Will Prop 30 hurt small business?

The measure promises to raise an additional $6 billion in annual state revenue by raising sales taxes and personal income taxes.

According to the state of California, personal income taxes are defined as “a tax on wage, business, investment, and other income of individuals and families.”

“Although we haven’t done enough research to know what all the effects will be, we just have major concerns regarding new taxes on businesses when so many of them are struggling right now,” said Christina Davis, president and CEO of the LAX Coastal Area Chamber of Commerce.

For small businesses earning $250,000 or more, Prop 30 adds another one to three percent in taxes.

“Left out of the campaign pitch was the fact that thousands of small businesses are required to calculate their April 15 obligation based on that same personal income tax schedule. Thus, their business taxes will climb depending on earnings,” the North County Times wrote.

Many of the chambers of commerce in Los Angeles county were divided on Prop 30, wanting to support education as well as workforce development.

“Just from speaking to small businesses, it’s really hard to hire new people and make that investment in jobs when you’re uncertain about what your liabilities are going to be,” Davis said. “To hire an employee, you’re paying pay-roll taxes with them and you try to control your costs as best as you can. So [small businesses] are very leery about hiring anyone new into their business."

The LAX Coastal Area Chamber of Commerce took an opposing position on Prop 30 because continual tax increases hurt business and because it didn't feel that the systemic problem was being corrected or addressed, Davis said.

“What I’ve been hearing from a lot of companies is that once someone leaves a position, they don’t refill the position," she said.

But now that the measure has passed, economic assessments of the actual effect on small businesses are underway.

In 2009, there were 47,874 business owners with a taxable income of more than $300,000, according to the Franchise Tax Board. Under the new legislation, businesses that make $300,000 - $500,000 annual income are required to pay an extra two percent in taxes.

To a small business earning $250,000 a year, the one percent increase equates to an additional $2,500 spent in taxes. For all those companies earning $300,000, the increase is $6,000.

Some might think these numbers are moderate, but Davis said the added expenses could be the difference between adding new jobs or not.

“I don’t think any of us are truly aware of what the final ramifications are going to be,” Davis said.