After enjoying economic growth for 10 years and record low unemployment, small businesses are feeling a disproportionate brunt of the COVID-19 pandemic. After California’s initial stay-in-place order and closure of non-essential businesses, the economic consequences have severely impacted nearly 4 million small businesses in the state.
Even efforts by state legislators to address the state’s pandemic-caused budget deficit, too many of the policies aimed to close the gap will severely burden small businesses. That list includes Senate Bill 793, introduced by state Sen. Jerry Hill, a Democrat from San Mateo, a ban on the sale of all flavored tobacco products, which will profoundly impact California’s 12,000 convenience stores.
Even during years of economic growth, many small businesses operated on relatively tight margins, leaving them poorly positioned for a financial setback from COVID-19. Yet, the state budget attempts to squeeze even more out of battered businesses, including $4.4 billion in tax increases.
They will also feel the downward pressure of a gas tax increase that will increase distribution and production costs, and for those selling gas, they will likely see a decrease of customers at the pump. To top it all off, these businesses are also feeling the impact of new minimum wage, family leave and other mandates and environmental regulations.
For convenience stores, SB 793 presents an even greater risk. The threat of a sales ban on flavored tobacco products, which includes menthol, coupled with Gov. Gavin Newsom’s decision to enact a second wave of shutdowns could spell disaster. With individuals encouraged to again stay home and businesses unable to open, this potential ban on a high revenue generator – flavored tobacco products – could spell the end for many of small businesses and the thousands of jobs they provide.
What’s worse is this ban penalizes otherwise law-abiding, compliant business owners. According to FDA data, California’s statewide compliance rate of selling tobacco to legal age adults was 95%, 97% in Sacramento. Yet, lawmakers seem to trust the internet over hard-working men and women who would do anything to keep their business open and profiting.
The most recent analysis by the Mackinac Center found almost 50% of the cigarettes consumed were smuggled in, or acquired through tax avoidance or evasion. Furthermore, the Centers for Disease Control and Prevention found the strange string of vaping deaths in 2019 was caused by products illegally obtained on the black market, not from regulated products sold in stores.
If lawmakers want to curb youth vaping – their stated goal of this legislation – putting more faith in illegal, predatory online vendors over vigilant store owners and their trained employees does the exact opposite: it puts children at risk.
The National Federation of Independent Business July jobs report shows the small business labor market has continued to weaken. Firms reduced employment by 0.28 workers per firm in June, weaker than the decrease of 0.17 workers per firm in May. These figures are not likely to improve as data was collected well before the recent renewal of state-imposed business shutdowns. And with the money provided by the federal government’s Paycheck Protection Program loans essentially used up, coupled with the unknown length of shutdowns, who knows how long convenient stores can weather the storm.
There’s no doubt we need to address the rise in youth vaping. But to water down the problem and propose a unilateral flavored tobacco ban as the solution is at best a half-hearted approach. Convenience store owners have proven to be responsible sellers – they are not the problem. It’s not too late for legislators to go back to the drawing board and, with input from the small business community, find a comprehensive solution to tackle a community problem without putting key members of the community out of business.
Julian Canete is the president and CEO of the California Hispanic Chamber of Commerce, [email protected]. This commentary was originally written for CalMatters.org.