Comcast Latest to Take Their Money and Run

prop-24Last week we reported that Genentech, one of the chief backers of Prop 24’s efforts to prevent the closing of tax loopholes opened up in the 2008 and 2009 budget deals, had pumped 1.6 million dollars into the efforts to defeat Prop 24, only to turn around and eliminate over 800 California jobs.

Now Dan Morain, Senior editor of the Sacramento Bee, is reporting that Comcast is the latest to play “take our tax breaks and run.”

Last month, one of the key deals made to secure the approval of the budget was a little tax break to Comcast – a company based in Philadelphia, Mr. Morain reports.

Now we find out that Comcast is laying off at least 212 workers at the start of 2011 and moving at least 150 jobs to Utah.

Voters on Election Day voted to defeat Proposition 24 that would have repealed roughly $1.5 billion in corporate tax breaks.

“Swiss pharmaceutical giant Roche, through its California subsidiary, Genentech,  was the largest donor to the campaign to kill the initiative, Proposition 24, essentially acknowledging that Roche will benefit mightily from the 2009 deal” writes Mr. Morain.  “With its California tax break secure, Roche last week issued an announcement from its headquarters in Basel, Switzerland, saying it would be implementing its “Operational Excellence Program.””

As Mr. Moraine put it, “What interesting timing. No political consultant would have ever advised that Roche announce lay-offs in the days leading up to the Nov. 2 vote on Proposition 24.”

Likewise, Comcast also played the sophistication game.  “Sophisticated political player that it is, Comcast surely would not have announced that it was shipping jobs to Utah if the California tax legislation had been pending,” Mr. Morain continued.

Mr. Morain writes, “Comcast is not the only beneficiary of legislation. It applies to other out-of-state companies such as Microsoft that sell so-called “intangible” goods into the state, including cable or software licensing agreements. California authorities estimate the provision will save such companies $100 million a year.”

However, our own Senator Lois Wolk is calling this the “Comcast provision.”

“If we’re going to be granting tax earmarks, we must demand specific performance,” said Senator Wolk who comes out of this looking very good, as she was one of the few who dissented when the Legislature approved last month’s tax deal.

Writes Mr. Morain, “In her view, a company receiving a tax benefit ought to commit to hiring California workers. The state should be able to claw back breaks given to a company ‘that takes our money and flees our state.’ “

Of course, in reality that is not how tax deals work in the Capitol, Dan Morain is quick to add.

But perhaps the real problem is that we are missing the big picture here, as companies flee California despite being handed huge tax breaks.  Lawmakers are willing to give up the store with these tax breaks, during a time when our state coffers are hurting, in the fleeting hope that somehow companies will stick around and add jobs.

Perhaps we need to change the way we give these tax breaks, and we can make them conditional upon companies bringing jobs in and not exporting jobs out of California.

It is difficult during tough economic times to promote business, but giving tax breaks and have companies still pull out is completely unacceptable from a public policy standpoint.  The fact that these companies knew enough to wait until just after the election and just after the budget was passed demonstrates they were fully aware of the stakes.

Unfortunately, our leaders have been snookered again.

“More often, lobbyists and the business interests they represent tell legislators that they must cut taxes, or else the businesses will head to some other state or foreign land,” Dan Morain wrote.  “Legislators often agree and in the process twist themselves and the tax code into knots – as happened when they approved the 2009 corporate tax-break legislation.”

“Politicians hope that by tweaking the tax code they can help businesses, and that businesses will hire more workers. No doubt, that’s true some of the time,” he writes.  “But businesses hire and fire for many reasons, most of them way beyond the control of California’s Assembly and Senate.”

He concludes, “When a corporation gets a tax break one month and announces that it’s moving jobs to Utah the next, California lawmakers end up looking like chumps.”

Worse than that, they look like politicians who sold out to big business while harming those who rely on services such as education, health care and other state and county services that help those in need.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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13 Comments

  1. rusty49

    David, you’re putting the spotlight on only a couple of companies who cut jobs, but how many jobs will be added or saved (Obama loves that one) because of tax breaks?

