Biased LA Times Has Trouble Connecting the Dots

GUEST COMMENTARY – In a truly ironic twist, we just had Times columnist George Skelton (who covers Sacramento) and departing Times columnist Jim Newton (who covered many local issues) give, respectively, their recommended fixes for our state and city/county governments.

Which would all be well and good if the problems they now decry hadn’t occurred on their watch, and in large part because of their fixed, intransigent “liberal” bias.  And while Skelton and Newton probably consider themselves part of the self-righteous answer to our problems, perhaps a healthy dose of humble pie would be a good idea for them because they helped cause our state and local messes.

After all, those two are the ones who kept adhering to policies that ultimately led to a one-party, inbred system that enriched a few while proclaiming to help the little guy … while a continuing efflux of generational Californians who built this state finally threw up their hands, and either withdrew from civic life or just fled the state into one of the saner states in our nation.

Which means that the rest of us still living here are either too stupid or stubborn to conclude we’re beyond repair, or we have more courage and integrity than Skelton or Newton with respect to serious confronting … and I mean CONFRONTING … the California problems that threaten to spread like a cancer to the rest of the nation:

1) Perhaps not all Democrats, but THIS group of Democrats running Sacramento and Downtown LA are the puppets of public sector unions–particularly educational unions–that don’t give a rip about students, taxpayers and families … but unions who make damn sure they’ve got the self-serving volunteers and money to elect their personal favorites. (Photo.)

Governor Brown’s attempts to limit-set the state’s educational and other unions when he “temporarily” raised taxes to balance the budget?  Quietly being placed aside as talk of permanent tax hikes get louder, and dying the sure death that former Governor Schwarzenegger’s proposed reforms did when he first became governor, and when he thought he had a voter mandate to reform Sacramento …

… and before “Benedict Arnold” Schwarzenegger decided if you can’t beat ’em, then join ’em.  So now Skelton says that Brown needs to stand up to the UC Regents and insatiable public sector unions pushing an unsustainable public pension our state can afford, and Newton recommends containing the influence of United Teachers Los Angeles.

Perhaps Skelton should follow Newton’s path and now depart from the biased Times, because neither really backed Schwarzenegger when it counted, and neither really backed Antonio Villaraigosa when he attacked the UTLA. Villaraigosa deservedly lost a lot of voter respect by the end of his mayoral term, but on education he showed some serious guts–and as with Schwarzenegger, he had wholly insufficient support from the press.

A press that, as with Skelton and Newton, would do well to learn how to Connect-the-Dots and recognize how political courage never wins without honest and courageous journalistic support.

2) We just had a slew of Sacramento politicians nailed on corruption charges, and we are in the middle of a host of corrupt and misguided educational projects such as bad iPad deals and Common Core being rammed down the students throats (and their taxpaying families) … and yet not a courageous word from either Skelton or Newton as to which group of politicians are truly behind this nonsense.

And nary a favorable word as to which end of the political spectrum are most outraged, and have been most outspoken, about the lack of political transparency and honesty in either Sacramento or Downtown Los Angeles.

On his way out, Newton suggests that “two mayors, Riordan and Antonio Villaraigosa, spilled much political blood trying to devise a better system for overseeing schools.  They came up short, but they were right.”  Yet did Newton ever have the temerity and spine to do honest reporting when it really counted, and recognize the historical prediction of that Democratic and American icon, FDR, who originally opposed public sector unions?

Not all unions … public sector unions!  The ones who did exactly what FDR feared, and who take taxpayer money and spend it on campaigns to make sure they get their favorite boys and girls into office.  And does Skelton, in his holiday wish list for Sacramento, really take it to the ongoing dysfunctional California Democratic Party system and suggest more political parity to keep things transparent and balanced?

No … because in Skelton and Newton’s world, only Republicans need to be reformed and bipartisan.  Which would be fine, if an inbred Democratic world was any better than an inbred Republican world.

Here’s a hint for the press–both for those who hold their nose and tolerate Republicans and Independents, or those who obviously hold Republicans and Independents in contempt:  stare in the mirror, ask YOURSELF if YOU need to show more impartiality, and Connect the Dots that “power corrupts, and absolute power corrupts absolutely” because ALL one-party systems are ripe for corruption and dysfunction.

3) While Skelton makes an excellent point against “Democrats now always bowing to labor and Republicans not consistently cowering before the anti-tax crowd”, he doesn’t Connect-the-Dots between how the outdated tax system and public pension system he decries, and who’s really, REALLY trying to fix it (and ditto for Newton).

