on April 25, 2013

This is a follow-up to last week's 'Tipping Point' piece on CMTA's proposed sales tax exemption on manufacturing equipment purchases.

Both tax exemption proposals were heard in committee this week, receiving positive comments from legislators.  SB 376 by Sen Lou Correa received a unanimous 7-0 vote in the Senate Governance and Finance Committee and Assemblyman Kevin Mullin's AB 486 received an affirming hearing but we won't know the bill's fate until the Assembly Revenue and Taxation Committee votes on it in its 'suspense file' hearing next week.  

Both bills enjoyed wide support in testimony with the only opposition coming from California Tax Reform Association, a group funded by public employee interests.  In ten years, among at least 30 proposals, only one ever made it past its first hearing,

CMTA stepped up its game this week to show the job impact from the manufacturers investment credit back when it was originally implemented in the state in 1993 for a ten-year period.  See for yourself below.  We basically caught up to U.S. manufacturing in the first seven years and grew by seven percent with 131,000 new manufacturing jobs before the massive tech bust occurred.  
manufacturing during the MIC
California manufacturers can overcome big challenges with the support of state and local government.  Most manufacturers realize there is a premium to pay to operate in the state, but the total valuation of California costs makes it almost impossible to compete.  Bringing back the sales tax exemption on manufacturing investments is one way to get back in line with most other states and position the state to compete for manufacturing scale-ups.

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Tipping point for California manufacturing investment

Posted by Gino DiCaro, VP, Communications on April 18, 2013

These days, it seems like states are figuring out how important manufacturing is to healthy economies.  The competition is picking up, as states move to reduce costs or create incentives for manufacturers.  After all, companies put investment capital in locations with the most attractive business climates.

This could be good news for California.  We have state-of-the-art advanced manufacturing facilities employing thousands of California workers. These companies could grow here if conditions are favorable. But there is one key issue that needs to be fixed if California is going to compete for its share of manufacturing growth.

A sales tax exemption on the purchase of manufacturing equipment is a policy most other states have adopted. This gives them a competitive advantage for their campaigns to grow high-wage manufacturing jobs. California had a similar tax rule, but it expired in 2003.  We could catch up by reinstating the exemption, which would put California back on so many lists for future investment and growth.  For many manufacturers, the sales tax exemption could be the 'tipping point' for a decision to invest in California.  

sales tax exemption

In the 1990's, when the tax credit was in place, California attracted on average almost 6 percent of the country's manufacturing investment dollars.   Manufacturing investment in California has now slowed to an average 1.9 percent of the country's, since that credit expired.

The credit helped Intel grow its wafer fabrication plant in Santa Clara and it helped Northrop Grumman grow in part  to more than 27,000 employees.  Because the exemption still exists in specific enterprise zones, it helped Fontana-based California Steel recently pay for a $100 million expansion.  Imagine if this powerful tool were available to every manufacturer again in California.

CMTA had its lobby day this week on the issue to start informing the legislature of the tremendous economic benefits, including new net revenues to the state.  Large employers, Intel, California Steel, Kimberly-Clark, International Paper, and Northrop Grumman joined to educate legislators why it is important to eliminate the tax on manufacturing investments.  

Economist, Bill Watkins put it perfectly last week when he urged the state Legislature to "Create an opportunity economy."  This manufacturing sales tax exemption would do exactly that and create the particular opportunity that California so badly needs.


(There are two sales tax exemption bills.  Assm. Kevin Mullin's AB 486 will be heard in Assm. Revenue and Taxation Committee on Monday, April 22 and Sen. Lou Correa's SB 376 will be heard in Sen. Governance and Finance Committee on Wednesday, April 24)

STE one pager |  Coalition letter in support





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Mounting support for competitive tax policy for manufacturing growth

Posted by Gino DiCaro, VP, Communications on Feb. 21, 2013


In 2003 California manufacturers lost a sales tax credit on their capital equipment purchases, making them approximately six percent less competitive than manufacturers in most other states.  Since then, there have been no less than 20 proposed exemptions in different forms before our state legislature.  None -- with one failing exception -- have made it to even a second committee hearing.

The annual proposals indicate that some legislators, like those in most states, understand the importance of competitive tax policy for manufacturers -- and the jobs, innovation and ripple effect they bring to a regional economy.  Unfortunately the proposals stumble every year on an unwarranted fear of lost state revenues.

This year, after a decade of limited bipartisan support, that might change.

