While California continues to raise taxes and impose even more costly regulations on the state’s #familybusinesses, Denmark is taking a different approach, according to @Forbes:
“Denmark’s policy shifts reflect a concerted effort to retain its invaluable family-owned enterprises…Bloomberg reported a new initiative from the Danish government, valued at 1.8 billion krone ($260 million), aims to ease the tax and regulatory burden on family-owned companies during generational transitions. The goal is clear: the initiative aims to prevent these companies from being compelled to sell to foreign investors due to stringent taxation and current rules.”
The Family Business Association of California is deeply disappointed that the California Supreme Court ruled today that the voters will not have the opportunity to decide on the Taxpayer Protection Act, which would have protected taxpayers from local tax increases by giving them the right to decide if they wanted to tax themselves.
“We are deeply disappointed that the CA Supreme Court won’t let voters decide on the Taxpayer Protection Act. This court probably would not have allowed Proposition 13 to be on the ballot in 1978. What a shame for California voters,” said FBAC Political Director Robert Rivinius.
The justices – six of the seven appointed by Democratic governors – agreed with the arguments made by the Governor and Democratic legislative leaders that the measure would have constituted a “revision” of the Constitution because they would “fundamentally restructure the most basic of government powers” and therefore could only be enacted through established protocols for changing the Constitution, not a voter initiative.
The court ordered the initiative – placed on the ballot by the signatures of over 1 million Californians – stricken from the ballot.
It is the first time in decades that the court removed an initiative measure from the ballot.
Undeterred by this setback, proponents of the TPA, including FBAC, are making plans to place a new taxpayer protection measure on the 2026 ballot.
JaniTek Cleaning Solutions, a Stockton-based commercial cleaning company serving the Central Valley and Central Coast, has joined FBAC as a Founding Member. Blain Bibb purchased two commercial cleaning franchises in 2007, then left the franchise and started JaniTek in 2014. The company employs more than 400 people and services more than 800 facilities.
Also joining as an FBAC Member is Golden State Strategy Group, a nationally recognized political strategy and fundraising firm founded by Molly Parnell in 2012. She began her career in 2003 working on Arnold Schwarzenegger’s campaign and later served as finance director and chief financial officer for the California Republican Party before forming her company. She has raised over $200 million for campaigns in the past 17 years.
Welcome to both new members who understand the importance of family businesses standing together against new laws and regulations that negatively affect them.
Attendees at this year’s FBAC Capitol Conference heard important updates on key issues from top political experts. Here’s a sampling.
Nevada governor gives Newsom a dose of his own medicine
Political consultant Rob Stutzman, founder of Stutzman Public Affairs and a chief strategist for former Governor Arnold Schwarzenegger, told Capitol Conference attendees that Governor Gavin Newsom, who has happily traveled to red states to lecture them about the need to adopt California’s liberal leanings, recently got a dose of his own medicine.
“Joe Lombardo, the Republican governor of Nevada, sent him a letter opposing California’s proposed oil refineries profits cap because 88% of Nevada’s gasoline supplies come from California refineries. If more refineries close because of the tax and there’s less supply, that wouldn’t be good for Nevada drivers – and Nevada is an early presidential caucus state in 2028,” he said. (Newsom responded by accusing the Nevada governor of politicizing the issue.)
Businesses are starting to fight back against government policies
After years of trying to reach some accommodation with progressive Democrats, business interests have decided that approach isn’t working and that they need to aggressively fight back against government policies that harm businesses. Both Stutzman and Rob Lapsley, president of the California Business Roundtable, said businesses are starting to be less willing to play around the edges and are fighting harder.
Stutzman noted that McDonald’s franchise owners were livid when Democratic lawmakers passed legislation that almost overnight increased the minimum wage for fast food workers to $20 an hour. They were also livid that they were not at the table when the behind-the-scenes negotiations were going on. (Remember the old political adage – if you’re not at the table you’re going to be on the menu.)
So the owners, mainly family businesses, banded together to defeat Asm. Chris Holden, D-Pasadena, during the March primary in his bid for L.A. County supervisor, and narrowly missed knocking Asm. Kevin McCarty, D-Sacramento, off the November ballot as he seeks to become mayor of Sacramento.
“This is a sign of coming attractions for the business community. Politicians need to start worrying about business coming after them,” Stutzman said.
Lapsley said that newfound recognition that businesses needed to fight back is also manifested in several measures likely to appear on the November ballot (see below). “We are going on offense,” Lapsley declared.