And neither of them give credit to a California Republican mantra which should also be one proclaimed by Democratic and Independent leaders, because it’s true from a mathematical, not politically partisan perspective:

WE DON’T HAVE A TAX PROBLEM, WE HAVE A SPENDING PROBLEM.

Let me translate this for anyone who’s willing to drop their obsession with “good guy/bad guy politics” or partisan politics of any sort, and let me translate this to Skelton, Newton, or any other biased self-proclaimed know-it-all from the media who needs to drink a tall glass of “shut your mouth” to wash down that aforementioned, long-overdue piece of humble pie.

I’ve jokingly referred to “Alpern’s Law of Taxes” (which really isn’t MY idea, but just common sense that’s been extolled by others for centuries, if not millennia): IT’S NOT THE AMOUNT OF TAXES THAT INFURIATES TAXPAYERS, BUT THE PERCEPTION OF HOW THEY’RE BEING SPENT.

When we’re fighting the Nazis, or their modern-day equivalents in the Taliban/al-Qaida, we can and should raise taxes to take ownership of our generational struggles.  FDR was right to do it in the 1940’s, and G.W. Bush was wrong to not do it when he declared a War on Terror.  Ditto if taxes are being raised for infrastructural needs SO LONG AS THEY ARE SPENT WELL.

However, pension spiking and allowing public sector workers to retire in their mid-50’s while the rest of us have to work until we drop dead of exhaustion. is NOT a prescription for a proper public investment of the taxpaying public as our infrastructure and governmental services crumble and disappear.

So Republicans have and did raise taxes (both Republican and Democratic voter majorities in L.A. County voted to raise sales taxes for transportation Measure R), and they need to do so again under the right circumstances. But shouldn’t Democrats get past “blame the Koch Brothers and Bush” to acknowledge that our taxes are too-often being spent poorly?

Do the likes of Skelton and Newton have the spine and moxie to suggest that public sector unions undo the Governor Davis Debacle and start calculating CalPERS and local/city/county investment returns at 4% or less (and have public sector workers pay more into their systems) until they’re no longer draining our state and local governmental coffers?

Do the likes of Skelton and Newton have the spine and moxie to suggest that while raising taxes on the rich is politically expedient, raising income and sales taxes on EVERYBODY combined with a moratorium on raising the state and local budgets (if not lowering them by 5-10%) is the best way to make everyone sacrifice together and keep our budgets balanced for the long-term?

Do the likes of Skelton and Newton have the open-mindedness to abandon their never-ending dogma of “end term limits” and listen to the voters who are smart enough to ignore them?  After all, the City of Long Beach did show how a popular Mayor (Beverly O’Neill) could retain her office with a write-in vote in a city that also retained general term limits.

(We are the same nation that had its tone set with our first president, George Washington, who many would have gladly been elected king but who proclaimed that he was only one man … and who voluntarily left office to leave it to others to take on the responsibilities of leading.)

As for little ol’ me, I’m just a dermatologist who’s also a local/volunteer civic leader and a transportation advocate in favor of Proper Planning and Good Government — and I’m always happy to be proven wrong.

But as for Skelton and Newton, they’re not too smart or too wise to acknowledge they really ARE biased, and really DON’T have all the answers, no matter which closed-minded and “progressive” rag chooses to hire them.

They, like the rest of us, really need to Connect the Dots and acknowledge when bad policies and bad politics are connected in a vicious circle that is self-serving and society-destroying.

Let’s hope that 2015 is a turning point when we all (certainly myself included, but especially the wizened columnists at the Times and other media outlets) can reopen our minds and rehash the “truisms” that need to be thrown out like yesterday’s news.

This article was originally published on CityWatchLA.com

(Ken Alpern is a Westside Village Zone Director and Board member of the Mar Vista Community Council (MVCC), previously co-chaired its Planning and Outreach Committees, and currently is Co-Chair of its MVCC Transportation/Infrastructure Committee. He is co-chair of the CD11Transportation Advisory Committee and chairs the nonprofit Transit Coalition, and can be reached at Alpern@MarVista.org  He also does regular commentary on the MarkIsler Radio Show on AM 870, and co-chairs the grassroots Friends of the Green Line at www.fogl.us. The views expressed in this article are solely those of Mr. Alpern.)

