What Is Prop 39?

Financial laws in America or always subject to a few caveats and loopholes. Some work in the state’s favor, while others prove to be detrimental. One such problem is a tax loophole created during Californian budget negotiations in 2009. Now legal professional and campaigners are calling for an end to this tax loophole once and for all, including the non-partisan California Legislative Analyst (LAO). This is where Prop 39 comes into play.

Why is this tax loophole such a problem for California?

The first issue here is a simple fact that this system does not favor Californian companies and workers at all. All of the significant business advantages and financial incentives go to out-of-state companies. They can come in, make the most of these tax breaks for a more profitable venture and there is little advantage in the state. Companies receive rewards for coming in with established brands and workers and setting up in California. They don’t need to provide new posts in the state or hire Californian workers.

The bigger issue is that it costs the state a lot of money at the same time. This initiative is harmful to the Californian economy because of this lack of job growth and prospects for the country. In fact, figures show that the state faces annual losses of $1 billion due to this system.

What is the aim of Prop 39?

The primary objective of this new proposition is to deal with both of the main issues here – to close the loophole that damages the Californian economy and to readdress the losses. The former is simple. A new law would close off this loophole and remove all those tax breaks and incentives for out-of-state companies. This would open up job prospects for California-based businesses and employees, improving the economic landscape in the process.


The solution is to switch to a mandatory single sales factor. The LAO claim that this approach will allow for a net gain of 40,000 jobs in the state. This mandatory single sales factor is nothing new. It is currently in place in many US states, including New York, Texas and Colorado.

This means some impressive forecasts for economic improvement. As for those losses of $1 billion per year, there is the hope that this change would address that balance and return these lost funds to the state of California. In addition to this, those heading the campaign for Prop 39 hope that some of the revenue from the venture will benefit the market directly.

Campaigners believe that this new measure will create an annual General Fund of $500 million at first, increasing to $1 billion after five years. This is an impressive increase is revenue that can benefit many services for Californian workers and their families. Key areas of interest are transport links and education. We cannot forget that this General Fund revenue is subject to Prop 98. This voter-approved proposition ensures that nearly half of new revenues go towards state education. However, there is also a strong focus on green energy.

Energy Efficiency Programs

They also hope to transfer a sum to energy efficiency programs in the state, increasing job prospects in this vital, growing industry. The forecast is for 20,000 to 30,000 construction-related jobs thanks to this direct link to clean energy projects. It is a nice touch in a proposition that aims to repair the damage caused by the state.

Current ideas include projects that focus on public buildings, particularly schools. This means work to improve the energy efficiency through insulation, window repair, improved tech and green power generation. Naturally, all the work will come from Californian sources. This is why so many supporters fight for Prop 39.

There is a clear message to all voters in California with this major proposition. Those that vote yes on Prop 39 will help to close this loophole, remove the incentives to harm the local economy and contribute to addressing the balance in the budget. Furthermore, there is the hope that the plentiful funds from this mandatory single sales factor approach will benefit the lives of Californian residents to a greater extent. A yes vote here could take the money back from big out-of-state businesses and ensure that the state receives improved education and green energy initiatives. A no vote will allow the current situation to continue, and a loss of billions of more dollars.