Okay - those who know me know that I never write a political post, but this one is as close as I've ever gotten.  I have no objection to paying taxes on my earnings, and in fact, if it would help the California economy, I would have no objections to raising my taxes a bit, but as someone who receives her income sporadically, and will never have a salary that stays relatively constant throughout the year, I do have a concern about one budget provision that our state legislature is proposing - mandatory withholding on my commissions. I also have a small direct selling business, and There would have to be withholding there too.

The California Legislature recently passed a budget bill that contains a 3% independent contractor withholding provision on earnings in excess of $600. I have not yet read the actual text of the law, but everything I have read makes no exception for real estate sales commissions.

The Good News: Governor Schwarzenegger vetoed the bill as he continues to insist on a comprehensive budget deal rather than addressing the budget issues through a variety of piecemeal bills. While this is good news, it doesn't address my concern, which is that my expenses continue all year, while the income comes in clumps, with nothing between.  This means that there may be times when I am working n the red and need the next commission check in full in order to stay on the level.  Then the next check will put me ahead and hopefully cover everything until another comes along. 

Also, having run small businesses with employees, I know that there are different charts for those getting regular paychecks and those who get occasional checks.  Those paid occasionally have a higher withholding.  That is why sometimes if you have ever gotten a bonus check on a job you will notice that a large chunk of it is withheld for taxes.  Sure, it means that we will get a big refund check next year, but I need the money now.  I'd rather pay it next year. 

When legislators return from the holiday weekend, they will again be faced with balancing the budget.

We need to make it clear that independent contractor withholding should not be included in the final budget deal.

Please reach out to Governor Schwarzenegger and thank him for his veto and ask that he VETO any other bill or budget package that contains withholding on direct sellers.

Please contact the Governor and tell him (in your own words) that:

• You are working hard to build your own small businesses (which is what each of us do as Realtors). You decide what homes to sell and set prices (and determine your commissions) and your own hours. You alone know your business expenses and income. As such, you are responsible for calculating your own taxes.
• The real estate industry has a high level of compliance for tax collection. Therefore, this burden is unnecessary.
• This new requirement creates a significant new bureaucratic layer of red tape, adds an unnecessary cost to doing business in California for each of us and for our managing brokers, and represents another blow to the state's struggling business climate.
• You oppose income tax withholding on independent contractors. No other state imposes this requirement.
• We respectfully urge you to VETO any proposal that contains withholding and suggest that California exempt real estate salespersons and other direct sellers from this requirement and protect these smallest of small businesses.

I do realize that something drastic must be done to fix California's financial woes, but our indsutry has taken a harder hit than many, we have been working hard to help right the housing mess, and now we are being asked to make what amounts to interest-free loans to the government in order to further fix the state.  I just hope Gov. Schwartzenegger and our legislators will forget this idea - and not just because it is a separate bill, but because it would work an undue hardship on many of us whose income is unreliable.

Do any of you in other states have taxes withheld from your commissions under your state laws?  As independent contractors, we have always simply gotten a 1099 and it is our responsibility to pay our taxes - our managing broker does not have to do it for us.