Archives for June 2013

Patriotism: Criticism is not unpatriotic

From U-T San Diego:

‘Patriotism” is a messy word for many people. In our society, the word brings with it connotations of racism, war and support of an often corrupt political system. But I think our modern notion of the concept is too warped by the cynicism that pervades modern American culture. A true patriot cannot by a cynic.

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Photo courtesy Fabi Fliervoet, flickr

Photo courtesy Fabi Fliervoet, flickr

Obama’s Second Term

obama second term

In U.S., 43% of Uninsured Unaware They Must Get Coverage

From Gallup:

The vast majority of Americans, 81%, say they are aware of the 2010 Affordable Care Act’s (ACA’s) requirement that most Americans must carry health insurance or pay a fine. Americans who are currently uninsured — those most directly affected by this requirement — are much less likely to be aware of the provision, with 56% saying they know about it and 43% saying they are unaware.

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State budget self-congratulations hardly justified

From U-T San Diego:

The smug remarks by Gov. Jerry Brown and his Democratic buddies in the Legislature on Thursday over the just-finalized state budget shouldn’t sit well with Californians who know the big picture on our finances.

Despite Brown’s reassurance that Californians “can sleep well tonight,” the 2013-14 spending plan is far more likely to cause tossing and turning — and perhaps some night tremors as well.

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L.A. Times Caught in Tax Liability

File this under Hoist With Your Own Petard.

losangelestimesAs I wrote last month, the Los Angeles Times mistakenly said Michael Dell used a tax dodge to avoid $1.1 million in property taxes on his purchase of the Miramar Hotel in Santa Monica. It was blamed on a loophole in Proposition 13, the 1978 tax-limitation measure.

Now it turns out the IRS ruled the Tribune Company, which owns the Times, owes $190 million in unpaid taxes for a similar tax dodge from when it sold the Long Island Newsday newspaper to Cablevision in 2008. The IRS tacked on a 20 percent penalty for “negligence or disregard of rules or regulations.” The Newsday deal was also very similar to the 2005 purchase of the LA Times.

Worse, today the Chicago Tribune, the Tribune Company’s flagship newspaper, reported that the total owed by the company to the IRS could be as much as $500 million.

And all this comes just months after the company emerged from a long bankruptcy ordeal.

Newsday deal was not tax exempt

The Tribune Company contended its 2008 sale of Newsday was not a sale at all because the Tribune as seller and Cablevision as buyer formed a partnership.  The Tribune contributed Newsday to the partnership and Cablevision contributed an I.O.U. based on borrowed money from a bank due in 10 years.  The Tribune asserted there was no tax due until the loan was repaid in 2018.

The Tribune had only one shareholder in the partnership with Cablevision, an employee stock ownership plan, called ESOP.  In essence, the Tribune’s employees assumed ownership of Newsday and folded it into a partnership with Cablevision.

According to the New York Times, tax analyst Robert Willens said, “It would have been probably the greatest tax avoidance structure ever devised, had they earned income.” Newsday did not earn any net income and thus the whole arrangement was ruled to be a tax dodge.

L.A. Times purchase of 2005 also likely not tax exempt

Billionaire Sam Zell bought the Tribune newspaper and broadcast chain in 2007 for $8 billion.  When Zell bought the Tribune, the ownership of the LA Times changed from a “C” Corporation to a Subchapter “S” Employee Stock Ownership Plan.

A “C” corporation is a conventional ownership and tax structure for corporations.  An “S” corporation pays no income taxes, but its stock shareholders do pay taxes on profits even though they may not have been paid dividends. “S Corps” is the preferred structure for small businesses with less than 100 stock shareholders.  The LA Times is not a small business and alone has a 500-person editorial/newsroom staff.

Glass houses 

The Times’ series of articles was about how Dell and his wife avoided $1.1 million in property taxes on their $200 million purchase of a majority share of the Miramar Hotel business in 2005.  The Times has made the Miramar Hotel into a symbol of how “Big Business” exploits loopholes in Prop. 13 to escape property taxes.

But as I wrote earlier, Michael Dell and his wife probably paid much higher taxes on their 2005 purchase of the Miramar Hotel operating company than buying the hotel real estate.  That is because California real estate taxes are 1 percent of the assessed value of a property.  Conversely, corporate taxes on the same sum to buy a hotel business in 2005 would have been assessed at a rate of 8.84 percent.

The backdrop to the Times series is the threatened elimination of Prop. 13 for commercial properties.  State Senate President Pro Tem Darrell Steinberg, D-Sacramento, next year is going to bring up eliminating the Prop. 13 protections for commercial properties.

