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CalChamber

A proposal to require businesses to withhold 3 percent of payments to independent contractor’s amounts to an interest-free loan to the state from small businesses, the California Chamber of Commerce has pointed out to state leaders.

“We respectfully urge you to abandon this proposal,” CalChamber President and CEO Allan Zaremberg wrote in a letter to Senate President Pro Tem Darrell Steinberg (D-Sacramento), who has been quoted in news articles as expressing support for independent contractor withholding.

The CalChamber also sent copies of the letter to Governor Arnold Schwarzenegger and all state legislators.
“Job Killer” Vetoed in 2009

An independent contractor withholding mandate was included in special session legislation last year that was vetoed by the Governor. The “job killer” proposal (SBX3 17; Ducheny; D-San Diego) would have required a 3 percent across-the-board withholding on payments to resident independent contractors.

Independent contractors are self-employed individuals and businesses, ranging from small businesses and entrepreneurs to large firms. Examples include: builders, real estate agents, computer programmers, accountants, automotive mechanics, attorneys, medical doctors, engineers.

As businesses, independent contractors pay more kinds of taxes than employees, such as self-employment taxes and local business taxes; pay income taxes throughout the year through quarterly estimated tax payments; and are subject to penalties for not paying or underpaying. Because of recent budget agreements, independent contractors must pay 70 percent of their taxes by June of each year for the next two years.

Threatens Small Business
In a year when the Governor and legislative leaders have indicated that job creation is a top priority, independent contractor withholding “will destroy rather than create California jobs,” Zaremberg wrote.
CalChamber opposition to independent contractor withholding is based on the following:

• Independent contractors already have a greater tax burden than employees;
• Withholding will wrongly force small businesses to loan money to the state, interest-free;
• Withholding could generate little if any new revenue for the state; and
• Withholding targets the wrong group of taxpayers – taxpayers who are already compliant.

A fact sheet on independent contractor withholding is available here.

Action Needed
CalChamber members need to make their voices heard!

To join the opposition coalition,
contact Kyla Christoffersen This e-mail address is being protected from spambots. You need JavaScript enabled to view it .