SACRAMENTO, Calif. (KTXL) — California manufacturers want the state to halt taxes on the purchase of new equipment, saying those taxes are hobbling the industry.
It comes as manufacturers aim to modernize production and make it more efficient as supply chain issues continue to impact the nation and the globe.
“It’s simple. We didn’t make up a complicated formula. We just said, ‘If you want to buy something, go buy it, please. You’ll be exempt from the sales tax so you can buy more and create more jobs,’” said Lance Hastings, CEO of California Manufacturers and Technology Association.
Hastings said California taxes both the production equipment and the product at some of the highest rates in the country. In some cases, it reaches up to 10.75%.
Experts note that as innovative as California is the state only attracts 1% of new manufacturing investments in the United States as a result of the financial burdens.
“We help machines and processes and robots move back and forth up and down and around,” Pamela Kan said.
Kan is the owner of Bishop-Wisecarver, a smaller manufacturer in the Bay Area. She notes most manufacturers in California are small and medium-sized.
“Take the sales tax of equipment off the table for small and medium-sized manufacturers. It’s a huge competitive win for us. I’m competing against competitors in lower-cost states. Efficiency is key to me. If I can produce my products more efficiently, by staying on top of the technology and using the latest equipment, it allows me to stay in California and allow my pricing to be competitive,” Kan explained.
Manufacturers said that slashing the tax could give businesses more purchasing power to modernize their equipment to be more efficient and up to date. They also said the industry in California could grow, even more, expanding the workforce and bringing in potentially billions more into the state’s economy.
“We are the number one producing state in the country. We have the most employees, 1.3 million, and our proposal, based on one economic study, would increase the manufacturing employment base in California by over 10%,” Hastings said. “So it would add new jobs, and every job in manufacturing supports 2 1/2 other jobs.”
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“When we don’t have the ability to make what this state needs, it really puts the state at risk for future growth,” Kan said.
Industry leaders are hoping lawmakers approve their request, either through state budget negotiations this spring or through Assembly Bill 1951.
The bill has no registered opposition.