LOS ANGELES (AP) — California voters on Tuesday approved closing a corporate tax loophole that Democratic lawmakers weren't able to pass through the Legislature.
Proposition 39 is expected to generate about $1 billion a year, with some of the money dedicated for energy efficiency projects. With more than half of precincts reporting, the measure had nearly 60 percent support and 40 percent against.
The Yes on Proposition 39 campaign was largely funded by nearly $30 million from billionaire hedge fund manager Tom Steyer, who called it an issue of tax fairness and a chance to restore confidence in state government.
"Honestly, we corrected a wrong and we took a step toward where we want to be, which is the best-governed state in the U.S.," Steyer said in an interview.
Art Pulaski, executive-secretary treasurer of the California Labor Federation, applauded the measure as a job creator for California.
The initiative closes a provision in the tax code that allows multistate corporations to choose between two tax formulas. The loophole dates to a late-hour, 2009 budget deal pushed by Republican lawmakers so they would put up enough votes in the state Legislature to pass a temporary tax increase that has since expired.
By using just one formula, the Franchise Tax Board has estimated the change would raise about $1 billion a year.
There was no formal opposition campaign, and the idea behind the initiative is supported by many California-based companies. Some business and anti-tax groups argued that repealing the tax break would make California less business friendly, at least for out-of-state companies.
The tax formula, known as single-sales factor, is used by many other states, including Michigan, New Jersey and Texas. The Legislative Analyst's Office has said that moving to the single-sales factor could result in up to 40,000 more jobs in California.
The $1 billion in additional revenue would be split between the state general fund and energy efficiency programs for the first five years, and would go entirely into the general fund after that.