Pro-business initiatives headed for November ballot
Two of those measures are strongly supported by FBAC:
The Taxpayer Protection and Government Accountability Act (TPA), which would give voters the final say on all new and higher taxes;
And the Fair Play and Employer Accountability Act, which would overturn the ruinous Private Attorneys General Act (PAGA) that has caused employers to pay millions of dollars over often-minor labor laws – most of which went to trial lawyers, not employees.
Lapsley, who is helping lead the campaign to enact the TPA, said the measure would restore 2/3 approval thresholds for all future tax proposals and would require local governments to put any tax or fee measure approved with less than a 2/3 vote since 2022 before the voters again. Governor Newsom, the Democratic leadership in the Legislature and local governments fiercely oppose the measure and are trying to remove it from the ballot. The state Supreme Court recently heard arguments but signaled they were unlikely to do so. The court must rule by the June 27 deadline to put measures on the November ballot.
“During the Supreme Court hearing, the governor’s attorneys said TPA would cause a major disruption to government services and that the power to tax should stay with the Legislature and its staff because they’re the only ones who understand it. The government will never willingly share that power with the public. The governor and the legislature do not want to see anything on the ballot about taxes at all,” he said.
Lapsley warned that if TPA is defeated in November, it will open the door to billions of dollars in new taxes.
FBAC Political Director Robert Rivinius said the power to raise taxes must be in the hands of the voters, not the politicians.
“California is becoming too expensive for working families and family businesses. We need to give Californians the final decision on raising their taxes and better accountability for how state and local governments spend their money. FBAC will work hard alongside our coalition partners to pass the TPA this year,” Rivinius said.
Brian Maas, president of the California New Car Dealers Association, which is leading the campaign to reform PAGA, said lawmakers don’t want several pro-business measures on the November ballot, and that conversations are taking place between proponents and government leaders to come up with a compromise.
“We want PAGA reform however we can get it,” Maas said. “Conversations are taking place – let’s see if we can get the Legislature to fix the problem they created. We have until June 27. If the Legislature has enacted effective PAGA reform by then we might be disposed to remove the measure from the ballot.”
“PAGA lawsuits are the bane of family businesses, and the law must be reformed,” Rivinius said. “Family businesses have become major targets of predatory lawsuits because it’s almost always far cheaper to settle a case than take it to court. We hope the Legislature will fix its mistake, but if they don’t FBAC and our members will work hard to ensure the ballot measure succeeds.”
FBAC Member briefs attendees on Board of Equalization
Ted Gaines, owner of FBAC Member Gaines Insurance and vice chair of the state Board of Equalization (BOE) reminded attendees that having an elected board to hear appeals on taxation rulings is important. The BOE today administers 34 tax and fee programs and acts in an oversight capacity to ensure compliance by county assessors with property tax laws, regulations, and assessment issues. The Board also hears various taxpayer appeals. But he pointed out that two new tax administration and appeals agencies created in 2017 and 2018 with members appointed by the Governor uphold virtually all findings by the agencies.
PAGA expert offers tips for business owners
Bruce Scheidt, managing shareholder with FBAC Regional Sponsor Kronick, Moskovitz, Tiedemann & Girard, discussed the PAGA reform measure but offered tips to business owners to follow until the law is reformed.
Make sure you classify your exempt employees correctly.
Have legally compliant policies. Courts like to see that you’ve done that when determining whether to give you the benefit of the doubt.
Monitor your time punches.
Make employees sign every pay period that they didn’t work off the clock.
Have mandatory arbitration agreements with employees. If an employee loses arbitration, he loses standing to file a PAGA claim.
Thanks to legislators for addressing Capitol Conference
Two business-oriented legislators – Assembly Members Vicente Valencia, D-Anaheim, and Diane Dixon, R-Newport Beach – made time to stop by the conference and say a few words. Valencia mentioned that he grew up working in his parents’ minimart in Orange County and appreciates the importance of family businesses. Dixon said the state should encourage family businesses to remain in California and not see businesses as the enemy.
The Family Business Association continues to review and analyze the 2,124 bills that have been proposed this year by state lawmakers, along with dozens of bills from 2023 that are still under consideration. A number of these bills would have significant impacts on family businesses, and FBA – the only organization that lobbies lawmakers and regulators exclusively on issues affecting the state’s thousands of family-owned businesses – has taken positions on several of them so far this year.
