Earlier this month, the California Senate approved AB 777, legislation that would exempt space companies from paying taxes on certain property related to spaceflight, including an “orbital space facility, space propulsion system, space vehicle, launch vehicle, satellite, or space station of any kind,” as well as components of such systems.
The bill is slightly different from what the California Assembly passed in January. The Senate version deleted a provision that extended the tax break to equipment that would be placed in those spaceflight systems, and also added a provision stating that an “inference shall not be drawn from this act” regarding whether such property qualifies as “business inventories” in the state tax code. Those amendments mean the bill is back in the Assembly to be passed again as amended.
One would normally think that a bill that provides a tax break to companies would be warmly received by the Wall Street Journal, but AB 777 is an exception. In an editorial published in Monday’s paper, the Journal criticized the bill; the company that reportedly instigated the bill, SpaceX; and its founder, Elon Musk. “Upon his request, Democrats who dominate the legislature are moving to exempt SpaceX and other space-travel companies from California’s personal property tax,” the editorial states. SpaceX could have sought an appeal of a property tax bill it received last year for engines it built, but instead “jumped the queue and petitioned the legislature for a tax reprieve.”
The Journal’s argument is that the legislature is providing special treatment to SpaceX because of the wealth and influence of Musk. “The current legislation would specifically benefit SpaceX and a handful of smaller space firms like Aerojet Rocketdyne,” the editorial states. Of course, Aerojet Rocketdyne, with more than 5,000 employees prior to laying off about 250 earlier this year, still has more employees company-wide than SpaceX, which has close to 4,000 employees. In addition, companies like Boeing and Space Systems/Loral, who build satellites in the state, may also qualify for the tax break.
The editorial notes that other exceptions to state property taxes have been made, such as household furnishings and pets. “But, ahem, taxing a rocket and Fido aren’t equivalent,” it argues. “For one, it’s hard to put a price on a dog.” (Clip that editorial out and take it with you the next time you go to a pet store.) The Journal would rather see the state repeal the entire personal property tax rather than grant individual exceptions, something that the California Legislature seems unlikely to take up soon.
The lead sponsor of the bill, Assemblyman Al Muratsuchi (D-Torrance), hasn’t hid the fact that AB 777 will benefit SpaceX. “Private companies like Space X [sic] are building rocket ships and creating thousands of good paying manufacturing jobs right here in Southern California. We want these companies to invest and grow in our state,” he wrote in an op-ed published last week in his local newspaper, the Daily Breeze. “Passage of AB 777 will be one giant leap forward for this exciting new industry and for California.”