Newsom Offers Tax Reprieve for Small Business as Virus Guts California Economy

(CN) — As the coronavirus-induced economic crisis deepens around the country and globe, California Governor Gavin Newsom will suspend payments of sales taxes that small businesses are required to give to the state for a year. 

“It’s a one-year reprieve for small businesses,” Newsom said Thursday during what has become a daily address. 

California Gov. Gavin Newsom. (AP Photo/Rich Pedroncelli, File)

Ordinarily, small businesses collect the sales taxes they accumulate throughout their year and pay the lump sum to the state at a given date. Some pay quarterly, semi-annually or annually. 

Newsom said the state will allow small businesses to keep up to $50,000 of generated sales taxes for up to a year as a bridge loan to keep them afloat when broad swaths of the state, national and global economies are effectively shuttered. 

“Our small businesspeople are the ones putting everything on the line and taking risks in ways large and small,” Newsom said. 

Sales taxes in California are collected by the state treasury, which then distributes the allotments due to counties and cities. The lack of sales tax revenue has the potential to hinder public sector operations in the near and long term. 

“The January budget is no longer operable,” Newsom said. “The magnitude of the impact is just now coming into the full light of day, but we are preparing for a substantial revision to our budget.”

Newsom gave the answer in response to a question about whether California is considering offering insurance to undocumented workers. Judging by Newsom’s response, that initiative is no longer a priority given the present health crisis coupled with a dramatic decline in revenues for the state and other local jurisdictions. 

Newsom also demurred when asked whether he would delay or forgive the payment of property taxes due on April 10. The short answer is no. 

“The cities and counties are in trouble,” Newsom said, adding it is the local jurisdictions and not the state that collects and uses property taxes to fund their various operations. 

Failing to collect property taxes in the short term could inhibit the ability of cities and counties across the state to provide services and continue various operations, including their departments of public health. 

“(Local jurisdictions) have asked us not to impose any mandate or dictate from on high unless the state would be able to backfill the dictates of that mandate,” Newsom said. 

In other words, counties and cities have asked Newsom not to delay property tax payments unless the state could pay for the losses incurred to their respective budgets, an unlikely prospect given the state must wrestle with its own significant deficits. 

However, the prospect also means many Californians who have recently lost their source of income will be forced to pony up what often amounts to sizeable property tax payments in the next eight days or else face substantial penalties. 

Newsom touted the federal programs offering small business loans and promised to ramp up capacity in the state’s employment division. The state typically takes 21 days to process unemployment claims in normal times but given that 1.9 million Californians have filed for unemployment since March 12 it could be a while before residents start seeing checks. 

“The economic consequences are profound,” Newsom said. 

Newsom, who like many officials giving daily press briefings about the global pandemic, has been reluctant to offer a glimpse of what the endgame for California looks like.

Shelter-in-place orders have been extended to May 3. On Thursday, Newsom said the most recent models show the virus peaking in California in mid-May, meaning it could be well into the summer months before Californians gain anything approaching a semblance of normality. 

But the governor urged Californians to keep doing their part by practicing physical distancing, keeping 6 feet away from each other, not congregating in groups and staying home as much as possible. 

The number of those hospitalized in California as a result of Covid-19 increased by only 5.4% from Wednesday to Thursday. The general trend is sharper, but the governor expressed optimism that the state’s health care capacity will be able to accommodate the sick if the trend holds. 

“The ICU numbers, while they are growing, are not growing as significantly as in other parts of the country,” he said. “We are buying time.”

Newsom said he will address the state once again on Friday, with the focus being on how to protect the homeless community in the state.  

There are nearly 10,000 confirmed cases of coronavirus in California and there have been 216 deaths. 

Meanwhile, the death toll inched higher in Los Angeles County on Thursday, as health officials announced 13 additional dead — including 11 who lived at nursing homes.

In total, 78 are dead in LA County and the death rate stands at 1.9%, slightly higher than the national average according to LA County Public Health director Barbara Ferrer. Health officials in LA County are investigating 54 institutional settings where there was at least one reported positive case, including nursing homes, assisted living facilities, shelters, jails and prisons. Nearly 300 cases involve either residents, guests or staff at these locations.

On the disparity of higher positive cases in more affluent communities, Ferrer said some residents were on vacation during the early phase of the outbreak in certain regions of Europe.

“Those people came back to their communities and they also may have infected others in their community,” said Ferrer. “That travel effect is still at play. I don’t think it’s just a testing effect.”

As of Wednesday, LA County had tested 23,300 people but that figure is not entirely accurate because some labs are not reporting back on negative tests and officials are unable to get a full picture of where people are being tested.

Ferrer said residents should continue to avoid close contact with others and wear homemade face masks that cover their nose and mouth.

“We do have weeks to go. I thank you for all you’re doing to prevent from becoming infected and to prevent from others becoming infected,” said Ferrer. “Please don’t lose hope and please don’t stop following all the directives you’re following right now to slow the spread of Covid-19.”

A Santa Rosa police detective was the first officer in California to die due to complications of the Covid-19 virus, Newsom’s office announced.

Marylou Armer, 44, died Tuesday. She was a 20-year veteran with the Santa Rosa Police Department and worked in the domestic violence sexual assault team when she died. She is survived by her husband and daughter.

About 80 confirmed cases and 1 death were reported in Sonoma County, north of the Bay Area.

On Wednesday, a sheriff’s deputy in Riverside County died due to complications from the coronavirus. Deputy Terrell Young was a 15-year veteran with the department and died Wednesday. Approximately 430 confirmed cases and 13 deaths are reported in Riverside County, northeast of Los Angeles.

And in Orange County a state-owned medical facility in Costa Mesa will treat non-Covid-19 patients after the city balked at plans to use the site as a quarantine area for passengers aboard a cruise ship that saw a virus outbreak during international travel.

In February, Costa Mesa secured a temporary order blocking the federal government’s plans to use the Fairview Development Center as a quarantine because city officials said they were given a few days’ notice of the arrival of infected patients. Federal officials withdrew the site for consideration about a week after the court’s order.

Now the site has become part of the state’s plans to increase hospital capacity by more than 50,000 beds through the end of May. Orange County reported just over 650 confirmed cases and 13 deaths as of Wednesday.

Worldwide, the confirmed cases count surpassed 1 million Thursday, a grim milestone as nearly all the countries on the globe are managing varying degrees of the coronavirus outbreak. 

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