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Calif. Gov. Jerry Brown proposes new corporate tax package

Gov. Jerry Brown will ask lawmakers today to tighten a corporate tax formula in exchange for giving manufacturers a sales tax exemption and offering enhanced job tax credits, according to legislative sources.

To enact the plan, the Democratic governor must win votes from at least two Republicans in each house, which Brown failed to do in his state budget fight earlier this year. Brown will portray his plan, which would start in 2012, as a job-creation package as California grapples with a 12 percent unemployment rate.

The linchpin is a requirement that multistate companies calculate their tax liability only on the proportion of sales they have in California relative to elsewhere in the nation, a method called "single sales factor."

Under a 2009 budget deal, firms can pick the more generous of two tax formulas starting this tax year, making California one of only two states to give companies that choice on an annual basis.

Brown wanted a mandatory single sales factor in January to raise nearly $1 billion for the state budget, but Republicans and business groups blocked that plan. Proponents say a mandatory formula would benefit companies that build facilities and create jobs in California. But it would force some major firms to pay more taxes and has divided the membership of leading business groups.

Rather than use the money to attack the deficit, the governor wants to direct it toward a nearly 4 percent state sales tax exemption for startup manufacturers and a 3 percent state sales tax exemption for existing firms, legislative sources said. The exemption would also apply to the biotechnology, software and clean energy industries.

Brown also wants to enhance employer tax credits by expanding the amount from $3,000 to $4,000 per worker and providing it to businesses with up to 50 employees, rather than 20 in present law.

Brown's proposal builds on Senate Bill 116 by Sen. Kevin de León, D-Los Angeles. SB 116 is on the Senate floor and has yet to be heard in the Assembly. The California Chamber of Commerce, California Taxpayers Association and California Manufacturers and Technology Association oppose the bill, according to a Senate analysis.

Brown called a news conference for this morning. The governor has faced mounting criticism for ignoring job creation while other state leaders, most notably Lt. Gov. Gavin Newsom, have announced their own ideas.

"Promoting job creation in California should be a top priority for all legislators," said Brown spokesman Gil Duran in an email. "We are hopeful that there will be bipartisan support for job creation in California."

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