By Joe Kefauver
ORLANDO, Fla.—It will clearly take economists, researchers and academics many years to fully grasp the devastating economic and social impacts of the COVID-19 pandemic. Almost every aspect of the American economy has been affected, and the total cost will be nearly impossible to aggregate. But what we do know is that it would have been impossible for federal, state and local governments to be financially prepared to weather such a cataclysmic storm. And we also know that financial recovery will be a long time coming, if ever. States and cities in particular were hit with a massive combination of unexpected and unbudgeted health-care costs to combat the virus on the front lines and at the same time, see a large chunk of their tax base switching from employed taxpayers to unemployed benefits seekers. Needless to say, states and municipalities are in a dire fiscal situation and regardless of who is in the White House next year, are going to be desperate for revenue.
While it may be more politically difficult than normal to pass additional wage and benefit mandates on struggling employers, it may be politically easier than normal to target business owners for additional fees, taxes, licensing requirements and a variety of “nickel and dime” increases to recoup much-needed revenue—not to mention going after them personally. If you operate a small business or convenience store, just about every fee or tax you pay will be on the table and part of the revenue conversation. For instance, California currently has a measure on the November ballot to essentially reverse the infamous property tax-capping Proposition 13 of the late 1970s and completely reconfigure the assessment process on the backs of commercial property owners. If passed by the voters, which appears to be likely, the state would recognize additional revenue in the billions of dollars. Whether you lease or own your commercial space, your costs—either your property taxes or your rent—are going to go through the roof.
Additionally, over the past year, many more states have played with “millionaires” taxes, significantly increasing tax rates for incomes over a certain threshold—New Jersey just did this a few weeks ago. California, Massachusetts and others have strongly considered these taxes in the past and will do so with renewed vigor in 2021.
Early storylines emerging from the pandemic will make their way into the political and legislative process. It appears to many opinion leaders and policymakers that the already significant gulf between the “haves and the have-nots” has been exponentially widened as a result of this crisis. It also appears to many of them that those at the financial top have emerged largely unscathed or in some cases, even prospered. Whether that is accurate or not is irrelevant. That perception is accepted widely enough that it will shape the political environment around the financial recovery of states and localities. Business owners—especially successful ones—need to be ready.
Joe Kefauver is managing partner of Align Public Strategies, a full service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision-making.