Written by Assemblyman Jim Patterson
If your friendly neighborhood shop owner looks a bit more tired and downtrodden than usual, ask if it’s their FUTA tax payment that’s bringing them down.
It sounds like a transit agency or a new hybrid fruit. It’s actually continued proof of Governor Brown’s disdain for business owners in this state — at least that’s how it must feel to them.
FUTA stands for the Federal Unemployment Tax Act. It is Governor Brown’s dirty little secret and it’s killing California’s job creators — something conveniently left out of his State of the State speech. Here’s the short version of why this mysterious tax bill is causing our job creators so much grief.
California didn’t have enough money to pay all the unemployment claims it approved during the Great Recession in 2009, so the state borrowed $10 billion from the federal government. Payments to Uncle Sam came due in 2011. Governor Brown paid back the interest on the loan — about $2 billion. The state’s job creators were left to do the heavy lifting and pay off the principal. By the end of this year, California employers will have repaid $9.6 billion dollars.
For Salter’s Distributing, a proud family owned company in Chowchilla, their usual federal “940 Tax” payment of $600 ballooned to almost $9,000 in 2018. Employers all over the state are experiencing the same shell shock. Depending on the number of people they employ, their FUTA payments can be massive.
For many California employers, the FUTA tax amounts to thousands of dollars being taken from the very funds they planned to use to hire more people, pay bonuses, increase employee pay or upgrade equipment. The state’s one-size-fits-all minimum wage hikes — and the maze of senseless, redundant, confusing regulations — have been hitting job creators harder than they’ve ever been hit before.
Business owners I talk to can’t understand why Governor Brown doesn’t just pay off this debt with the $7.1 billion surplus. Federal law says he can’t. What he could have done was work with the Legislature to undo a 2001 party-line vote that raised unemployment payouts by 95 percent. The shortsighted, feel-good law is a major reason why we are in this boat today. Instead of acting, Governor Brown and the ruling party did nothing, thrusting this major cost onto the backs of California’s employers.
I joined others last year to introduce a bill that would have helped good people like the Salter’s make up their losses with a state tax credit. The bill was killed almost instantly by the ruling party in Sacramento, despite knowing full well without it they would be crushing many of the state’s best employers.
California business owners did all they could to stay afloat during the recession. Those who made it through have been pushed to the breaking point.
Fortunately for the Salters and every other business owner in this state, the $9,000 check they cut is supposed to be the final payment needed to cover what California owes.
What won’t stop is Governor Brown’s utter disdain for California business owners and the people they employ.
Jim Patterson represents the 23rd Assembly District, which covers portions of Fresno and Tulare counties. He served as the mayor of Fresno from 1993-2001.