Correa Stewart STE

Yesterday, Senator Lou Correa and Assemblyman Kevin Mullin held a press conference at CMTA's office to announce new legislation to provide a sales tax exemption designed to stimulate our manufacturing base. 

CMTA president Jack Stewart summed it up with clarity at the press conference, "By creating a sales tax exemption for manufacturing equipment, California sends a strong signal to investors around the United States and around the world that California is serious about attracting new investment."

Competitive state tax policy is absolutely critical for California to attract domestic manufacturing investment.

California is the largest manufacturing state, but our state has been among the lowest performing states in per capita manufacturing investment in the last decade.

There are many reasons for this, but the state’s total valuation of costs makes it very difficult to compete for new manufacturing start-ups and expansions. 

Advanced manufacturing equipment is expensive, often resulting in millions of dollars per year in new equipment or retrofits for a company.  A six percent tax disadvantage on these critical inputs means less investment and fewer middle-class jobs for California.  Often this doesn't result in companies moving out of state, but  means a company quietly elects to grow elsewhere.

Some folks think the exemption equates to less revenue for the state.  The opposite is true.  A study done by the Milken Institute on a similar exemption showed that after the first three years of the policy, the state would reap more than 45,000 jobs and bring in more than $500 million in new state revenues with a net increase of $39 million to the state.  Senator Correa’s legislation delays a company’s ability to recognize the tax savings for the first three years, allowing the state to reap the revenue benefits before paying for the exemption. 

The legislation is more popular than ever with co-authors from both parties jumping on board.  There is no reason our legislature shouldn’t fully embrace this concept when so many other states already do.

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It's time for 15 economic recovery policies in California

Posted by Gino DiCaro, VP, Communications on Jan. 23, 2009

Yesterday, a coalition of employers from a wide spectrum of industries -- including the manufacturers -- deeply concerned about California's economy delivered to legislators and the governor their recommendations for policies to support job growth and improve state finances.  

California is dependent on income, sales, corporate and property tax for its general fund dollars.  More than 50 percent of the general fund is dependant on income tax alone.  Our government programs survive on profitable businesses employing a high-wage workforce.  With the country's third worst unemployment rate (9.3 percent), and few growing sectors outside government services, the state will not get out of the current crisis without improving the business climate.

These recommendations by a very diverse group of industries are meant to create a springboard for the state's economic recovery and change the legislature's attitude toward a healthy business climate.  Without real incentives -- like the one Tesla Motors received back in June -- and long term certainty in California, we will not see the growth that is mandatory for our recovery.

The manufacturers are firmly behind this growing effort, and this group -- titled "California Businesses for Economic Recovery"-- will not stop advocating for the collective proposals now and in the future.  While each proposal has a different value for individual organizations, we all agree that the combined list deserves serious attention.

Key points for lawmakers and media to consider as impetus for the listed recommendations:

•    The uncertainty of California's regulatory and fiscal environment makes it almost impossible for short and long term business growth
•    Taxes, fees, mandates and regulations are currently enacted without considering their cumulative and dynamic impact
•     Industries such as high tech, manufacturing, entertainment and agriculture are being lured away by Nevada, Arizona and other regions
•    Business costs in California are 23 percent higher than the national average
•    California’s unemployment rate (8.4%) is third worst in the country and at its highest level since the early 90's

Recommendations titles:

•    Delayed sales tax exemption
•    Design build
•    Eliminate corporate penalty
•    Employment training panel
•    Energy infrastructure Development
•    Flexible workweek/alternative schedules
•    Greenhouse gas emissions AB 32 and CEQA
•    Homebuyer tax credit
•    Infrastructure bonds
•    Meal and rest period clarification
•    Public private partnerships
•    Research and development tax credit
•    SB 375 land use and transportation bill clean up
•    Tourism tax repair

See cover letter to legislature
See details of proposals
See press release
See economic recovery two-pager


    * AeA
    * American Council of Engineering Companies
    * Antelope Valley Board of Trade
    * Assn. of Destination Management Companies
    * California Business Properties Assn.
    * California Building Industry Assn.
    * California Grocers Assn.
    * California Independent Petroleum Assn.
    * California Manufacturers & Technology Assn.
    * California Restaurant Assn.
    * California Retailers Assn.
    * California Space Authority
    * California Trucking Assn.
    * Chemical Industry Council
    * National Federation of Independent Business
    * Santa Barbara Technology & Industry Assn.
    * Technology Council of Southern California

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