California’s Legislature and the Governor signaled to manufacturers that the state will be a more competitive place to invest over the next eight years by passing an eight-year 4.19 cent sales tax exemption on the purchase of manufacturing equipment. This was a three and a half year increase over the four and a half year exemption passed earlier this month.

The California Manufacturers & Technology Association (CMTA) is pleased to support the package and acknowledges the work done by the Administration and the Legislature to develop a revitalized economic development program for our state.

“Manufacturing jobs are more often the middle-wage jobs that allow a worker to earn a decent wage and benefits that can support a family,” said Assemblyman Jeff Gorell during the legislative floor discussion. “By extending the sunset on the manufacturers tax exemption from four and a half to eight years, we are incentivizing long-term investments and commitment to grow jobs fueling new economic growth.”

“This puts California in the mix for the next round of manufacturing investments,” said CMTA president, Jack Stewart. “With so many other states exempting this tax, today’s action will help reverse our investment losses to other states and grow high wage jobs in California.”

Because manufacturers have decades-long planning horizons for major investments and three to five-year capital budgets for ongoing purchases of equipment, the short four and a half year sunset originally proposed was not long enough to incentivize new manufacturing investment.

CMTA has pushed for a long-term statewide sales tax exemption every year since the Manufacturers Investment Credit expired in 2003.

In that time the state’s manufacturing investments have declined as a percentage of the nation’s total growth, and in 2012 California attracted barely one percent of U.S. manufacturing investments.

“An eight-year sunset on the manufacturing sales tax exemption is a terrific start to improving California’s manufacturing climate,” said Stewart. “We look forward to working with GoBiz, the Legislature and the Administration to make this policy work along with the additional new economic development tools contained in SB 90 and AB 93.”

“We urge state leaders to continue working on economic development strategies to replace beneficial incentives lost with the elimination of the Enterprise Zone program. Bringing jobs to the hardest hit areas of California should be our highest priority,” Stewart concluded.