Grayson’s bill boosts support for manufacturing
CONTRA COSTA COUNTY, CA (May 25, 2022) — California has long been a global hub for innovation and technology, but over the last two years, our state has attracted less than 1% of the country’s manufacturing investments.
I’m determined to change that and bring manufacturing investment back to California in order to make “design here, build here” a reality for our state’s companies. My bill, AB1951, will create the California Manufacturing Attraction and Development Exemption (CA MADE) to eliminate sales tax on most manufacturing equipment purchases.
Right now, California double-taxes production – with taxes on both production of equipment and the product. This places a high cost burden on manufacturers that provide good-paying jobs in our communities and doesn’t allow our economy to grow.
By dropping the tax on equipment, the bill aims to increase tax revenues by dramatically improving California’s competitiveness. Long-term tax revenue from jobs and investments will more than make up for any one-time revenue loss on the sales of manufacturing equipment. In fact, some economists estimate that the state would receive anywhere from a 2½-1 to 5-1 return on investment.
One common misconception is that big corporations do all the manufacturing, when in truth, nearly two-thirds of California manufacturers have less than 25 employees. Today, the purchase of needed machinery is subject to state sales tax of 7.25% to 10.75%, making it more difficult to scale up these types of businesses. As a small business owner myself, I know that’s an incredible range to try to forecast.
Competitive tax structure
A more competitive tax structure helps everyone in this state, because we all benefit when Californians hold manufacturing jobs. When manufacturing grows, it creates opportunities for the middle class and our economy gets stronger. Our state revenues reap benefits from an influx of economic activity.
Manufacturing employs 1.3 million people in California. Here in the Bay Area, manufacturing supports nearly 300,000 jobs with an average annual salary of $88,500.
While spending time in our community, I’m sure you often cross paths with the hard-working women and men of this industry. Did you know that each manufacturing job supports at least 2.5 others in the economy, with some subsectors, such as aerospace, supporting as many as eight or nine more jobs? That is a lot, but we can do better.
California manufacturing was already facing a decline in total employment, but the pandemic has further challenged our manufacturing sector. Since March 2020, manufacturing jobs in California have decreased 4%. Thirty-eight other states have already eliminated the sales tax on manufacturing equipment, and now is the time for California to follow suit.
I’m proud that the Assembly Committee on Revenue and Taxation has already passed AB1951 and that it has the support of the California Manufacturers & Technology Association. I’m hopeful that my colleagues will join me in helping manufacturing grow in our state.
If you’d like to learn more about this bill or other legislation I’m authoring, please contact my Concord office.
Reach Assemblyman Tim Grayson at (925) 521-1511. Visit or write the district office 2151 Salvio Street, Suite P, Concord, CA 94520