Opposing a proposed sales tax on the service industry is among the National Federation of Independent Business (NFIB)’s top three priorities for the upcoming 2021-2022 legislative session, which begins on Jan. 4 and ends Sept. 10, 2021.
“Extending the sales tax on services is not only devastating to the service industries themselves but also those that they do business with,” John Kabateck, California state director for the NFIB, said. “It's got this ripple effect. So, why during this devastating pandemic, would anyone give a notion of thought to imposing more cost burden on already delicate and fragile mom and pop businesses? It's absurd.”
The statewide sales tax rate is 7.25%, which is the highest of all 50 states, while its corporate income tax rate is flat at 8.840% of gross income, according to tax-rates.org.
“We'll be spending the next several months and next year educating legislators in their district about the severe impact a sales tax on services would have,” Kabateck told the Southern California Record.
The NFIB represents 15,000 independent and small businesses statewide.
“Any new taxes are just not palatable for small businesses already paying so much right now but we hear from many of our small business owners that they would be open to the idea of a flat tax, which is not a formal NFIB position yet,” Kabateck said in an interview.
Another important issue for the new year is the revival of AB 1035, which Sen. Hannah Beth-Jackson, chair of the Senate Committee, did not put on the schedule, according to media reports.
“We have a great interest in revisiting a variation of that legislation because what we are finding is this pandemic isn't going away anytime soon, unfortunately, and with that will be more complicated laws, rules, and regulations that employers must abide by,” Kabateck said. “We will be asking for the ability to have some protection from frivolous lawsuits for small businesses.”
As previously reported in the Southern California Record, AB 1035 would have exempted small businesses with 25 or fewer employees from liability for a COVID-19 related injury or illness in a claim that a person contracted COVID-19 while on their premises or due to the actions of the business.
The third issue is fueled by the defeat of Proposition 15 this week on election day.
As previously reported, the ballot initiative would have changed property tax reforms from 1978’s Proposition (Prop) 13 by limiting property taxes to 1% of the purchase price and preventing annual increases from exceeding 2%. Currently, when a property is sold, it is reassessed at present cash value.
“Labor is likely to continue to push extraordinarily hard with the defeat of Prop 15 to find ways to raise property taxes,” Kabateck said. “Even with the people speaking against Prop 15, the race was so close that labor will come back and work on some new formula.”