Buried in between the lumps of coal in the Christmas stocking the California Legislature hung out for small business were a couple of foil-wrapped candy kisses.
At New Year’s, small-business owners teetering on the brink of bankruptcy got a slight push back on to firmer ground thanks to a boost in the carry-forward amounts on their net-operating loss deductions. This adjustment in the tax code could provide thousands of small enterprises with the one tool needed to change the flow of ink from red to black , time!
The only other highlight for California’s small-business was a law finally recognizing its importance.
In a measure authored by Assemblyman Roderick Wright, D-Los Angeles, and signed into law by Gov. Gray Davis, the Office of Small Business Advocate was removed from the state Trade and Commerce Agency , where it had been treated as nothing more than an office curio , and sent over to the Office of Planning and Research directly under the chief executive’s wing.
The new law, which also establishes a Small Business Reform Task Force in the governor’s office, is more than symbolic. Included in its 19 points were orders to state bureaucracies to streamline their paperwork requirements for small-business owners.
Still, small-business owners have many more reasons for apprehension than jubilation in the New Year. Bigger gifts under the tree of government went to the twin nemeses of small business: government mandates and increased legal liability.
A half-dollar boost in the job-killing state minimum wage was made law to appease union leaders representing the already employed and the already well-paid. Young, entry-level workers are the big losers, but they don’t have much of a lobby in Sacramento.
Trial lawyers do, however, have a powerful lobby in the Capitol, and , with small-business owners in their crosshairs , succeeded in passing a law to keep their members rich in billable hours. As of Jan. 1, current or prospective employees can now sue an employer for discrimination based of the condition of their mental health.
Small-business owners, who typically make around $40,000 a year, can spend on average $100,000 defending themselves against frivolous lawsuits. Many are forced to close their businesses and lay off their workers in order to meet legal expenses. The new law turns what should have been a rich vein for humor when it was first proposed into a cash cow for lawyers.
Lawyers and union executives received a lot of what they wanted from the Legislature, but failed to get some of it past the governor. Most, if not all, of these measures , which either died in committee or on the governor’s desk , will get return engagements in the New Year:
– A 30 percent increase in workers’ compensation costs.
– Reserving one appointment to the Workers’ Compensation Appeals Board for a union official.
– A boost in unemployment insurance premiums.
– Setting aside one appointment to the Unemployment Insurance Appeals Board for a union official.
– Expanding the family-leave law to include non-family members of employees.
– More health care mandates.
– Abolishing the pre-dispute arbitration clauses in health plans that have helped such major health care providers as Kaiser Hospital remain solvent.
– Red-lining of small business from competing on state contracts through increased requirements on health care coverage for workers.
Also certain to make return engagements in the next session of the Legislature are three measures that, if passed, could be of big benefit to small business:
– An end to the minimum-franchise tax businesses pay to the state for , yes, it’s no joke , the privilege of doing business in California. Most states don’t have this tax, considering, as they do, it a privilege conferred upon them to have businesses in their states.
– Allowing the self-employed and small-business owners 100 percent deductibility of the cost of their health insurance premiums.
– Bringing the state tax code into closer alignment with the federal Small Business Protection Act of 1996 in recognizing the important role of independent contractors, whom California insists its small-business owners classify as full-time employees, often fining them heavily if they don’t.
California will be well-served if no further harm comes to the people who employ the overwhelming majority of its workers: small-business owners. In fact, a lot of good may come from acknowledging its primacy of place as government’s top revenue producer.
Hopper is California director for the National Federation of Independent Business.