  2. E Roberts Musser

    dmg: “”More often, lobbyists and the business interests they represent tell legislators that they must cut taxes, or else the businesses will head to some other state or foreign land,” Dan Morain wrote. “Legislators often agree and in the process twist themselves and the tax code into knots – as happened when they approved the 2009 corporate tax-break legislation.””

    I’m a bit confused here. It is my understanding that Prop 24, which was defeated by voters, would have stopped several corportate tax breaks slated to go into effect in 2011 and 2012.

    According to you, Comcast and other businesses (e.g. Genentech) were going to lay off workers whether Prop 24 was passed or not. So Prop 24 had nothing to do with their business decision.

    So you are just upset that these companies laid the workers off before the vote on Prop 24 was taken – that this was somehow “dishonest”.

    So now I’m going to ask you a question: Would you prefer they lay the workers off prior to the decision on Prop 24 – which would have made what difference in terms of layoffs? Can’t you make the argument had Prop 24 passed, the companies in question might have had to lay off even more workers had Prop 24 passed?

  3. E Roberts Musser

    Correction: “So you are just upset that these companies DID NOT lay the workers off before the vote on Prop 24 was taken – that this was somehow “dishonest”, even tho it would have been shooting themselves in the foot and a very poor business decision.

  4. Ryan Kelly

    I switched to satellite TV a long time ago, due to very poor service from Comcast. If the employees truly valued their jobs, they would have given better service and treated customers better. As it is, they have lost market share.

  5. Adam Smith

    Seems like the original law might have been poorly worded if it allows the corporations to get the full benefit of the tax breaks without requisite jobs for a defined period of time.

    However, we shouldn’t let a poorly structured law blind us to the benefits and job creation that can come from appropriately structured tax breaks for companies. I think it is almost certain that you’d see many more jobs leaving if the tax breaks had been repealed completely.

  6. Rifkin

    [i]”Last week we reported that Genentech, one of the chief backers of Prop 24’s efforts to prevent the closing of tax loopholes opened up in the 2008 and 2009 budget deals, had pumped 1.6 million dollars into the efforts to defeat Prop 24, only to turn around and eliminate over 800 California jobs.”[/i]

    What tax loopholes? I’m not really sure what you mean by a tax loophole, anyhow. Can you define what a loophole is?

    Prop 24 would have prohibited multi-state (or multi-national) businesses from carrying forward losses more than 10 years or from receiving some tax credits that those businesses can now claim federally.

    No doubt, the motive of the corporations which opposed Prop 24 was to pay less in taxes. However, it’s not as if the budget deal which later inspired the unions to push for Prop 24 opened up some gaping loophole wherein corporations doing business in our state will no longer pay taxes or will henceforth pay substantially less in taxes. For the most part, these changes only apply when corporations are losing money.

    And keep this in mind about corporate taxes in general–all corporate income is taxed twice* (or more) in the United States. In most fast-growing countries, it is only taxed once.

    [i]”Now Dan Morain, Senior editor of the Sacramento Bee, is reporting that Comcast is the latest to play “take our tax breaks and run.” Last month, one of the key deals made to secure the approval of the budget was a little tax break to Comcast – a company based in Philadelphia, Mr. Morain reports. Now we find out that Comcast is laying off at least 212 workers at the start of 2011 and moving at least 150 jobs to Utah.[/i]

    Where is your evidence that Comcasts’ decision to move jobs to Utah has anything to do with Prop 24? As it happens, Comcast gave no money to the No on 24 campaign, AFAICT. Here is the list of the largest givers:

