CALL TO ACTION! Independent Contractor Tax Withholding

Earlier this week, the California Joint Legislative Committee on the Budget (Budget Conference Committee) passed, by party-line vote, a series of tax proposals by Democrats that will be extremely harmful to employers and the economy.

Two of these proposals would impose a costly new mandate on ALL employers to withhold and remit to FTB 3% of all payments made to independent contractors (outside businesses providing goods/services). For independent contractors where there is an issue with their taxpayer identification number, an additional 7% withholding would be required (for a total of 10%).

This is a particularly bad idea because it would force struggling small businesses to loan money to the state. Withholding accelerates tax revenue to the state or collects revenue that will have to be refunded – equivalent to a low interest loan on the backs of small businesses. The proposal would also create a costly new mandate for private and public sector employers who use independent contractors and thus discourage employers from hiring small businesses.

At a time when our state unemployment rate is approaching the highest level ever, the imposition of a new cost burden on private and public sector employers who use independent contractors, and the threat to small businesses created by the proposal, runs counter to our need to encourage economic recovery and stimulate job growth.

The full legislature may vote on the independent contractor tax withholding proposals as early as this coming Monday, June 22, 2009.

All of the statewide real estate organizations are part of a coalition to oppose this bad idea. If you would like to add your company name to the letter, please send Matthew Hargrove at mhargrove@cbpa.com your company name and logo, by 10:00 a.m. Monday, June 22, 2009. TAKE ACTION NOW! JOIN THE COALITION!