Is It Time To Garnish The IRS’ Pay?

The IRS has abused its power and misused its resources, so it deserves the budget cuts it got in the 2015 spending bill, a leading anti-tax group argues.

“If the IRS wants to see an increase in its budget, it probably should stop harassing conservatives,” Americans for Tax reform spokesman told The Daily Caller News Foundation. ”They used their resources in a completely inappropriate and political way that has basically ruined the reputation of the agency on the Hill.”

Congress cut the IRS budget by $346 million in the 2015 spending bill, reported Politico, and the agency has absorbed about $1 billion in cuts since 2010. It’s one of the only agencies whose budget was cut this year.

“[The cuts] are a logical response to the stewardship they’ve had with the resources they’ve been given,” Kartch told TheDCNF. “They’ve been given certain resources to implement the mission of the agency, and they’ve used them to harass Tea Party organizations. They’ve used them to harass conservative taxpayers. They’ve basically politicized the entire Cincinnati office for several years.”

Commissioner John Koskinen has already announced a hiring freeze and suspension of overtime hours, and said Thursday the most recent cuts could shut the agency down temporarily.

“People call it furloughs,” Koskinen said, according to Politico. “I view it as: Are we going to have to shut the place down? And at this point, that will be the last thing we do … but there is no way we can say right now that that wont happen.”

The cuts come as the IRS prepares to take on new responsibilities implementing Obamacare, and in the face of a mandatory government-wide pay raise Koskinen said will cost $250 million.

Kartch accused Koskinen of trying to extort Congress by purposely absorbing the cuts in a politically painful manner. In addition to the shutdown, Koskinen has warned taxpayers refunds could be delayed this year.

“They have a mandate to implement [the cuts], but the resources that they allocate is up to them,” Kartch said.

But Alan Viard, a budget and tax policy analyst at the American Enterprise Institute, said across-the-board cuts won’t fix the problem and are likely to hurt taxpayers.

“I’m very concerned about what the IRS did on the 501c4 applications by the tea party groups, and so it’s quite proper to try to stop that type of abuse or make sure it doesn’t happen again,” Viard told TheDCNF. “But just cutting the agencies overall funding is really not a good way to do that.”

Viard suggests a more targeted approach, such as clarifying 501C4 laws or reassigning certain responsibilities to other agencies, rather than the easier option of spending cuts.

“It really backfires by harming ordinary taxpayers who still have to comply with the complicated tax code Congress has imposed upon us,” he added. “Having given us this complicated tax system, I think it behooves Congress to try to give the IRS the resources to administer that system.”

This piece was originally published by the Daily Caller News Foundation

CA Tax Board Delays Refunding Taxpayers’ Money

California’s Franchise Tax Board is taking too long to complete audits and resolve taxpayers’ refund claims, protests and appeals, costing businesses hundreds of millions of dollars, according to the California Taxpayers Association.

Gina Rodriquez, vice president of state tax policy for CalTax, voiced her concerns last week at the FTB’s annual Taxpayers’ Bill of Rights hearing. The Bill of Rights, which was enacted by the state Legislature in 1988, spells out the rules and procedures for tax audits and taxpayer protests and appeals of those audits. The protest is the first step in the audit appeal process.

The FTB has consistently shortchanged taxpayers by not following its own guidelines, according to Rodriquez. “CalTax brought this to your attention last year,” she told the tax board. “However, the FTB seems to have fallen a bit short in addressing our concerns. I want to go through this with you again this year.

“Taxpayers’ liabilities should be determined within a reasonable timeframe. Once determined, any overpayment should be returned to them as quickly as possible. The FTB’s high compliance backlog seems to violate the spirit of the Taxpayers’ Bill of Rights. The FTB must do more to avoid any conflict between protecting revenue and providing due process to taxpayers.”

FTB guidelines require the agency to resolve tax protests in two years. But in 2013 it was taking FTB auditors nearly twice as long, 44 months, to close out protest cases, according to Rodriquez.

Report

The 2014 annual report to the Legislature by the FTB’s Taxpayers’ Rights Advocate Steve Sims has also noted the problem. “For the past several years, I have raised concerns about the additional time and resources required for taxpayers to protest an assessment,” said Sims in the report.

