The Guardian’s Vivian Ho reports on the latest from California:
In an effort to assist small businesses suffering from the economic blowback of the coronavirus crisis, Gavin Newsom, California’s governor, announced Thursday that the state was offering a 12-month reprieve on sales tax receipts for up to $50,000.
Essentially, consumers will continue to pay sales tax on items and services purchased at small businesses, but instead of turning over those payments to the state, those businesses can use up to $50,000 of those funds “as a bridge loan,” Newsom said.
Newsom encouraged small business owners to see this initiative as a bridge loan so that they would also apply for the federal loans like the economic disaster injury loan assistance and the paycheck protection program. “We need to be able to get federal dollars into the state of California,” Newsom said.
The sales and use tax makes up a significant portion of California’s annual budget, with the receipts comprising 18.8% of the 2019-20 general fund. California ranks in the top 10 in the country for highest sales tax.
The exact impact of this initiative remains unclear, as so much else is in flux, but when asked about the budget he proposed in January, Newsom said, “The world has radically changed since the budget was proposed.”
“The magnitude and impact of all of this is just coming into full light of day and we should be prepared for substantial adjustments in our budget,” he said.
In California, 1.9 million have filed for unemployment insurance since 12 March, Newsom said, with the state averages 111,000 claims a day over the past week.
Nearly half of all private sector employees in California were employed by small businesses, Newsom said.