Rob Kerth, president of the North Sacramento Chamber of Commerce, points out that the $1.3 billion in tax breaks that would be undone by Proposition 24 would largely benefit big corporations — and provide nothing for the portable ice rink company he owns.
It's not lost on Kerth and others that the state is struggling through chronic budget shortfalls — forcing spending cuts to schools, healthcare, parks and other programs — at a time when many of California's biggest companies are minting money.
Just this month, Google reported $2.2 billion in profit for the three months ended Sept. 30. Days later, Apple Inc. said it made $4.3 billion in profit.
"It's further unbalancing the playing field," Kerth said. "It lets people out of paying their fair share and makes the rest of us pay more."
Business groups contend that the state should strive to keep taxes on business as low as possible, saying the less they pay in taxes, the more they can spend to hire people and create jobs.
"There's something wonderful and encouraging that you can have companies like Google and others who can still be making money during the worst economic downturn since the Depression," said Loren Kaye, president of the California Foundation for Commerce and Education.
But corporations now shoulder less of the state's tax burden than they did a generation ago, according to a Times analysis of state Franchise Tax Board data. The analysis found that corporations reporting net income paid 5.4% of their state income in taxes in 2008, the most recent year available, down from 9.7% in 1981.
The analysis looked at the amount of taxes assessed on all corporations in California in each year, and calculated it as a percentage of income corporations reported to the Franchise Tax Board that year.
The trend can also be seen in the share of state tax revenue collected from corporations versus individuals over time. Corporations contributed 16% of the state's general fund in 1977-78, but that's now down to 11%. Personal income taxes, meanwhile, have grown to 53% of general fund revenue, from 36% in 1977-78.
The decline in the share of corporate income taxes is partly explained by companies changing their structures to "S" corporations and limited liability corporations, said Justin Garosi of the Legislative Analyst's Office. But it's also a result of companies taking better advantage of the tax code to reduce what they pay.
"Companies can play games to try to shift their income around," he said.
Businesses have also benefited more from Proposition 13 than homeowners. A study in May by the California Tax Reform Assn. found that residential property owners provided 53% of the property tax revenue for Los Angeles County in 1975, but now shoulder 69% of the tax burden.
California businesses also get a big break from the state's research-and-development tax credit adopted in 1986. The credit allows companies that boost their R&D spending to claim a tax credit of 15% of that increase. If a company spends $2 million more, for example, it gets a $300,000 credit.
Chip maker Intel Corp. is able to generate an R&D tax credit of $60 million a year, according to spokesman Chuck Mulloy. Some might argue Intel doesn't need the credit — it recently reported a third-quarter profit of $3 billion — but Mulloy makes no apologies, saying it's "the only incentive tax left in California."
The credit was worth $1.2 billion to companies operating in California in 2008, the most recent year for which data are available, state officials say. But the state does not require individual companies to disclose how much they received in that or other tax credits.
This summer the state Legislature approved AB 2666, which would have required the state to reveal what it awards publicly traded corporations in tax breaks.
"There are businesses that do pay their share, but it would seem that there are other businesses that don't," said Assemblywoman Nancy Skinner (D- Berkeley), the bill's sponsor. "How do we determine which without some kind of transparency?"
Opponents said that it would discourage business investment, and Gov. Arnold Schwarzenegger vetoed it.
alana.semuels@latimes.com
