Ever wonder why small-business job creators are losing ground in California?
Here's an example from the not-too-distant past:
I opened a psychotherapy office back in the late 1970s. I had earned my professional license from the state and was now officially authorized to perform personality transformations on people with precarious pasts.
Of course, I needed malpractice insurance (you never know when someone doesn't like his newly discovered self) and the usual office expenses of rent and utilities.
As time progressed, so did the size of the operation. Soon it became a partnership, and now we owned the facilities. We rented space to other therapists. We had two full-time administrative assistants and an insurance specialist. In those days, growth was good.
I checked with my accountant as to whether I needed additional licenses to continue with the operation. He assured me that as a professional, a state blessing was enough.
However, the city of Stockton had different ideas. A few years later, they came knocking on the door. They said I was deficient in three areas of compliance. They didn't care about my state license (the city didn't make any money from that). They wanted a separate business license for my individual practice, a license for renting office space and another that had something to do with the partnership.
I had been out of compliance for quite some time, but because of the statute of limitations, they could only go back three years.
The next day, I went to city headquarters to pay my dues. With a surly attitude, the clerk made a comment about "slackers" not paying their "fair share." It was obvious she was clueless about the expenses of running a business.
By the time city, state and federal agencies were done with us, things looked something like this: Multiple in-house city licenses (including the renters who also needed professional tags) along with separate business licenses; a county license which taxed office furniture; property tax; state income tax; Social Security taxes; state and federal unemployment taxes; mandatory workmen's comp insurance; federal income tax on any individual profits; and a tax on any separate profits from the partnership.
When they were done, around 50 percent of gross income went to taxes and required fees. To make matters worse, HMOs were coming into fashion. These insurance companies only wanted to pay a fraction of regular health care costs while their executives made substantial salaries. Some would pay doctors more money as an incentive for curtailing patient services — a practice known as "capitation."
About this time during the mid 1990s, many older professionals with many years of training and experience were leaving the health care professions. They'd had enough of doing business in this fashion — a problem that was developing all over the nation, but was especially prominent in California.
I began to think that maybe that arrogant clerk was right, sitting in her government cubicle while whistling worry-free folk tunes. Why should I knock myself out in a financial struggle when I can go to work for a public agency with an above-average salary, generous retirement and a guaranteed lunch period? Let the other guys pay the bills.
People on various economic levels must have the same thoughts, because almost 20 years later we now live in a country where more people than ever collect food stamps. As high as 51 percent pay no federal income tax. About 10 percent of these receive "refundable cash credits."
It's a nice ride for now, but it's only a matter of time until most of the hardworking, job-creating small businesses see the light, throw in the towel and join the crowd. That's when the gravy train runs off the cliff.
So, if you're thinking about starting a business, you might want to consider friendlier atmospheres in such places as Texas, North Carolina, or Florida — even Canada.
According to Chief Executive Magazine, there is no place in the U.S. that is worse for doing business than California.
Steve Hansen is a Lodi writer.