Ninth Circuit Court’s decision last Thursday turns all eyes on Assembly Bill 5
SACRAMENTO, May 6, 2019--The workweek part of the U.S. Small Business Administration’s National Small Business Week, May 5-11, is off to a rocky start today in California thanks in part to a 9th U.S. Circuit Court of Appeals decision handed down Thursday in San Francisco.
“What California is doing to its small businesses can only be great news for Arizona, Idaho, and Nevada, which truly believe in the importance of Main Street enterprises and have policies aimed at welcoming our state’s mom-and-pop firms,” said John Kabateck, California state director for NFIB, America’s leading small-business association.
Kabateck listed four, big issues California is hurting itself with that are doing, or will soon do, the most damage.
Independent Contractors--In a matter that should have been handled legislatively, not judicially, the California Supreme Court’s Dynamex decision last year has now imperiled the working fate of two million Californians who freely choose to be their own bosses offering their services on their own terms. Thursday’s federal court decision making Dynamex retroactive now muddies the waters more. “If it weren’t a bad decision there wouldn’t be legislative efforts trying to blunt the force of Dynamex,” said Kabateck, who pointed to Assembly Bill 5 as the example.
Consumer Privacy Act--Passed with great fanfare last year and signed by former Gov. Jerry Brown, the California Consumer Privacy Act was another initiative hurried into law without proper consideration and debate about all of its potential consequences. Coming into the CCPA’s crosshairs, when it takes effect next year, will be tens of thousands of small businesses that have been able to use their scarce resources to advertise their goods and services on the internet. Senate Bill 561, if it passes, would exacerbate the situation by permitting lawsuits for any violation of the CCPA, eliminate the 30-day time period businesses have to fix a CCPA violation before a lawsuit could be filed, and would prohibit small businesses from seeking guidance on the Act from the attorney general. That’s why small businesses are supporting Senate Bill 753, an ameliorative measure that ensures the goals of the CCPA are kept without its needlessly punishing effects.
Sales Tax on Services--The services of everyone from your doctor, dentist, gardener, barber, beautician, and other occupations would now come under a sales tax just like your groceries and other tangible goods are. Senate Bill 522 purports to “realign the state’s outdated tax code with the realities of California’s 21stcentury economy.” But in reality, the measure will have an inflationary effect, drive business to border states that have no sales tax (Oregon) or lower rates. If passed, SB 522 would become law immediately.
Split Roll Property Taxes--A 2020 ballot initiative overhauling the split roll property tax system created by Proposition 13 would allow the state to start boosting rates on business property. This would be a disaster not only for small business startups but also for small businesses currently benefiting from low rental rates.
“It’s a fair question to ask why our economy, particularly our small business economy, is the hottest it’s ever been, setting record highs in everything from job openings to employee compensation, if things are so bad for small business in California,” said Kabateck. “The answer is we have – gratefully! – a Congress that doesn’t think and act the way California’s Legislature and judiciary do. It knows and appreciates the centrality of small businesses to the nation’s economy and believes in nurturing that centrality with laws like the Tax Cuts and Jobs Act. Smarter states are looking at ways to leverage the benefits of the TCJA with policies that can sustain all the good it has wrought. Not California. We believe it’s more fun to step on Superman’s cape than to let him soar to the aid of others.”
For more than 75 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-driven. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.