Local restaurant owner David Houston looks at a state Legislature under total control of Democrats and trembles.
Houston, who owns five Barney’s Beanery restaurants in Los Angeles County, said he’s bracing for what he expects to be a flood of legislation that would increase regulation on his restaurant chain, expose him to more lawsuits and raise his expenses.
“I think it will be more difficult to operate a business,” Houston said. “There will be more regulation, more litigation and more taxes. It’s very, very scary.”
Houston is not alone. Business owners throughout the county and state are concerned that Democrats will now be able to force adoption of bills that impose more regulations on business, raise fees and taxes, and give lawyers more opportunity to file lawsuits against businesses. They are skeptical of Gov. Jerry Brown’s comments last week that he would rein in any excessive legislative tendencies.
“With their supermajorities, the Democrats – and their public employee union and environmentalist allies – can override vetoes by Gov. Brown,” said David Fleming, of counsel to Latham & Watkins LLP and founding chairman of the Los Angeles County Business Federation. “California is bad for business today. Tomorrow, it will become toxic.”
Fleming said he doubts that Brown will be able to keep his word about preventing tax increases or other anti-business legislation from getting through.
Last week, Democrats gained three seats in the state Senate, giving them one more than the two-thirds majority. And they were on the verge of gaining the two seats in the Assembly necessary for a two-thirds majority in that chamber. At press time, Democratic Assembly candidates held narrow leads in two races.
It’s a significant development since tax increases are notoriously difficult to pass in California because they require a two-thirds vote in the Legislature or voter approval of a ballot initiative. In recent years, Republicans have blocked any tax hikes in the Legislature. With their supermajority, Democrats would no longer need Republican votes to pass tax increases, so long as the Democrats vote in a united bloc.
The supermajority also gives Democrats the power to override the governor’s vetoes, giving them more leverage in negotiations with Brown.
Signal Hill shop owner Tom Benson said he fears Democrats will move to raise the car tax, which he believes would reduce car purchases and cut into his business. His Bud’s Beach Cities auto upholstery shop receives 40 percent of its business from referrals and contracts with auto dealerships.
“If they get two-thirds, it doesn’t have to go to the voters,” Benson said.
But business owners’ concerns go beyond tax increases. Restaurant owner Houston said he’s expecting Democrats will introduce legislation to increase the minimum wage, which he said would dramatically raise his operating costs.
“They’ll be able to pass that with or without the governor,” he said.
Houston said he’s also concerned Democrats will pass bills that give third parties the right to file more lawsuits against businesses.
As a result of the changes in Sacramento, he said he’s going to be much more cautious in hiring.
“We have openings for full-time workers but we may go with more part-time workers,” he said.
But not everyone in the business community was pessimistic. Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce, said he expects even the threat of a veto by Brown could halt some anti-business legislation.
“I believe his veto would dissuade at least some members from acting to override it,” Toebben said. “That means it’s now more important than ever to have the governor as the backstop, preventing anti-business legislation from getting through.”
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