By Julian Cañete, President and CEO, California Hispanic Chambers of Commerce
Most of the Latino business owners I work with never had a company retirement plan. They opened a taquería, a body shop or a cleaning service, and any savings for later in life came out of their own pockets, usually after payroll and rent were covered. On the November ballot, Prop 42 gives voters a chance to make sure the state can’t tax those savings.
I hear the same story in every region of the state. An owner puts a few thousand dollars into an IRA after a strong holiday season. Another skips her own paycheck during a slow month so her employees get paid on time, then catches up on her retirement savings when business picks back up. It takes decades, and nobody hands them a match or a pension at the end.
Under California’s Constitution as it stands today, the Legislature has the authority to pass new taxes on retirement accounts, savings accounts and other personal property. Lawmakers have tried. Since 2019, five separate proposals to tax retirement and personal savings have been introduced in Sacramento. None passed, but the idea has not gone away, and the authority to do it is still there for the next attempt.
For the owners in our chambers, those savings are what they plan to live on, use to help their kids, or put toward handing the business down to the next generation.
Saving in California is already difficult. The state ranks as the third most expensive for retirees, and I hear the same worry from business owners everywhere I go: between taxes and the cost of living, it’s harder than ever to put money away for retirement. Many of them know someone who has had to keep working longer than they planned because they simply couldn’t afford to stop.
Prop 42 closes the loophole in the Constitution that allows new state taxes on retirement accounts, pensions, 401(k)s, IRAs, savings and other personal property. It also prohibits retroactive taxes, so the rules can’t be changed after people have already saved. It does not cut funding for schools, public safety or health care, and it does not affect income or property taxes.
Small businesses support Prop 42, and so do firefighters, peace officers, construction workers, veterans and seniors. The California Small Business Association and the California Multicultural Business Alliance are among the groups backing it.
Latino entrepreneurs have done their part for California’s economy. When they save for the future, they should be able to count on that money being there.
Vote Yes on Prop 42.