The Times’ editorial stance long has been that taxes should be raised, including by modifying Prop. 13. Now, the Times is getting its wish by having to pay a lot more taxes itself through the Tribune Company.

To coin a phrase, those who live in glass houses shouldn’t throw stone newspapers.

(Wayne Lusvardi is an investigative reporter for CalWatchdog. Originally posted on CalWatchdog.)

Supreme Court Finally Fixes the Voting Rights Act

On Tuesday, the US Supreme Court finally tossed out the antiquated formula that brought a number of states and counties, including four here in California, under the federal Voting Rights Act.  The outcry from the usual suspects has been ferocious, that the Court decimated minority voting rights by finding that Section 4 of the Voting Rights Act is so outdated as to be unconstitutional.  Count on hysterical editorials from our state’s leading liberal newspapers as well as the gaggle of law school professors who follow this stuff.

nsa irs spying voting rights actBut in fact the coverage formula should never have been renewed by the Congress in 2006, and in 2009 the Supreme Court warned them that it was probably unconstitutional.  Now it is.

The Voting Rights Act has had huge bipartisan support because minority Democrats love it as it forces creation of “majority minority” legislative and congressional districts, and Republicans love it for exactly the same reason, it ghettoizes minority votes into a handful of heavily Democratic districts, thereby wasting millions of Democratic votes.  Democrats were chagrined to see in 2012 that they won a plurality of votes for Congress but Republicans won control of the House of Representatives.  How did that happen?  Republican gerrymandering in several states helped but the biggest factor was concentration of minority Democrats into Voting Rights Act districts.  For all the Democratic wailing about the obstructionist GOP House, that’s the reason why.

In California, the Voting Rights Act had a somewhat different impact; it helped to destroy effective representation in a number of districts, primarily in the Central Valley.  The now unconstitutional coverage formula brought the counties of Kings, Merced, Monterey and Yuba under the Act.  These counties had nothing to do with minority voting rights, but all four had large military bases during the Vietnam War and the formula caused them to be covered.  It was an absurdity when it occurred and was compounded over the decades until finally the Supreme County threw out the formula yesterday.

In 2011, the Citizens Redistricting Commission interpreted the Voting Rights Act that it had to draw districts in these counties with exactly the same minority percentages as the old gerrymandered  2001 plan it was replacing, and that in itself was an absurdity.  The old 16th Senate district, which is undergoing a special election right now, consists of part of the city of Fresno and part of the city of Bakersfield, connected through long hooks and fingers to unite minority population in both cities.  But the two cities are miles apart, have different media markets and little in common.

However, the Commission interpreted the Voting Rights Act to require hacking up Fresno and Bakersfield on racial lines such that neither city is wholly contained in single Assembly, Senate or Congressional district.  This was forced on the Commission, so it claimed, by the fact that Kings County, a VRA covered county, was situated between the two cities.

In 2001, Democrats and Republicans agreed on a plan to draw a highly gerrymandered Senate district for then-Assemblyman Dennis Cardoza (D-Merced) that combined Merced County with Salinas in Monterey County, both VRA counties.  The district made no sense except in partisan terms, although Cardoza did not run for it and Republicans actually have won it three times.

But when the Commission redrew the Senate districts in 2011, their attorneys convinced them that Merced and Salinas should remain in the same district, even though they are a mountain range apart with nothing in common and testimony was received from both places that they did not want this illogical district.  The ridiculous impact of this was to actually deny Latinos, the supposed beneficiaries of the Voting Rights Act in California, an additional Senate district.  If Salinas had been combined with heavily Latino San Jose, a Latino Senate district would have emerged, but that did not happen.

The Supreme Court’s ruling does not “gut” the Voting Rights Act, other sections still allow citizens to challenge the way districts are drawn if they can prove racial gerrymandering or denial of minority voting opportunities.  But the Court did finally say enough is enough to an outdated formula that never should have brought California under this part of the Voting Rights Act in the first place.

(Tony Quinn is a political analyst. Originally posted on Fox and Hounds.)

Obama: “Under my plan electricity rates would necessarily skyrocket”

Immigration Road

immigration reform rubio

Public records and meetings need better protection

From SJ Mercury:

State Senate leaders have delayed a few days, until at least Monday, a vote on a constitutional amendment intended to strengthen open-government laws that might do just the opposite.

Senate President Pro Tem Darrell Steinberg insists he learned from public and press outrage over lawmakers’ recent attempt to pass legislation that would have gutted the state Public Records Act.

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War Infinitum