Jobs, Jobs, Jobs in California
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In his State of the State address in January, Governor Schwarzenegger announced his Jobs Creation Initiative. A month later, he's still traveling around California promoting this plan in an effort to get the legislature to act on it. Here are the components of the governor's job creation proposal.
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The Homebuyer Tax Credit
Back in 2009, California offered a $10,000 tax credit for buyers of new homes. It was successful in increasing new home sales, but when the money dried up, so did the home sales. Governor Schwarzenegger wants to allocate an additional $200 million for tax credits, not just for new homes, but for existing homes as well. An active real estate market means jobs in mortgage, title, escrow, real estate sales and more. When those homes are new construction, framers, electricians, plumbers and roofers are needed.
Elimination of Sales Tax on Green Technology Manufacturing Equipment
Green products, such as solar energy systems, are poised to take off. We're just at the edge of making them economically viable, and consumer interest in doing the right thing for the environment has never been stronger. Just look at the success of hybrid cars ' in spite of their higher price tag. Removing the sales tax on equipment needed to make green products will make these products more affordable for the end consumer. As sales increase, jobs are created. These are jobs that will be around for a long time, since the entire green industry is expected to grow and thrive over many years.
New Hire Tax Credit
The governor has proposed a $ tax credit to businesses that hire new employees. This gives that little extra push to companies that want to hire but were reluctant. This is ingenious in that it's available in any industry to any company that's ready to grow. Small businesses can benefit if they are able to add just one or two new jobs. Larger firms will be encouraged to employ more people.
Streamlining of Construction Regulations
Construction takes a lot of time to get started, and state regulations slow things down. Streamlining the regulations will help home builders bring new projects to the market faster. It removes a major obstacle, allowing the homebuyer's tax credit to have a positive effect sooner.
Elimination of Frivolous Lawsuits
California businesses worry about liability more than businesses in other states. Frivolous lawsuits cost millions and hurt businesses, killing jobs. If we can free up the resources that businesses currently use to fight these lawsuits, they'll be able to spend more on their businesses. That means jobs.
The governor's plan has two strategies. The first is to encourage investment. There are some individuals and businesses out there that can afford to spend, but they're holding back. If an incentive from the state can get them off the fence and convince them to buy, then jobs are created. The people who hold those jobs will then be able to afford to spend. He's chosen two specific industries, housing and green technology, because they have great potential to create jobs. The new hire tax credit directly targets jobs in any sector. If this strategy works, it should become self sustaining.
The second strategy involves removing obstacles to business. This is a good idea regardless of the economic conditions, but it's especially important now when jobs are so desperately needed.
The big question is whether these efforts, many of which cost the state money, will be worth it. The homebuyer tax credit, while successful, didn't get the real estate market moving in the long run. How much will it take and for how long? If these efforts alone don't turn the California economy around, is it worth the money to make things better in the short run? I think it is.