Small businesses are the backbone of California’s economy. They are praised in speeches by elected officials and correctly regarded as the engine that will pull us out of the recession.
On the other hand, the term “independent contractor” sounds technical and can conjure up images of a faceless business that has no loyalty, threatens government jobs and is a ripe target for new taxes or regulations. Politicians don’t tout their support for “independent contractors” when running for office.
The truth is that most independent contractors are small businesses. They are painters, plumbers, real estate agents, auto mechanics, computer programmers, photographers, sound engineers, doctors, accountants — and many other types of small businesses.
In Sacramento, some legislators are seeking to implement an “independent contractor withholding” proposal, which would require businesses to withhold 3 percent of their payments to independent contractors to provide an interest-free loan to the state.
The 3 percent withholding hits small businesses at a time when they need every dollar of revenue to keep their doors open and maintain their current employees.
The irony is that this proposal won’t generate additional or new tax revenue for Sacramento. Instead, it accelerates income tax payments for small businesses — and provides an interest-free loan to the state until tax returns are filed. This may help California’s short-term cash flow, but it does nothing for the state’s bottom line and hurts small businesses in the process.
In Los Angeles, some members of the L.A. City Council are also taking advantage of the “name” ruse. During last month’s debate over the city’s unsustainable budget, Councilmember Janice Hahn told a packed room that “It’s time for us to lay off private contractors and keep our city workers!” Councilmember Paul Koretz, also wants the city’s independent contractors to take a 10 percent across-the-board cut before any layoffs of city workers.
That call to action may generate a brief standing ovation from city employees in Council Chambers, but it sends a message to hundreds of small businesses and their employees throughout Los Angeles that they are second-class citizens. Those independent contractors employ tens of thousands of Angelenos and are part of the private sector workplace in Los Angeles County that has already been forced to lay off nearly one-half million workers since the great recession started.
If “small business” had been substituted for “independent contractor,” these proposals would likely go nowhere and the rhetorical flourishes would have fallen flat. At the end of the day, this is about small businesses and jobs in Los Angeles and throughout the state.
So, when you hear elected officials piling onto “independent contractors” remind them that they are really talking about small businesses – perhaps even yours.