“I am pleased that the focused efforts by our Legal and Audit Divisions to resolve older protests resulted in a 200 percent increase in the number of cases resolved, and an overall reduction of 12 percent in the total number of protest inventory cases. Yet, for the business-entity, docketed protests resolved by our Legal Division for FY 2013/14, only 47 percent of the tax at issue was sustained. This once again raises concern about the number of revisions to assessments that occur once a business entity taxpayer elects to file a protest.”

The FTB has also fallen short in responding in a timely manner to taxpayers’ claims for refunds, said Rodriquez.

“The FTB has in its inventory more than 500 refund claims that are more than three years old,” she said. “This is an unacceptable number, as it means hundreds of millions of dollars – and maybe more, we don’t have a real good handle on the dollar amount – [withheld from] the taxpayers’ working capital, stifling economic advancement.”

CalTax doesn’t know how many hundreds of millions of dollars in potential refunds are being tied up by the FTB’s delays because “the FTB does not have a complete picture of its refund claim inventory,” said Rodriquez. “[FTB] staff is unable to tell CalTax whether the inventory has increased since the 2008 enactment of the Large Corporate Underpayment Penalty, also known as the LCUP.

“The 20 percent LCUP is quite punitive. So punitive, in fact, that taxpayers are forced to file their original returns with an overpayment to avoid the imposition of the penalty. Then they subsequently have to file refund claims for legitimate issues. The LCUP does ultimately increase government and taxpayer costs due to the increased workloads in the returns. The legislative purpose in enacting the LCUP in the 2008 budget negotiations was to raise revenue. And I ask: Has that goal been reached?”

No interest

Adding insult to injury, the FTB does not pay interest on the refunds, potentially allowing the state to use the money for years, itself accruing interest, without any compensation to the taxpayers.

Noting the IRS resolves federal tax refund claims much quicker, Rodriquez asked, “Why can’t the FTB have a dedicated staff to work those refund claims? We know we have a problem; let’s address it with some resources.”

FTB is also dragging its heels on audits, according to CalTax.

“Delayed audits have led to unfair audit practices,” said Rodriquez. “FTB is not completing many multi-state and high-level audits in a timely manner. In addition, CalTax members have reported a growing trend among auditors not to process overpayment issues before the audit closes. Some auditors request that taxpayers file a claim for a refund to address the overpayment issue for the same year that it’s under audit. This not only violates the published audit guidelines, but it worsens the high [backlog] inventory problem we have with refund claims.”

In addition, the FTB is taking too long to resolve appeals, she said. “Taxpayers deserve to have their appeals heard within a reasonable time frame. As years pass with a pending appeal, interest accrues, the audit file becomes stale, taxpayers die, key witnesses move on or become unavailable. Additionally, taxpayers lack any guidance for the years subsequent to the years under appeal.”

Concerns

Sims acknowledged CalTax’s concerns, but said the FTB is working to improve its performance, despite not having enough staff members. “[M]any of those issues have been raised in my annual report to the Legislature,” he said. “But I also want to talk to the effort the department has made in terms of trying to fix some of the problems. I’ve been working with our audit and legal division on this issue for more than the two or three years it’s been raised – more like five years. And I do want to say a lot has been done in terms of improving the process.

“One of problems regarding the protest inventory – she’s correct, it’s taking too long, in my opinion. But at the same time, they have reduced the volume of protests. I don’t know that we would have been able to do both at the same time because of the limited resources. Resources are somewhat limited. There is a resource issue that really needs to be addressed.”

Another reason for tax disputes taking longer to resolve is that they tend to be more complex than in prior years. “Taxpayers are becoming a lot more sophisticated,” he said. “The issues that are getting filed on these claims, they are full-blown audit-type issues. They require experienced resources. The department has taken certain steps to involve attorneys in the process a lot earlier to try to assist in handling these types of issues.”

Issues

Board Member Jerome Horton would like more information on the causes of the delays. “Why don’t we set up a meeting so I can have an opportunity to take a look at these in a little more detail,” he said. “I would like to have the department delineate those items that are systemic, those that are institutional and then those that are resource-type issues. If we are having a resource issue, we should consider requesting additional resources to be able to address those.”

A tax concern was also raised by Lynn Freer, president of Spidell Publishing, which provides publications and seminars for tax professionals. She said California tax law differs from federal tax law concerning the Affordable Care Act, which she dubbed “the Accountants’ Crying Act.” That lack of conformity can complicate taxes for self-employed filers who receive an insurance premium credit in 2014 only to find out they have to pay the credit back in 2015 because their income turned out to be too high to qualify for the credit.

