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Report: California Does Not Know If Its Business Tax Breaks Work

California does a poor job tracking the impact of billions of dollars in tax breaks and credits it provides to businesses each year, according to a new national study.

The non-partisan Pew Charitable Trusts ranks California among 23 states that are “trailing” in their ability to evaluate whether tax incentive programs are having the desired effect.

The state offers tax incentives to encourage a range of businesses, including TV and film productions in-state, low-income housing developments, and companies that are just starting out.

"Tax incentives are really important decisions that states make in terms of trying to grow their economy, create jobs, attract new businesses, and they’re also major budget commitments," says Josh Goodman, an author of the report at Pew. "So, what we’ve found is that states need to be carefully measuring the results of their incentives with a regular, consistent process. And that’s what California lacks right now."

A state audit last year found California’s research credit costs $1.5 billion in revenue, but the state collects no evidence — one way or the other — about if it encourages research.

Goodman says lawmakers have tracked some programs, such as the film incentive, but have not set out any consistent processes.


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