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Obama, Arnold, Steinberg throw down on taxes

By Josh Richman
Wednesday, January 27th, 2010 at 1:20 pm in Arnold Schwarzenegger, California State Senate, Darrell Steinberg, state budget, taxes.

So is it President Obama versus California Democrats, Schwarzenegger versus the truth, or both?

Gov. Arnold Schwarzenegger’s office this morning sent reporters a missive noting President Obama’s comment in an interview with ABC’s Diane Sawyer yesterday that “I can guarantee that the worst thing we could do would be to raise taxes when the economy is still this weak.”

Although the President was talking about federal taxes, the governor’s office juxtaposed this with Legislative Democrats’ calls to help close the state’s chronic budget shortfalls and structural deficit with some revenue increases. Among those was this:

Senate President pro Tem Darrell Steinberg (D-Sacramento) Calls For Tax Increase On Independent Contractors.
“Senate President pro Tem Darrell Steinberg of Sacramento said the state could generate a one-time boost of $2 billion simply by requiring tax withholdings on payments to independent contractors.” (Judy Lin, “Schwarzenegger Doesn’t Blame Voters For Ill Will,” The Associated Press, 1/25/10)
Steinberg: “At every opportunity I decry the governor and minority party’s refusal to consider applying the same tax withholding rules to businesses that we apply to working people. The Franchise Tax Board tells us that applying a 3 percent withholding for independent contractors would raise $2 billion.” (Senator Darrell Steinberg, “Schwarzenegger’s Budget Doesn’t Reflect California’s Priorities,” San Jose Mercury News, 1/18/10)

Steinberg’s office shot back a short while ago, accusing the governor of perpetuating his pattern of not letting the facts get in the way of his rhetoric.

Governor Schwarzenegger’s office today released a document stating that Senate President pro Tempore Darrell Steinberg’s endorsement of a tax withholding requirement on independent contractors is a tax increase.

That assertion is patently false, and is yet another example of how the Governor refuses to let the facts get in the way of his rhetoric.

Here are the facts. Under existing law, employers are required to deduct and withhold from wages an amount equivalent to an employee’s reasonable tax obligation. Each quarter, employers are then required to remit to the Employment Development Department the total amount of income taxes they withheld. These provisions do not currently apply to payments made for goods and services performed by independent contractors.

In other words, the proposal endorsed by Steinberg does not increase anybody’s taxes; it only proposes that independent contractors pay the taxes they currently owe. Indeed, according to the Franchise Tax Board, such a policy would result in more than $1 billion in revenue for fiscal year 10/11, with ongoing revenues in the hundreds of millions in the following years.

So here’s a question for the Governor: Why do you believe that the law-abiding taxpayers of California should be forced year after year to pick up the slack for tax-dodgers?

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  • Doug

    Unless Steinberg is proposing a NEW 3% tax on top of that state taxes I already pay quarterly as an independent contractor, his idiotic proposal will generate NO additional revenue but will cost companies money to administer. Typical politician.