Why Newsom’s Gruesome Prop 50 Power Grab Must Be Stopped

California is home to 4.2 million small businesses, representing 99.9 percent of all businesses in the state and employing 7 million workers. More than 90 percent of California businesses employ fewer than 10 employees, and 7 percent of the state’s businesses have 20 to 100 employees, according to the Public Policy Institute of California. There are reasons for those declining numbers, and those reasons are called taxes, licensing fees, and regulations. California imposes too many of all three.

 Every year, California small businesses struggle to survive under the weight of restrictive licensing, regulations, and taxes imposed by the supermajority Democratic legislature and Governor Gavin Newsom. 

 To put it in perspective, the annual California Franchise Tax is the highest in the nation, as are the corporate income tax and personal state income tax. Legislation to temporarily suspend the franchise tax passed during the pandemic revealed, “these [franchise] taxes may stifle economic growth and job creation and may inhibit the formation of many small businesses.”

 But that’s not what Gov. Gavin Newsom and the Democrats in the Assembly are focused on. They’re gripped by another “temporary” piece of legislation they recently passed that does not deliver tax relief, but would create “temporary” redistricting to “stop the Trump administration.” 

 The California Legislature and Gov. Newsom passed Proposition 50, a ~$300 million ballot initiative that would redistrict California and eliminate Republican districts. According to reports, these new maps will divide counties 114 times and cities 141 times. The new maps would further disenfranchise the millions of Californians who split tickets or vote Republican, putting more power into the hands of the state’s unchallenged Democratic Party machine.

 Since its passage, a coalition of community and business leaders, local governments, small business associations, and chambers of commerce have joined the “No on 50” campaign to “stop Newsom’s power grab” before the November 4 election. Early in-person voting started on October 25 and mail-in voting began last week.

 The $300 million price tag amid a $20 billion budget shortfall is, according to California Small Business Association President Michael Hedges, “reckless.”

 “Small businesses in California are already navigating a challenging economic landscape…Furthermore, spending $300 million on Proposition 50’s special election while small businesses are drowning in high taxes is a reckless misuse of taxpayer funds,” said Hedges. 

 Additionally, California’s Republican congressional delegation supported President Trump’s “One Big Beautiful Bill Act” which extended the 20 percent Business Tax Deduction for small businesses. Every congressional representative in the  California Democratic delegation voted against the Act. 

 Without its passage, the NFIB reports that every (4.2 million) small businesses in California would face significantly higher taxes, a potential economic slowdown and increased financial strain. The report also highlights “a stark contrast in tax rates between small businesses and their larger corporate competitors if the deduction was not made permanent. In California, the C-Corp tax rate would remain at 29.84%, while the small business rate would surge to 52.9%.”

 “California should reject Prop 50 and keep the current maps which were drawn by the California Citizens Redistricting Commission, an independent body tasked with drawing fair maps after every census. Its supporters say Prop 50 is defense against a Republican power play in Texas. If what happened in Texas was wrong, two wrongs don’t make a right. But viewed through our small business lens, it doesn’t matter. Neither Republicans nor Democrats do much to help small businesses, which are 99.9% of all businesses in California and the nation. They work, instead, for the one-tenth of one percent of firms that are big businesses. We should hound our representatives to truly protect and empower our small businesses.” said Bruce de Torres, American Small Business League communications director.

 California Democrats may want to “stop Trump,” but if successful, they may stop small businesses from incorporating or flourishing in California – at all.