California War against Baby Sitters

There are two ways a person can go into business, and that is either providing a good or providing a service. Based on two laws, the Food Safety Modernization Act and the Consumer Product Safety Improvement Act, it is potentially impossible for an individual to sell a product as a means of earning a living.

But there is no consistent regulation of providing services instead. The Institute for Justice has detailed many instances of local regulation regarding taxi service, interior decorating, or hair cutting. One area that has been ignored until now has been house cleaning or babysitting.

The state of California is now making an inroad on this means of augmenting a family budget - it has introduced Assembly Bill 889 that covers "persons who engage in specific types of domestic service." It leaves out those who provide health care through various state programs.

There are exemptions from those covered in the proposed law. Those under 18 are not covered by it, and family members who provide those services are not covered by it. This will not impact the income bondage of teenagers forbidden from earning a real living since it is unlikely they would ever earn much through babysitting, and so they are exempted. The bill requires extensive record keeping and benefits to accompany domestic employment and the fines are per violation per day so can quickly add up.

This will not impact the wealthy who hire domestic help, as they are capable of affording the paperwork that the bill demands. But a maid who works for several different middle class clients will find those clients have a hard time keeping up with the paperwork. It also creates a disincentive to do this without paperwork on the grounds that only the employer is liable and the employee is not. Therefore it sets the scene for a domestic employee to be able to turn around and threaten to report the employer unless unreasonable demands are met. Finally those who depend on babysitters will have a harder time having their needs met.

It is obvious who will be hurt by it; all who make money from babysitting or house cleaning, and those who depend on the services but are not wealthy enough to afford the employee paperwork. Who will benefit from it though? The bill sponsor claims that it is to protect domestic laborers, many of who are poor, minority, and even illegal aliens. That is not a politically powerful group. Who actually benefits from it?

House cleaning services, babysitting services, and day cares all benefit on the financial side. It will drive out the independent operator as those in the middle class who would hire domestic help will be forced to contract with the agency that handles the paperwork. On the political side the government will definitely benefit from more and more people being employed instead of self-employed and thus easier to track and record in accord with the war on home based businesses.

California Shoots Self In Foot

Because California legislators are unable to control their urge to spend, especially their urge to spend on public employee pensions and salaries, they are always looking for new sources of revenue. There was one major stream of business not taxed, so the inevitable occurred. The government of the state of California decided to force businesses that do business over the internet to collect sales tax.

It is already law that residents of the state are supposed to pay the sales tax for all internet purchases. There is a line on the state income tax forms for that purpose - a line ignored by Californians. Frustrated by their inability to force Californians to pay yet another tax in one of the highest taxed states in the country, the idea was to “close a loophole” and force internet businesses to do the same tax collection that stores physically located in the state collect - a service they provide “free” to the state.

Already Amazon.com and Overstock.com are reacting to this new law. They are not collecting the sale taxes, though. They are pulling out of the state.

Both businesses have affiliate programs whereby people can sell their products through these major corporations. Both partners in the affiliate programs profit. The major corporations profit by getting a portion of the proceeds, and the small affiliates profit by having their products listed through major outlets where they can reach larger audiences.

These affiliate programs are all ended. The business connections have been severed. Amazon alone had 10,000 affiliates in California, and has ceased to do business with them unless they leave the state.

This law, instead of raising revenue, has created a revenue loss. Instead of increased sales tax, it has resulted in decreased income tax. It may have even resulted in increased unemployment compensation.

One would hope that the legislators and the governor would see the results and admit that a mistake has been made. One would hope that they would see the decreased revenue and the increased unemployment. Of course one would also hope that politicians are honest, capable, and intelligent, but the evidence indicates otherwise.