“There are all sorts of technical issues involved,” said Freer. “So we would like to request guidance. We would like a rapid resolution. But one step further, it would be nice to have conformity. If we were to automatically conform to federal law, it would be much easier for these taxpayers. Unfortunately, folks who are involved in this premium credit are typically going to be lower-income taxpayers. They are least able to afford to pay folks to figure these things out, or least able to handle problems when they arise later.”

The FTB board did not respond to her request for Obamacare tax clarification.

This article was originally published by CalWatchdog.com

The Prop. 30 Tax Hike Should Retire on Schedule

No matter how high taxes are increased, it’s never enough for public officials and bureaucrats who live off taxpayer funded paychecks.  According to these people, there is always one more dollar that is needed to make government “whole.”  And being made “whole” in California means maintaining the highest paid government employees in all 50 states.

So it should come as no surprise that the tax-and-spend interests have already begun banging the drum and shaking the tambourine on behalf of extending Proposition 30, the “temporary” tax increase approved by voters in 2012.  Proposition 30 imposed the highest income tax rate in America.  It also bumped up the sales tax – a tax that hits lower income families particularly hard — to tops in the nation.

The sales tax component of Proposition 30 is set to expire at the end of 2016 and the higher income tax rate will sunset in 2018, so those who feed off taxes are starting to panic.

During the last year, some lawmakers resisted putting Proposition 2 on the November ballot because it required the establishment of a rainy day fund to tide government over through lean times.   These Sacramento politicians were concerned that if it passed, and the state had money in the bank, it would be more difficult to make the case that the Proposition 30 taxes should be made permanent.

State schools chief Tom Torlakson came out for the extension of Proposition 30 long ago, and we are now seeing the head of one of the state’s two major teachers unions, the California Federation of Teachers, calling for its continuation while maintaining it is not enough.

Of course, it’s never enough.

Writing in the Sacramento Bee, teachers union president Joshua Pechthalt attempts to make the case that the temporary tax hike should be extended.  He justifies his position by claiming California is thriving and upper income individuals, unfazed by the higher taxes, are happy to stay and pay.

Not so fast.

While Pechthalt believes things are fine now that our economy is supposedly in a “recovery,” working families aren’t seeing it. Our unemployment rate is the third highest in the nation and the US Census puts our supplemental poverty ranking at worst in the country.

Pechthalt’s evidence that Proposition 30 has not impacted high income individuals seems to be that wealthier communities, like Beverly Hills, have not become ghost towns.

Objective real estate reports from Nevada and other low or no income tax states make it clear that California has indeed lost many upper income taxpayers because of Proposition 30.  The Wall Street Journal reported that “many Californians have arrived [in Nevada] in the wake of Proposition 30.  Passed at the end of 2012, the measure hiked personal income and sales taxes.”  The San Francisco Chronicle published a piece in January of this year entitled “State leaders closely watch migrating millionaires” noting that “whether you sympathize or not, millionaires’ migrating out of California has serious consequences to the state’s bottom line and is something state leaders are watching closely.”

The other problem with the union leader’s thesis is that we simply don’t know how many of California’s high earners decided to absorb the confiscatory tax rates for a couple of years knowing that they would eventually expire.  If made permanent, the existing millionaire out-migration could very well turn into a torrent.

So, instead of asking whether we should make Proposition 30’s temporary tax hikes permanent, a better question would be whether those tax hikes were needed at all or, better yet, did they inflict more harm than good?  There is compelling evidence that California would today be grabbing a bigger slice of the national economic recovery had it not passed Proposition 30 at all.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article was originally published by the Howard Jarvis Taxpayers Association.

Don’t Break This Tax Promise

Voters passed Prop 30 as a temporary tax measure to avoid automatic cuts but now there is talk to extend it. Monday, December 1, 2014

Voters are right to be wary of “temporary” tax hikes, and California’s Proposition 30, which passed in 2012, is no exception. Democratic lawmakers are already talking about the possibility of an extension of the tax increase, either through legislative action or in the form of a 2016 ballot measure.

California fell into a significant budget deficit on the heels of the Great Recession. Between 2007 and 2008, state revenues fell by $25 billion, mostly due to decreases in personal income, corporate and other taxes. Social programs, K-12 and higher education were all headed for drastic cuts, so Gov. Jerry Brown helped place Proposition 30, or the Schools and Local Public Safety Protection Act, on the ballot.

