A California state assemblyman has drafted legislation aimed at closing corporate tax loopholes he claims are operated out of offshore financial jurisdictions like the Cayman Islands.

“With a grim economy and no-win budget choices, it’s clear that making big business pay their fair share of state tax is more important than ever,” said California Assembly Member Marty Block (D-San Diego) on the California Progress report website.  

Mr. Block has dubbed his legislation the ‘Cayman Islands Tax Loophole Bill’.

“You might have heard about a single building in the Cayman Islands that houses almost 19,000 shell corporations,” he said.  “Corporations transfer their profits to these fake companies so they don’t have to pay taxes.”

The bill, which would have effect only in the US state of California, would take money from multinational corporations who Mr. Block said are taking advantage of the state’s corporate tax loopholes, and use that money to pay for a tax cut on college textbooks and supplies.

The proposal would only tax those corporations if the money subject to the corporate tax was made in California.  

The bill has been approved by the California assembly by the bare minimum of votes required. It would also have to be passed by the state senate before going to Governor Arnold Schwarzenegger for approval.

Economic analysts have stated the bill is part of California’s attempt to balance its budget deficit without actually raising taxes on state residents.

State Republican Party leaders in California have said Mr. Block’s proposal would discourage businesses from operating and investing in California.