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Community commentary: Enterprise zones bring state money

March 14, 2011|By Don Wagner

The California Legislature created enterprise zones in 1984 to attract employers to economically distressed communities. That effort paid off, with the program creating jobs, reducing poverty and stimulating economic activity. Unfortunately, the governor is proposing to eliminate enterprise zones as a small part of his overall — and largely illusory — plan to balance the budget.

Enterprise zones work simply and largely well. California provides tax credits to companies that hire workers within the state's 42 designated zones, encouraging the creation or retention of jobs for veterans, the disabled, the disadvantaged and others. These are jobs in some of the state's most depressed areas.

In fact, according to a recent study by USC accounting professor Charles Swenson, perhaps more than 1 million jobs have been affected by the program.

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That is why the governor's efforts to shut down the program is such a bad idea.

By repealing the tax credits that fuel enterprise zones, California's many employers who took the state at its word, then located and grew their businesses in such zones — and have helped improve some of our struggling communities — will instead find their tax bills climbing dramatically. This will leave them with less in their budgets for payroll, benefits, capital improvements and hiring.

At a time when California has the nation's second highest unemployment rate, we will see more people collecting unemployment insurance rather than paying taxes. Additionally, businesses that set up shop in enterprise zones will suffer from decreased productivity or have to shut down, thereby further reducing state and local revenues.

With 12.5% unemployment, shouldn't we be doing everything we can to keep people employed and help small businesses improve local economies and grow — not reduce — their revenues? This is even more true as the proposed elimination of enterprise zones will actually save very little toward the state's budget deficit of more than $25 billion.

Finally, of course, none of this is to suggest that the enterprise zone program either works flawlessly or cannot be improved. Like any government program, it has inefficiencies and imperfections.

But given the overall strong performance of enterprise zones around the state, given the disadvantaged communities they help, and given the relatively small budget "savings" that would be achieved by their elimination, this is hardly a budget solution worth the cost.

DON WAGNER serves Newport Beach, Laguna Beach, Irvine and other cities as an assemblyman in the 70th District.

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