Photo by Clayton Cardinalli on unsplash.com

California’s industrial sector is disappointed with Gov. Gavin Newsom’s veto of AB 1951, which would have provided manufacturers with a full sales tax exemption on the purchase of equipment through 2027.

The bill authored by Assemblymember Tim Grayson (D-Concord) would have expanded investment and production opportunities in California, according to the California Chamber of Commerce, which supported the bill.

In returning AB 1951 without a signature, Gov. Newsom in his veto message said he intends to work with the Legislature and stakeholders to propose something on the topic next year.

He said local agencies stood to lose more than $500 million in tax revenue each year if AB 1951 were enacted.

“As a strong supporter of California’s business climate and manufacturing industry, I agree with the intent of this bill to invest in California’s economy, incentivize innovation, and spur a manufacturing marketplace that is competitive nation-wide,” Newsom said. “However, we cannot ask our local governments to bear this loss in revenue.”

The leader of the California Manufacturers & Technology Association, which represents 400 businesses in the Golden State’s manufacturing community, said AB 1951 would have brought California in line with 38 other states that do not tax the purchase of manufacturing equipment.

“Still, we will remain an outlier and risk losing our status as the nation’s leading output, employment, and facilities manufacturers,” said CMTA CEO and President Lance Hastings. “CMTA is prepared to have a meaningful, candid, and challenging conversation with the Governor and Legislature about how the California government is financed. California’s early-20th century taxation model does not fit our 21st-century requirement to reward innovation and a sustainable future. Let’s not miss this opportunity to be better.”