The measure was a 0.25 statewide sales tax increase and an income tax increase for individuals making over $250,000 annually – set to expire in 2016 and 2018, respectively. If Proposition 30 had not passed, there would have been automatic “trigger cuts” to K-12, higher education and public safety. To be specific, K-12 funding would have been cut by $5.4 billion, the University of California and California state systems would have lost $500 million, and there would have been a $1 billion cut to public safety services.

After thoughtful consideration, the Valley Industry & Commerce Association decided to support Proposition 30 to avoid those devastating cuts, largely because of the measure’s sunset provisions. The measure passed with 55 percent of the voters’ approval.

Proposition 30’s passage stabilized school funding for the first time since the Great Recession, and prevented thousands of teacher layoffs. The Legislature balanced its budget after years of instability, and without cutting programs. Gov. Brown proposed a budget with a projected surplus of over $5 billion, and the year-to-year gaps between state spending and revenues have been erased for the time being.

Proposition 30 has wholly done its job, a rare outcome for tax increases. Recently, California’s nonpartisan Legislative Analyst’s Office reported that the expiration of temporary tax hikes over the next several years would not result in a ‘fiscal cliff’ as some have feared. Thanks to an economy reliably on the rebound, the state will be able to weather the major loss in tax revenue – Proposition 30 raised an extra $6 billion a year.

The Legislative Analyst’s Office also estimates that the state will have $4.2 billion in reserves at the start of the next fiscal year, which will begin in July. Proposition 2, which voters passed on Nov. 4, requires that $2 billion of that money be deposited into California’s savings account. A large chunk of the state’s surplus will be spent on public education, which should assuage any worries about schools running into trouble once Proposition 30 expires.

Gov. Brown, whose efforts got Proposition 30 placed on the ballot back in 2012, has indicated that when he said the tax hikes were temporary, he meant it. Still, there has been buzz from some Democrats – notably from Superintendent of Public Instruction Tom Torlakson and Senator Mark Leno. Sacramento Councilman-turned-Assemblymember Kevin McCarty has called Proposition 30 a “tourniquet,” and supports making the measure permanent.

With a huge budget surplus, a positive outlook from the Legislative Analyst’s Office, and Gov. Brown in favor of his own effort expiring, why are some legislators already campaigning for Proposition 30’s extension? Considering the electorate’s general skepticism toward tax increases, shouldn’t it be easier to find funding for education and public safety in our now-flush budget? It doesn’t seem like it would require much creativity.

VICA believes that temporary tax hikes should remain temporary. Extending Proposition 30 sets a dangerous precedent for tax increases, and is unfair to voters and Californians in general.

Stuart Waldman is president of the Valley Industry and Commerce Association; a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.

This article was originally published on Fox and Hounds Daily

For What Are Taxpayers Thankful in 2014?

“In this season of Thanksgiving, please don’t blame taxpayers if they are distracted by the injuries being perpetrated against them by our political class.”  These words were the preface of this column at the beginning of the holiday season in 2008 and, sadly, little has changed.  In fact, in many ways taxpayers are worse off now than they were then.

Six years ago, California’s tax burden was ranked 6th nationally.  Today we trail only New York as the worst state for taxpayers.   We now rank first in state sales tax, first in marginal income tax rates, first in gasoline tax and, even with Proposition 13, we rank in the top third in per capita property taxes.  Because Proposition 13 makes it harder for California to overtake New York as our nation’s number one taxpayer hell, one can expect new efforts by Sacramento politicians to undermine its protections in the new legislative session.

Some of our state leaders like to chirp happily about California’s declining unemployment rate, but only three states are worse off and our 7.3 percent rate is much higher than the national rate of 5.8 percent.  Still, all these figures are suspect because they do not count the discouraged who have stopped looking for work entirely.  And even those counted include many part-time workers for whom the best holiday gift would be finding fulltime employment.

Then there is the constantly growing, and largely ignored unfunded pension liability now estimated at several hundred billion. It stood at $6.3 billion just a decade ago.  As more government workers retire, this debt will come due and will have to be addressed by either reduced public services or tax increases or both.  The pressure for new revenue to support the retired workforce will provide an additional incentive to politicians to demolish Proposition 13’s taxpayer protections.

Nonetheless, while elected officials may be planning to put coal in taxpayers’ stockings as we approach Christmas, there are a few things for which we can all be grateful.

