Sharp Eye on Tax Breaks You heard a lot about pork in those frantic days when the California Legislature was putting the final touches on the state budget. Compared with Congress’ largess, the pet projects in the state budget are relatively minuscule, of course: say $250,000 for a park in Calexico, $34,000 for the Lake Tahoe airport tower, $200,000 for the Bay Area World Trade Center and $250,000 to repair a lifeguard tower in Huntington Beach. Many of these items, especially those sponsored by Democrats, will be excised by Gov. Pete Wilson’s veto in the next several days. But there’s another form of pork that begins to add up to real money. Targeted tax cuts help specific industries and, in some cases, individual corporations. They can make sense, depending on the target and the reasons for the cuts. Critics used to call this corporate welfare. Now it’s being justified in the name of economic competitiveness or job creation. The governor should consider using his veto power selectively but firmly on questionable giveaways, such as a $40-million cut for the horse racing industry, the second in recent years. Racing officials claim the industry provides 50,000 jobs and churns more than $4 billion in revenues annually and needs a tax break to remain competitive. But Wilson should consider whether pumping money into a troubled business makes sense.
Several cuts would go into effect only if voters reject Proposition 7 on the November ballot, an initiative that would grant $219 million in tax credits for cleaning up or replacing heavily polluting trucks, construction equipment and the like. The cuts that are contingent on Proposition 7 losing include a reduction of $10 million for custom or prepackaged computer software and a $7.5-million sales tax exemption on selected equipment used by movie producers. Another break, not contingent on Proposition 7; offers a potential tax reduction of up to $64 million to any firm winning a contract on the Joint Strike Fighter military aircraft project. This item, sponsored by Assemblyman George Runner Jr. (R-Lancaster), would help giant aerospace companies operation in the Palmdale-Lancaster area. On the spending side, Wilson is expected to veto $500 million or more from the budget. Some spending items, including a variety of programs to aid local government and state aid to local libraries, should be spared the veto ax. Budget money well spent benefits the lives of large numbers of Californians and in the long run reduces the need for spending later. Wilson should keep that in mind in looking at both tax breaks and new spending.