    [b]NAME OF CONTRIBUTOR–AMOUNT[/b]
    GENENTECH, INC.–$1,600,500.00
    CISCO SYSTEMS, INC.–$1,600,000.00
    VIACOM INC.–$1,600,000.00
    GENERAL ELECTRIC COMPANY–$1,500,000.00
    TIME WARNER–$1,500,000.00
    THE WALT DISNEY COMPANY –$1,400,000.00
    FOX GROUP–$1,325,000.00
    CBS CORPORATION–$1,250,000.00
    QUALCOMM –$1,000,000.00
    JOHNSON & JOHNSON –$775,000.00
    AMGEN INC.–$600,000.00
    JUNIPER NETWORKS–$150,000.00
    SALESFORCE.COM, INC.–$125,000.00
    ABBOTT LABORATORIES–$100,000.00
    ACTIVISION BLIZZARD–$100,000.00
    GEP ADMINISTRATIVE–$100,000.00
    HEWLETT-PACKARD–$100,000.00
    PFIZER INC.–$100,000.00
    THE DIRECTV GROUP, INC.–$100,000.00
    YAHOO! INC.–$100,000.00

    —–

    How is corporate income taxed twice? Take Cisco Systems, which I happen to own shares in. (I will only address federal taxes, here.) Say Cisco makes say $1,612.90 in income (on my shares). The corporation is in the 38% bracket, so they must pay $612.90 corporate income tax on that. Cisco then decides to pay me, the owner of its stock, a dividend of $1,000. Say I’m in the 28% tax bracket. I have to pay $280 income tax on that, leaving me $720 after tax. (Note that a dividend is not a capital gain. It’s taxed as marginal income.) So on $1,612.90 in income, my money was first taxed at the corporate level, then at mine, with the federal government taking 55.36% of the income.

  7. Rifkin

    The Yes on 24 campaign was mostly public school teachers, who combined spent more than $10 million. I’m not sure what “America’s Families First” is, but I suspect they live off of taxpayer money:

    [b]NAME OF CONTRIBUTOR–AMOUNT[/b]
    CALIFORNIA TEACHERS ASSOCIATION–$8,886,367.05
    AMERICA’S FAMILIES FIRST, INC.–$2,150,000.00
    NATIONAL EDUCATION ASSOCIATION–$2,125,000.00
    COMMUNITIES AGAINST PROP 23 –$350,000.00
    S.C.O.P.E — $325,000.00
    A.L.L.E.R.T. –$200,000.00
    ALLIANCE FOR A BETTER CALIFORNIA–$155,371.58
    AFSCME–$100,000.00
    CALIFORNIA FEDERATION OF TEACHERS–$100,000.00
    CALIFORNIA SCHOOL EMPLOYEES ASS–$100,000.00
    SERVICE EMPLOYEES INTL–$100,000.00
    YES ON PROP 1A AND 1B–$86,882.02
    UNITED TEACHERS LOS ANGELES –$19,670.00
    CALIFORNIA FACULTY ASSOCIATION–$16,500.00
    CALIFORNIA FIREFIGHTERS–$1,331.10
    THE NATIONAL UFW PAC–$1,314.48

  8. Don Shor

    America’s Families First appears to be an independent-expenditure group run by Democratic-leaning political operatives:
    [url]http://thecaucus.blogs.nytimes.com/2010/10/01/document-outlines-independent-groups-plans-to-help-democrats/#more-106135[/url]

  9. E Roberts Musser

    wdf1: “I wonder how relevant cable will be in ten years.”

    I hope not very. Cable is frustrating to deal with and very expensive.

    Just discovered Skype – where you can see and talk to anyone anywhere in the world for free over your computer. I am currently tutoring someone in Math this way. Have had wonderful chats with my family on the East Coast – as if we were sitting in the same room together. For anyone who wants to download it for free, just go to http://www.skype.com. Enjoy!

  10. rusty49

    ERM: I’ve been skypeing my daughter, her husband just got stationed in Lanstuhl, and grandson in Germany for the last few months. I love it, we talk with video and it’s free.

  11. E Roberts Musser

    rusty49: “ERM: I’ve been skypeing my daughter, her husband just got stationed in Lanstuhl, and grandson in Germany for the last few months. I love it, we talk with video and it’s free.”

    Yes, isn’t it a wonderful thing? I’ll bet it makes life so much richer to be able to see your family when you talk to them as if they are right in the room with you! Frankly, this is one of the most useful and wonderful inventions of the technological age IMHO. It brings families closer together than ever. And to think it is free of charge…amazing…

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