California Assembly in session
Given that many of the bills pending in the Legislature punish businesses rather than help them succeed, FBA will eventually oppose many of them. That’s especially true since lawmakers frequently engage in a practice called gut and amend, in which a bill is stripped of its original language and replaced by text that radically changes the intent of the bill.
“Unfortunately, too many bills continue to be introduced that would make it harder for family businesses to prosper and be passed down to the next generation,” said FBA consultant Robert Rivinius. “California’s 1.4 million family businesses employ some 7 million people and because they are firmly rooted in their communities they strongly support their employees and the communities they serve. State government needs to make it easier, not harder, for these companies to remain in business.”
FBA is now supporting two more 2024 measures:
SB 1243, by Sen. Bill Dodd, D-Napa, which would make compliance with campaign contribution laws more manageable, and
SCA 4 by FBA’s 2023 Legislator of the Year, Sen. Kelly Seyarto, R-Murrieta, which would restore the tax treatment of passing single-family residences to immediate family members without requiring the tax base.
These are in addition to two measures FBA had already weighed-in on: AB 2011 by Asm. Rebecca Bauer-Kahan, D-Orinda, which would make the state’s small employer family leave mediation program permanent, and AB 2371 by Asm. Juan Carillo, D-Palmdale, which FBA is cosponsoring along with FBA member AMAROK. The bill would create uniformity in local permitting requirements for specified security alarm technology.
FBA is now opposing eight additional 2024 bills:
AB 2248 by Asm. Ash Kalra, D-San Jose, which would invite more litigation under the onerous Private Attorneys General Act.
AB 2499 by Asm. Pilar Schiavo, D-Chatsworth, which would lower the threshold for jury duty and crime victim leave from 25 employees to just one.
ACA 3 by Asm. Alex Lee, D-Milpitas, which would impose a wealth tax and eliminate the voter-approved Gann Limit.
ACA 11 by Asm. Phil Ting, D-San Francisco, which would abolish the State Board of Equalization, removing the only tax agency made up of elected officials directly accountable to taxpayers.
And four measures by Sen. Lola Smallwood-Cuevas, D-Los Angeles – SB 1089, which would require grocery stores and pharmacies to provide at least 90-day notice to employees before a closure; SB 1446, which would require grocery stores and pharmacies to employ one employee per two self-checkout stations, whose sole job would be to monitor the self-checkout stations; SB 1434, which is a vast reworking of California’s unemployment insurance system and would massively increase unemployment insurance taxes on all employers in California by providing, among other changes, a 55% increase in maximum UI benefits for all workers; and SB 1345, which aims to restrict the use of criminal background checks by employers.
FBA previously had expressed opposition to SB 1116 by Sen. Anthony Portantino, D-La Canada-Flintridge, which would effectively require employers to subsidize striking workers even if those workers or the strikes had nothing to do with the employer.
The Association also continues to support two bills introduced in 2023 – SB 393 by Sen. Steve Glazer, D-Orinda, which would require CEQA plaintiffs to disclose contributors of $1,000 or more to fund the legal action, and SB 585 by Sen. Roger Niello, R-Fair Oaks, which would give small businesses time to correct construction-related accessibility issues before claims could be filed under the Unruh Civil Rights Act.
FBA continues to oppose SB 399 by Sen. Aisha Wahab, D-Hayward, which would effectively prohibit any discussion of political matters in the workplace.
FBA is monitoring the 2,124 bills state lawmakers introduced this year (not to mention hundreds of measures introduced in 2023 and still alive in the Legislature) and has taken positions on three priority bills for family businesses so far.
FBA is opposed to SB 1116, which would force employers to pay unemployment insurance (UI) payments to striking workers, raise taxes on employers, overturn more than 70 years of precedent, and put California’s UI program at risk of violating federal law. This bill is a repeat of last year’s SB 799, which was vetoed by the Governor because of the debt it would add to California’s UI Fund – which is an even more pressing concern with this year’s budget concerns.
The Association is cosponsoring AB 2371 with FBA Member AMAROK, a commercial security company. This bill would enable property owners and businesses to install and employ electric security fences in a timely manner, while still allowing local government authorities to regulate or prohibit installations that do not comply with all requirements under State law.
Finally, FBA supports AB 2011, which would make the Civil Rights Department’s small employer family leave mediation program permanent, benefitting both workers and small employers.
Businesses are starting to fight back against government policies