First is Proposition 13, which limits annual increases in property taxes and forces the tax raisers in the Legislature to get a two-thirds vote of their colleagues to raise state taxes.   We at the Howard Jarvis Taxpayers Association hear daily from those who are thankful for Proposition 13 and credit its most famous feature — limiting annual property tax increases to no more than 2 percent — for allowing them to keep their homes.

While during the session just passed, those favoring new taxes dominated the Legislature, the November election has turned out some fiscally irresponsible lawmakers and replaced them with some who understand the detrimental impact of new taxes on individual taxpayers and the overall economy, and who are likely to reject new taxes.  So taxpayers are grateful not only for Proposition 13 but for lawmakers who will defend their interests against great pressure for new taxes from special interests including public employee unions.

Taxpayers are also thankful for all individuals, regardless of party affiliation, who make the personal sacrifice to run for office and present their ideas to voters.  A functioning free republic relies on individuals who are willing to step into the arena, even in those instances where their chances of prevailing are small.

Finally, complaints against government at all levels are an American birthright.  But we are mindful that billions of souls around the world risk imprisonment or death for speaking out against their despotic governments or leaders.  So, in keeping with the season, let us be thankful that we live in a country that, despite her faults, remains the last, best hope for mankind.

Brown Key to 2016 Tax Measures

With the 2014 election finally over, attention is turned to possible tax measures on the 2016 ballot. I previously wrote about groups looking to raise taxes on commercial property, oil extraction, cigarettes, and extending or making permanent the income tax piece of Proposition 30. Marc Lifsher covered similar ground in the Los Angeles Times over the weekend. The Public Policy Institute of California released a poll last night that asked voters about some of the possible tax increases they could face on the ballot.

The key to which major tax measures will advance to the ballot very well could be Governor Jerry Brown.

It may not seem unusual for proponents of tax increase proposals to want a popular, re-elected governor to support their agenda. However, the key to getting Brown on board is not so much for his endorsement but for his influence with certain powerful political players.

During the Proposition 30 campaign, Brown was effective in neutralizing opposition from the business community. While some business leaders grumbled about the tax, and the board of the state Chamber of Commerce had extensive debate over whether to oppose the measure, in the end the business community, particularly big business, generally withheld opposition to Prop 30.

Supporters of proposed tax ballot measures would like to see the same script in 2016.

In the most recent election season, the governor emphasized the Proposition 30 taxes were temporary. He also warned against taking on Proposition 13 and its property tax protections. While Prop 13 was not tested in the new PPIC poll, Prop 30 extension received support from 52% of likely voters while 43% opposed.

Pro-tax advocates will have to convince the governor they have a winning measure. Then they will push the governor to use his influence with the business community to hold fire on whichever measure – or measures – moves forward. This is particularly true with the major tax issues, less so with so called sin taxes on proscribed goods or services such as the tax on cigarettes.

There is also the issue of a major overhaul of the tax system that has support from some reformers. More on this tomorrow.

Any group considering pushing a tax increase in 2016 will have to consider how the governor plans to use his influence on the issue.

This article was originally published on Fox and Hounds Daily

California: The Land of Double Taxation for Small Businesses

Just think: You run a business. Your partner embezzles from you and you are reeling – you feel like you’ve been punched in the gut. Next, California’s state government shows up and slaps you around. When you object, Sacramento offers no apology, no comfort. You’re on your own.

Farfetched? Read on to see what happened to a California Limited Liability Company (LLC) that tried to play by the rules.

First, an LLC is a form of business that permits the owner to avoid double taxation. In California, such companies must pay an annual minimum franchise tax of $800, which is the highest of any state (in 40 other states the fee is $100 or less) and may be subject to additional fees based on revenue.

An article by Mike Dazé in Bloomberg BNA – Corporate Close-Up: The Burden of California’s Taxes and Fees on Limited Liability Companies – points out that the State Board of Equalization “illustrates the challenges businesses face when trying to reduce their liability for taxes and fees in California. A company filing two-short period returns in tax year 2010 unsuccessfully protested the imposition of the minimum tax and LLC fee in each short period.”

In short, they objected to double taxation.

The company, Bay Area Gun Vault, LLC, converted from a two-member entity into a single-member LLC after one of the two members was caught embezzling money and was removed. So the company filed two short-period returns for 2010, one as a two-member LLC and the second as a single-member LLC.

In the first return, the company timely paid the annual tax of $800 and an extra LLC fee on profit. In the return for the second period, the company did not pay the LLC annual fee, but did pay the tax.

