Brown is now moving the state enterprise zones to a new system that encourages higher pay, and broadens some tax incentives to all businesses.
Moving forward, wage credits are going to stay in current enterprise zone areas that are not considered wealthy, but will also be expanded to businesses in census designated areas of high poverty. Brown originally wanted to only apply the credits to the census designated areas, but that was changed during the legislative negotiations.
Come Jan. 1, future qualifying employees — long-term unemployed, veterans at discharge, ex-offenders and those on the federal Earned Income Tax Credit — will only be eligible for a tax break for their employer if they are paid above $12 per hour.
The state will give a credit on 35 percent of the difference between the actual pay and $12 per hour, with the wage maximum of $28 per hour. That means that if an employer pays a worker $13 per hour, the credit would be based on $1 per hour.
Steve Copp, who owns Chula Vista based Plenums Plus, a manufacturer of air conditioning equipment, said about 20 percent of his new hires earn $12 or more.
Other new tax incentives created by the legislation will apply all over. The widest example is eliminating sales tax on manufacturing or biotech equipment. The state will also create an agency called California Competes, which will offer income tax incentives to companies and small businesses that are considering creating jobs in California, a state with some of the highest costs of doing business due to high taxes. Small businesses are set to receive 25 percent of the incentive credits.
Johnston, president of YYK Enterprise, who bought the company five years ago, said ex-offenders have an opportunity to work their way into superintendent positions, which pay $30 per hour. He said he plans to continue his same hiring practices, whether the new employees qualify for a tax credit or not. Johnston said he hired 45 more people Tuesday and is hoping to add another 75.
The current enterprise zone system, including tax credits on low-income jobs, will be available through the end of 2013. Anyone hired before Dec. 31 will qualify for the credit for five years. Companies that have banked previous enterprise zone tax credits have 10 years to use them.
Cox, Chula Vista’s mayor, said she feels the state reneged on a commitment to keep the zones in place through 2021. Still, she hasn’t yet noticed an influx of permit applications at the city to start businesses before the opportunity goes away.
“I don’t see any rush in the immediate future,” she said. “I do think though that as businesses become more aware of the opportunities presented in an enterprise zone, they’ll inquire with us.”