The good economic news just keeps coming, as today’s release of NFIB’s monthly Small Business Economic Trends (SBET) report revealed. But the sustainability of that is threatened more in the Golden State than anywhere else in the nation, according to a top California small-business leader.
According to John Kabateck, California state director for the National Federation of Independent Business, “if prophecies can be self-fulfilling so, too, can bad jokes, and the bad joke heard too often these days is, ‘Do you know how to open a small business in California? Open a big business and then wait.’”
Despite California’s best efforts, the nation’s economy is still performing above historic levels. Last Thursday, NFIB’s monthly Jobs Report showed that despite finding qualified workers as their top difficulty, small-business owners were still creating jobs at a steady pace. The very next day, the U.S. Labor Department showed the unemployment rate at a 50-year low. Today’s SBET report followed with more good news on continued job creation, capital spending, and inventory investment. The SBET is a national snapshot and not broken down by state.
Kabateck attributed the continued good national numbers to the December 2017 Congressional passage of the Tax Cuts and Jobs Act and, in particular, the 20 percent small business deduction (Section 199A) contained within it, which NFIB played the leading role in securing. But, he warned, while the new corporate tax rates contained in the Tax Cuts and Jobs Act were made permanent, the small business deduction expires Dec. 31, 2025. “That’s why its vital Congress follows through on the good it did with the Tax Cuts and Jobs Act by making small businesses’ deduction permanent. Main Street deserves the same certainty given Wall Street and Silicon Valley.”
In another recently released poll conducted by NFIB, The Tax Cuts and Jobs Act, One Year Later, Part II, it found, “The vast majority of small business owners (82 percent) think the new tax law has had a positive impact on the general economy. Seventeen percent said ‘very positive’ while another 66 percent said ‘positive.’” And, “The provision that is most frequently viewed as important to small business owners and their businesses is the creation of the Small Business Deduction, with up to 20 percent of qualified business income as an allowable tax deduction (Section 199A).”
Although national policy drives economies more than state policies, the latter can either be a help or hindrance, which, according to Kabateck, California has been a pioneer in advancing onerous taxes, regulations and frivolous lawsuits that target ‘mom and pops’ and entrepreneurs.
“Small-business owners here are facing the potential of higher rents from the chipping away of Proposition 13 protections, millions of livelihoods are now in jeopardy from the devastation created by the State Supreme Court’s Dynamex decision and Assembly Bill 5’s botched attempt to codify it, and legislators are looking to slap a sales tax on services. On and on I could go,” Kabateck said, “to say nothing of the fact we live in the highest-taxed state in the nation.”
What happens when superior policy, such as the Congressional Tax Cuts and Jobs Act, is enacted? Kabateck answered that everyone benefits and pointed to revealing data in the NFIB poll on the Tax Cuts and Jobs Act: “A quarter of small business owners who reported tax savings raised spending on employee compensation. The second most frequently reported increase in spending was on business investment and expansion. Tax savings motivated 16 percent of small business owners to hire additional employees and another 20 percent to pay down debt obligations.’”
About the Small Business Economic Trends
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the 4th quarter of 1973 and monthly surveys since 1986. Survey respondents are drawn from a random sample of NFIB’s membership. The report is released on the second Tuesday of each month. Click here for a one-page history of the SBET.
Keep up with the latest on California small-business at www.nfib.com/california or by following NFIB on Twitter @NFIB_CA or on Facebook @NFIB.CA
The views and opinions expressed in this commentary are those of the author and do not necessarily reflect the official position of Citizens Journal.
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 nonprofit, nonpartisan, and member-driven association. 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.
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