Ken Monroe

The Family Business Association of California is celebrating its 10th anniversary this year. While that may not be a record for longevity compared to many of the highly effective trade associations that have advocated on behalf of large and small businesses in California for decades, it is unique in that the FBA is the only organization that solely represents family businesses that have operated in California for as many as 100 years or more.

Too often, the interests of California’s estimated 1.4 million family-owned businesses — a critically important and large sector of California’s economy — were not considered as state officials made decisions about taxes, laws and regulations affecting the business community. Too often, as the old political saying goes, because family businesses weren’t at the table when these decisions were being made, we were on the menu. That’s especially true when it comes to perhaps our top priority — the need to keep our businesses family-owned from generation to generation.

The primary difference between family businesses in California and other businesses is our desire to stay in California, provide stable employment, participate in our local economies and take the long view of success. Family businesses are not bound by driving quarterly results but instead are generally focused on long-term financial success, satisfied customers and engaged employees. However, bills passed by the Legislature often do more harm than good to those many family businesses committed to our communities.

During its decade of working to promote family businesses in California, FBA has achieved a number of significant accomplishments, including:

• — Killing legislation to create a new inheritance tax that would have inhibited the passing of family businesses to the next generation.
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• — Introducing legislation to add a definition of family business to state law.
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• — Stopping proposals to limit how families move assets.
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• — And helping defeat the “split-roll” property tax initiative and “single-payer” health care proposal, both of which would have cost our members billions of dollars per year.

 

These victories were important because the success and continuation of family businesses are essential to our state’s future prosperity. Studies have shown that nationally, family businesses generate 57% of the nation’s GDP, employ 63% of the workforce and create 75% of all new jobs.

Furthermore, in addition to our economic impact, family businesses serve as the foundation for our communities. Studies show that we engage in higher levels of philanthropic giving, donate more to local causes and have better records of environmental stewardship than businesses as a whole. In addition, we tend to invest more in our employees’ training and benefits, are more likely to promote women to executive management and are less likely to lay off workers in tough economic times.

Unfortunately, our elected officials and regulators need to be working to make it easier, not harder, for these essential companies to grow and thrive. Too often, however, that is not the case. Over 2,000 bills were introduced during the most recent legislative session and, according to CalTax, those with a fiscal impact would have imposed more than $198.9 billion a year in higher taxes and fees. As the 2023 session draws near, the state is looking at a projected $25 billion budget deficit that would grow much larger if the state and nation enters a recession. It is inevitable that many lawmakers will seek to increase taxes and add more regulations.

It is well documented that these taxes and regulations drive many businesses out of California, leaving the deeply rooted family businesses of California as an even more important foundation for supporting our local economies. However, while it is becoming more difficult for us to successfully operate, many legislators seem to think that we will always be here no matter what they do, making profits that can be taxed. 

So FBA will continue working with partners in the business community and with business-friendly legislators from both parties who understand that adding more and more complex and expensive requirements will only further damage our economy and our quality of life.

And that’s why FBA will ensure that family businesses remain at the table, and not on the menu, in Sacramento.

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Ken Monroe is president of Holt of California and Chairman of the Family Business Association.