Sacramento, Calif. – The California Manufacturers & Technology Association (CMTA) issued the following statement regarding the legislative budget agreement in AB 109 (Budget Bill), which is expected to move through the Legislature later today.
“The budget being advanced by the Legislature is a significant setback for California manufacturers,” said Lance Hastings, President & CEO of CMTA. “Right now, affordability and economic growth should be the top priorities, yet the budget raises taxes on manufacturers that make the everyday essentials Californians depend on.”
The budget includes several tax-related provisions that CMTA has strongly opposed, including permanent limitations on the state’s research and development tax credit and a new tax on Software as a Service (SaaS) products.
CMTA has consistently warned that these proposals will increase costs for manufacturers and weaken California’s competitiveness. The limitation on the R&D tax credit sends a troubling signal that California is effectively taxing new innovation.
“Manufacturers in California don’t operate in isolation, they power the entire economy,” Hastings continued. “From the food on our tables to the fuel in our cars, and the technology we rely on every day, this industry is the backbone of daily life. These tax hikes will ultimately be passed down as higher costs for all Californians.”
What This Means for California Manufacturers
The SaaS tax and permanent limitation on business tax credits will increase operating costs across core business functions, including software and compliance tools, and make long-term investments in research and product development more expensive. At a time when manufacturers are already facing global competition and affordability challenges in California, these policies will further discourage investment and drive jobs and growth out of state.
CMTA is deeply disappointed that the Legislature has chosen to increase taxes on manufacturers and raise costs for California families.
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About CMTA
The California Manufacturers & Technology Association (CMTA) has advocated for pro-growth laws and regulations before the California legislature and administrative agencies since 1918. The total output from manufacturing in California is $382 billion per year, roughly 10 percent of the total economic output of the state. Manufacturers employ 1.2 million Californians paying wages more than $2,500 higher than other non-farm employers in the state.