Gov. Gavin Newsom signed a trio of laws on Wednesday intended to bolster struggling small businesses in California and encourage their owners to hire more workers, each of which received bipartisan support but only light scrutiny by the Legislature before its adjournment last week.
One effort will ensure coronavirus loan funds that are forgiven aren’t treated as taxable income. Newsom says the second bill, enacted as part of the state budget, accelerates the use of various bond funds but includes a variety of proposals unrelated to helping businesses. The third offers up to $100 million in tax credits for small businesses that have suffered during the pandemic but also agree to hire new or laid-off workers.
But the new law offering tax credits to small-business owners will have a clear and immediate effect on the state budget, and received far less review by legislators. Drafted by the governor’s financial team, the $100-million tax break makes good on Newsom’s promise last month to enact a so-called “Main Street hiring credit” to incentivize some small businesses to restore jobs eliminated earlier this year by the coronavirus-induced recession.
Whether the proposal will work, and its exact cost to the state in the form of reduced tax revenues, is unclear. Jay Chamberlain, the chief of the financial research unit of the California Department of Finance, told lawmakers in a brief committee hearing on Aug. 30 that uncertainty was one reason the tax credits were capped at a cost to the state budget of no more than $100 million.