A proposed tax on lawyers, accountants and consultants could hurt California economy.
SB522, proposed by Sen. Bob Hertzberg, would expand California’s sales and use tax to include business services such as those provided by lawyers, accountants, and consultants, according to CALmatters.
The legislation has yet to be heard but is considered to be part of the senator’s push to reform California’s tax structure. According to the text of the proposed bill, the state’s economy has evolved from being agriculture- and manufacturing-based to a service-based economy. The service industry accounted for 82 percent of California’s private gross domestic product in 2017, making it the largest sector of economic growth and output for the state.
However, small business advocates in California are heavily opposed to this potential tax on the service industry. Many contend that local businesses will likely have to increase prices to accommodate the tax increase. This, in turn, would put California at a competitive disadvantage when compared with other states, making it less business-friendly.
Though the intention of the bill is to improve the state’s economy by requiring out-of-state companies doing business in California to contribute to the economy, local businesses may suffer more from it than benefit.
