While Gov. Brown’s revised budget wasn’t all bad news, its overall tone was that an end to the persistent problems that have continued to cripple the California economy was nowhere in sight. It will be a long time before the state is financially stable again. And while there were some things about which small businesses have some reason to be optimistic, there were also some proposals that gravely – and understandably – concern them.
First the good news: The economy does look like it’s turning around a little with $3.5 billion more in revenues than anticipated. The trick is going to be how legislators and bureaucrats choose to use that extra revenue. Will they continue to spend, spend, spend, or will they pay off some of the massive debt we have accumulated over the years? We now have a shortfall of $9.6 billion for this year with another $1.2 billion needed for a reserve.
Now the bad news: The governor continues his proposal to extend taxes for five years – only now it will be an “increase” which will add up to over $50 billion in new taxes over the next sixty months. NFIB/CA members opposed similar tax increases in 2008 because they simply don’t believe that government is using the money it currently collects in an efficient and effective manner. In addition, small employers simply cannot continue to absorb more costs from Sacramento and also be expected to create jobs and stimulate the economy.
In his budget May revise, the governor makes a nod to business, but as of now it seems to be little more than that. It is slightly encouraging that Gov.Brown proposed a state sales tax exclusion for business equipment purchases beginning in 2012, which would be especially helpful for new start-up businesses, but it doesn’t do much to help existing companies. And he decided to tie the tax credit to the voters of his proposed tax increases. Businesses should be encouraged to thrive without the threat of new taxes.
There was also a proposal to expand the small business new-hire tax credit to employers with up to 50 employees, which would encourage more small employers to hire. Unfortunately, the governor’s proposal adds an expiration date of Dec. 31, 2012, rather than simply waiting until the available $400 million is exhausted, meaning that many businesses will not receive the credit. Additionally, the challenge with both of these tax credit proposals is that small business owners need to feel confident that government won’t continue to heap on more regulations, red tape and other impediments. If they are unsure, they won’t start new businesses or grow ones they already have. While perhaps well intended, a small business hiring tax credit has no real value or impact if a small business is in no position to hire.
The recession has reduced our state’s revenue base by 30 percent, so it will take a lot of work to make up for the losses. The only way to fix this is to enable businesses to put people back to work so that they are expanding the tax base. This is NFIB’s primary goal and we are working hard for small businesses so that California can once again be the economic powerhouse that it once was.