published on July 20, 2021 - 10:39 AM
Written by Gordon Webster, Jr.

What happens when you squeeze small businesses to cover a budget deficit that never happens?

The answer (at least in California) is nothing. Nothing happens.

That’s why the California Chamber of Commerce and a coalition of business groups are urging legislators in Sacramento to restore the net operating loss (NOL) deduction and business incentive tax credits that were suspended and capped last year in response to the pandemic.

The reason given for such a measure was to close an estimated $54.3 billion budget deficit. Of course, as anyone who has seen Gov. Newsom’s anti-recall TV commercials, that deficit never materialized. Instead, the state has a $76 billion budget surplus that is being liquidated to have “California roaring back.”

Doing away with the net operating loss and limiting tax credits for tax years 2020-22 was expected to raise about $9.2 billion in revenue for the cash-strapped state. Employers were happy to pitch in. But now it’s those very employers who are struggling — in search of any kind of relief available.

“Business should be allowed to immediately utilize NOLs and earned tax credits to offset any harm they have suffered as a result of this pandemic, and to encourage employers who are considering leaving to stay,” the coalition wrote in a letter to lawmakers.

California will only come roaring back if its businesses are allowed to succeed. Tax increases in the time of surplus are not the path to success.

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