Manufacturing Tax Credit Expansion Moves

A California Chamber of Commerce- supported job creator bill providing an economic incentive for manufacturers to invest in and expand production in California won approval from a Senate policy committee this week.

AB 52 (Grayson; D-Concord) expands investment and production in California by expanding the sales and use tax exemption for the purchase of manufacturing and research and development (R&D) equipment.

The tax credit transforms the current incentive landscape, making manufacturing investment in California far more competitive and attractive.

California operational costs can challenge a manufacturer’s ability to revitalize and uplift communities, but this investment will signal that the state is serious about retaining and attracting production.

California ranks amongst the highest in the nation in state and local sales tax rates. While the base state sales tax rate is 6%, the local portions of the sales tax can reach up to 10.75%.

California’s economic success depends on production-driven manufacturers that serve as catalysts for building sustainable jobs reflecting the state’s diversity. With increased levels of production and innovation, manufacturing will revitalize a diverse workforce and grow technical skills that lift the state’s economy and the families that live here.

AB 52 would promote increased production and ensure the growth of high-wage jobs for various skill levels and backgrounds in manufacturing firms, helping to cultivate and foster future manufacturing growth in the state’s historically diverse regional economies.

The tax credit will bring California in line with 38 other states which cover the taxes on qualified manufacturing purchases. With tremendous economic ripple effects, every manufacturing job supports at least 2.5 other jobs.

Manufacturers throughout the state have stepped up and led efforts to keep supply chains solid and resilient, but manufacturing growth in California is still outpaced by the rest of the country. The state lost 7.1% of its manufacturing job base over the last decade and has attracted no more than 1% of the country’s large manufacturing investments in the same period.

AB 52 will help local manufacturers compete in a domestic and global economy that operates on razor-thin margins, and it will lead to growth in innovation, production of wide-ranging goods, and an increase in high-quality jobs.

AB 52 won approval on June 14 from the Senate Governance and Finance Committee. It will be considered next by the Senate Appropriations Committee.

Staff Contact: Preston Young