San Francisco Examiner, July 20, 2001

Following a recent rally for the homeless in the state capital, the local weekly lamented the climate of “unbridled capitalism” in America. Capitalism actually remains quite bridled in America, and regulations designed for large-scale businesses usually owned by men have a particular effect on women who choose to work at home.

According to the U.S. Department of Labor, women-owned businesses are the fastest growing segment of the economy, growing at twice the rate of men. Home-based businesses are popular with women, as they allow them more flexible schedules to care for their children and save on child-care costs.

Joanne Cornwell of San Diego attempted to start a home-based business braiding hair, but she found that the law forces hairbraiders to go to school for 1600 hours of cosmetology training that includes no natural hair-care training whatsoever.

“There have been obstacles at every turn,” says Cornwell. “This legal challenge presented to African-American women who braid hair is an unnecessary burden.”

Wendi Niad of Sherman Oaks started a personal management business, working from home, but found that city zoning laws created barriers. Technically, her home business is treated as though it were a factory.

Wendy Niad also needed more employees, including a business manager but mandatory workers compensation and Cal/OSHA laws discouraged her from hiring. Those laws and regulations were intended more for industrial applications, not the home setting that many women find ideal.

The skills she learned at the Protocol School in Washington prompted Syndi Seid to launch Advanced Etiquette, a home-based business dedicated to the promotion of professionalism and social etiquette, with an emphasis on the international scene.

Though free to choose her clients and set her own schedule. Syndi had to obtain a Business Tax Registration Certificate, and register her business’s name. She would like to expand and hire employees, but these would exceed the threshold of the local payroll tax. While these measures would apply to men in the same situation, they do not encourage women to become entrepreneurs.

Isabelle Greene earned a botany degree then studied at a fine-arts school for botany illustration. After she designed a carport for a client, she began designing landscapes. The quality of her work produced a stream of eager customers. But when she applied for a job with a firm in Santa Barbara, she found that, though much in demand, she lacked the official license to be a landscape architect. This involved fees, exams, and a long commute to UCLA. It took seven years for her to obtain the license.

Child care is an urgent need for women but mandatory training, licensing and inspections discourage women from going into this business.

The businesses women run in their homes do not always fit the regular pattern, which can create conflicts with the state’s new overtime law, designed for conventional and industrial applications. Like their male counterparts, women must also cope with mandatory insurance, state disability rules, worker compensation, business tax registration, fire and health permits, and in some cases police permits. Taxes are another obstacle.

Once a woman-owned business pays more than $100 in wages in a calendar quarter, it triggers application of payroll and employment taxes. The employer must report all new employees to the Employment Development Department within 15 days and report all wages, even if no wages were paid in a given quarter. Employers must also file an annual reconciliation statement.

Women entrepreneurs that employ at least one person, whether part-time or full-time, must pay a state-mandated Employment Training Tax on the first $7,000 in wages per employee per year. The moneys paid to the state go into a “training fund” used to “empower workers, promote business and boost California’s economy.” All employers, even those in newly established businesses, must pay this tax regardless of gross receipts.

Female and male employers alike must withhold state personal income tax from the employee’s wages and pay the taxes to the state. While the money for the taxes comes from the employee, the employer must comply with frequent withholding and reporting requirements, increasing an already substantial paperwork load.

Withholding, a supposedly temporary practice dating from World War II, means that the government gets the money of women employees before they do. There are some choice words to describe this practice, and the entire regulatory regime that women face, but unbridled capitalism is not among them.

Legislators need to take into account how the regulatory regime affects the home-based business situations that women such as Joanne Cornwell and others are choosing. Instead of drafting special rules for these cases, or for women only, lawmakers should simply lighten the regulatory load and lower the tax burden for all.

Sally Pipes is the President and CEO of the Pacific Research Institute, a California-based think tank. She can be reached via email at spipes@pacificresearch.org.