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READER REBUTTAL: Enterprise Zones

April 30, 2006

When The Orange County Register ventures into a discussion of government policy, business management and tax incentives, as in the editorial "Make the entire state an 'enterprise zone'" [Opinion, April 5], your working knowledge of the interactions of these topics leaves much to be desired. While every public-policy idea in theory can have positive merit, the application of that plan in the real world can sometimes lead to results that were not considered or anticipated. This would be the situation faced by extending the California Enterprise Zone Program.

Your editorial writer is uninformed about the application of the program. You were correct in your statement that the program was to promote business expansion and job creation in slow-growth and distressed areas. However, you state that the program has "mutated" into something different.

You then quote Raymond Keating, chief economist at the Small Business and Entrepreneurship Council, who carped that enterprise zones have "gone down the path of corporate welfare." This is the banner statement of those who know nothing about a policy, but would rather hide behind anti-business slogans.

The provisions of the California Enterprise Zone Program have not changed; the qualifications and benefits remain as originally enacted. You note that businesses are provided a hiring credit of $34,000 for each "disadvantaged" employee, but you fail to mention that this credit is spread over a five-year period and is applied only if the employee remains with the business for that period.

You also want the reader to believe that "highly compensated" hires somehow exploit the system, but fail to mention that the credit is limited to salaries no higher than $21,000 a year. The program was enacted to encourage businesses, large and small, to stay in or relocate to distressed areas. In exchange, business is given tax incentives for the hiring of disadvantaged employees, or those difficult to place or displaced by plant closure or layoff. It was also structured for businesses to be encouraged to hire workers who also live in the distressed area.

A valid concern is the lack of measurement guidelines to evaluate the benefits provided by such a program. Neither the cities nor the state implemented any data-gathering models, so critics can run wild with assumptions, and those who favor the program can only point to testimonials of business owners. Finally, how can you compare Anaheim, with its "cash cow" tax revenue from Disneyland, Angel Stadium and the Pond, with the revenue potential of Santa Ana? A provision like the State Enterprise Program gives a city like Santa Ana an alternative incentive to use business as the revitalization tool to its growth.

RANDY KUHLER
President, Kuhler & Associates
A Newport Beach business consulting firm specializing in state tax law

For more information, please contact Jarrett Stewart at jstewart@kuhler.com.

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