California's Business Climate:
Governor Touts Business Expansion in San Jose Fueled by Generous Tax Incentives

Governor Jerry Brown travelled to San Jose on August 16 to be present at an announcement that Samsung is going to expand its research-and-development workforce. It is not known if the governor knew that the expansion was influenced by a bevy of generous tax incentives.

According to the San Jose Mercury News, the state will provide reimbursement for employee training, and the company will be eligible for the research-and-development tax credit. San Jose will cut its traffic impact fees by more than half, construction taxes by more than 75 percent, will rebate up to half of utility taxes for 10 years, and will provide a $500,000 economic development incentive.

The governor said Samsung's announcement shows that despite persistent criticism that high taxes and heavy regulations make California hostile toward business, the state remains a draw for technology companies. (CalTax: The tax incentives seem to contradict that statement. It appears that because of California's hostile business climate, a number of generous tax incentives are necessary to attract businesses to this state.)

This was the governor's first trip to San Jose since his election. No details were available on the new jobs that will be created. Discussing Samsung's expected growth, San Jose Mayor Chuck Reed said: "I don't know how big they are going to get or how fast they are going to grow. We haven't seen the plan. But the key thing is that they've decided to stay and grow in the city and not somewhere else."

At the same time that this agreement was announced, there was a big trial in progress in San Jose, with Apple accusing Samsung of infringing on its patents (Apple Inc. v. Samsung Electronics Company, Ltd., 11-1846 (N.S. Cal. Filed April 15, 2011)). (Sources: The Daily Recorder, August 16, and San Jose Mercury News, August 17.)

August 24, 2012
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