A report recently released in New Jersey shows that, of the $4 billion in tax credits the Garden State has given to companies since 2010, a whopping 43 percent have been for jobs that already exist.
Kish Rajan, director of the Governor’s Office of Business and Economic Development,says that is definitely not going to happen in California. In July, Go-Biz awarded almost $30 million in future tax credits to 29 companies that have agreed to create new California jobs. If they don’t follow through, he says, neither will California.
“We required businesses to tell us what their project was, how many jobs it would create, what kind of wages it will pay and what type of capital expenditures will be made in the course of your project,” he says. “We will be monitoring these over time and if they don’t actually deliver against the commitments they made, we have the ability to recover any tax credits that they may have earned.”
Rajan has his hands full these days. He is Gov. Jerry Brown’s liaison with the business community, the point man in Brown’s all-out effort to grow the economy and create jobs. It’s a heavy lift, given California’s notoriously-rigid regulatory environment, high taxes and expensive land costs.
But GO-Biz also has a variety of tools at its disposal, including $780 million in business tax credits to disperse over the next five years. Tax credits to lure new businesses to town are of course nothing new—states have been using them for decades. But unlike some, Rajan says California is committed to ensuring those tax breaks actually do what they are intended to do: create jobs.
“In California we aren’t just writing these folks checks and hoping that the business is going to materialize,” he says. “The tax benefits they get for hiring people and the investments they make are directly based upon on actually seeing those jobs and investments materialize, and come afterward in the form of a tax rebate.”
Part of Rajan’s and GO-Biz’s success hinges on reaching out to business owners who aren’t aware of the tax incentives California offers. Earlier this year, Rajan met a business owner at a manufacturing roundtable luncheon. The owner was unaware of a manufacturing credit that took effect this year which allows manufacturers who buy new equipment to forgo paying the state sales tax (4.19 percent) on those purchases.
“He told me, ‘I’m going to purchase a million dollars of equipment this year—I already know that, so this lunch we’re doing is a $40,000 lunch for me,’” says Rajan. “He was pretty excited about that.”
Check back next week for Rich Eisen’s full interview with Kish Rajan, or grab a copy of our print magazine today.
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