Prop. 55 is being sold to voters under false pretenses and represents a "massive" 23% tax increase on small businesses in California--which represent 2/3 of California's total economic output from business in the state, according to an interview by Inside Source with Tom Scott, the California State Director of the National Federation of Independent Business.
"In addition to everything else that is going on in this state. Proposition 55 is just another example of how this state is not focusing on improving its business climate, it's only making it worse," says Scott.
Scott says Prop. 55 is being sold by proponents as a "tax on the wealthy" but "this is not a tax on wealthy people" because 80% of businesses pay taxes through the state's personal income tax and could be potentially hit by the 23% tax increase contained in Prop. 55.
"This was sold in 2012 as a temporary fix..The promise needs to be kept. And its not being kept. Really shame on the people that are pushing this," Scott concludes.
Scott says that small business in California is already at a big competitive disadvantage to big business and Prop. 55 will make things 23% worse.
"Not everybody is living in a gold rush," Scott says, adding that not all business owners are in the biotech, Pharma, high-tech and motion picture industries which are doing relatively well in the state and responsible for the bulk of job growth and economic activity.
For example, in the July 2016 jobs report that just came out, only 24% of the jobs created in the state were created outside of the Bay Area, despite those areas representing about 75% of the state's population.
"If this state does not start seriously focusing on the business climate. Probably the only thing that is going to be left is high-tech, Pharma and the motion picture industry," Scott says.
He says that there is a big difference between operating a small business in Fresno compared to Santa Monica or San Francisco, and the Democrat leadership in this state continues to not only ignore, but exacerbate the state's deteriorating business climate.
Recent research produced by the Kersten Institute and other economists has found that the California economy is actually underperforming the national economy by 20-40% if the Bay Area is excluded.
Moreover, big business and certain industries such as high-tech and Pharma can better deal with the state's deteriorating business climate, but Scott's members are hit the hardest, and are already at a competitive disadvantage to big business.
To illustrate, the corporate tax rate in California is 8.84% but loopholes in the corporate tax lead to the effective rate being less than 4% on average. Small business, on the other hand, would pay 13.3% under Prop. 55 because they are forced to pay through the personal income tax that does not provide for the same tax loopholes and avoidance afforded under the state's corporate tax.
"They either lay people off, curtail their operations or they bump their prices," Scott says regarding the impact of Prop. 55 passing in November 2016.
Scott says business in California has already taken a number of hits this year including the minimum wage increase, sick leave, paid family leave, multiple regulations, and increases in fees and taxes. "It is this piling on effect which is just killing small business. The big corporations can dodge a lot of this stuff," Scott says, noting that small business cannot afford to hire the same lawyers, accountants and regulator experts utilized by big business to comply with California's increasingly hostile business climate.
"They just keep throwing the money under the guise that it's for the children. I mean look, I want a great education system just like the next person but something is wrong," Scott says noting that education programs have received more than a 50% funding increase over the last four years but the state's education system still ranks 46th out of the 50 states.
"If this Governor and the Legislature is going to break promise after promise and there is no accountability, not only for the electeds, but how the money will be used. I would tell the voters to vote no because ultimately you are the ones that will be paying for it. Either in higher prices for services and goods, or your kids can't find jobs because businesses are just cutting back," Scott stated.
"Business is getting ravenged on health care costs, in addition to Prop. 55 and everything else," Scott says, noting that Prop. 55 provides money for "health care," while small businesses will pay for it in the form of a 23% tax increase in addition to the 13% increase in the Obamacare rates that were supposed to be lower.
For more information visit: www.opposeprop55.com