Enterprise zones a flop, says Public Policy Institute of California study

Enterprise zones were “to help small business, particularly disadvantaged, minority-owned businesses create jobs for local residents,” says Steve Erie, University of California San Diego professor of political science. But the program is “a failure — another corporate welfare scheme.”

Enterprise zones, which through tax breaks were supposed to help small businesses in distressed areas, are a boon for big business, but are not creating jobs or development, according to a study by the Sacramento-based California Budget Project. The zones cost the state $721.6 million in 2010, up from $675,000 in 1986. Corporations with assets of $1 billion or more claimed more than two-thirds of the dollar value of enterprise zone tax credits in 2010, says the study, yet fewer than 1% of companies filing tax returns in California have $1 billion or more in assets. San Diego claimed 9.7% of enterprise zone tax credits in 2010 — second in the state behind San Francisco’s 11.2%.

“A comprehensive study by researchers at the Public Policy Institute of California found that [enterprise zones] do not have an effect on business creation or job growth,” says the study. These zones “are unlikely to reduce either unemployment or poverty.” The Legislative Analyst’s Office has also shown that enterprise zones are ineffective in creating new jobs. Businesses have the “ability to claim tax credits for decisions made in prior years, which offers a reward for routine business activity instead of providing an incentive to hire target groups of individuals,” says the study. The credits go to NEW HIRES, not new jobs. Thus, businesses can perpetually claim tax credits for positions that open up due to normal turnover, without creating new jobs, points out the study.


Complete text linked here.

Leave a Reply

Your email address will not be published. Required fields are marked *