Despite two tax returns, the company clarified that the income was for the same business with the same tax ID number and assets and was operating in the same location. So the company should owe only $800 in tax and an LLC fee of $6,000.

But the removal of the embezzler caused a “technical termination” of the original LLC because 50 percent or more of the interests changed hands. Hence, the resulting single-member LLC was a “new entity for tax purposes” and owed the minimum tax and LLC fee during the same year.

Mr. Dazé wrote, “The logic of the company’s argument is appealing: LLC taxes and fees should not be imposed twice in the same year on the same business.”

The Board claims there is no statutory support for that position.

Well, if the Board is correct, why did legislators let an unfair law stand? Do Sacramento lawmakers use no foresight in determining whether technical provisions in business-oriented laws might cause future injury?

Actually, I know the answer to my own questions. Here is why the legislature doesn’t care how its actions harm the business community:

  • First, the Franchise Tax Board (California’s version of the Internal Revenue Service) has projected revenue from LLC taxes and fees to be $753 million in fiscal year 2014-2015. Sacramento wants to collect every single penny of that revenue.
  • Next, California’s legislature is packed with people who will use taxpayer funds to support the latest half-baked ideas. But they routinely turn a deaf ear to requests from the business community for fair taxation and regulatory policies.
  • Finally, most Sacramento politicians are clueless about what it takes to run a business.

To amplify on that last point – only “18 percent of the Democrats who control both houses of California’s full-time legislature worked in business, farming or medicine before being elected,” wrote former California Assemblyman Chuck DeVore. “The remainder drew paychecks from government, worked as community organizers, or were attorneys.”

In business-friendly Texas, “Democrats are more than twice as likely as their California counterparts to claim private-sector experience outside the field of law,” continued DeVore, and “75 percent of the Republicans earn a living in business, farming, or medicine….” All of that can be found in his book, The Texas Model: Prosperity in the Lone Star State and Lessons for America.

The analysis was for a couple of years ago, but the makeup of both legislatures remains virtually the same.

California is replete with demands for “environmental justice,” “social justice,” “income justice,” “sexual justice,” “workplace justice” – oh, the list goes on and on. What California needs more of is “entrepreneurial Justice,” “business justice” and “tax justice.”

Gov. Jerry Brown and legislative leaders should reverse tax-confiscatory policies and refund overpayments to that LLC and others in similar positons. If not, California will perpetuate its mean-spiritedness towards corporations – even the one-person kind.

The Irvine-based Principal of Spectrum Location Solutions helps companies plan and select ideal sites for new facilities across the U.S. and internationally.

This article was originally published at Fox and Hounds Daily

Is local tax measure success a sign of things to come?

As usual, Michael Coleman’s California City Finance website has an excellent recap of local tax measures and how they fared in the recent election. Local ballots contained 268 revenue measures — tax increases, tax extensions or bonds — of which 189 passed, or 71 percent.

The two largest categories of revenue instruments were:

  • General-fund city taxes requiring a majority vote. Of them, 61 of 88 passed, or 69 percent.
  • School bonds requiring a 55 percent vote. They fared even better, with 90 of 112 measures passing, or 80 percent.

In addition, school parcel taxes requiring a two-thirds vote were perfect on Election Day, with all eight passing.

With pro-spending groups making no secret of their desire to raise many different state taxes, does the success of so many local taxes auger well for them?

State and local tax campaigns are fought in different environments. The governments closer to the people have a better connection to local voters and generally are held in higher regard than governments farther away.

Local tax measures and school bonds usually don’t face well-funded opposition campaigns.

In addition, local government support for tax measures skate the line of impartiality. One example cited by the California Taxpayers Association was a 1 percentage-point sales tax in El Cerrito, Measure R.  According to CalTax:

“Typical of many cities, El Cerrito mailed a campaign-style ‘Measure R Voter Guide‘ to residents, filled with photos of smiling children and police officers, and providing one-sided ‘information’ about the tax measure. The city’s taxpayer-funded mailing referred to Measure R as the ‘El Cerrito Preservation of Citywide Services Measure.’”

Pay more

At the Capitol Weekly’s election post-mortem conference, it was often pointed out that California’s electorate is made up of two-thirds progressive voters and two-thirds fiscally conservative voters. Obviously, there is an overlap and the election campaign struggle occurs in the overlapping area.

Voters locally showed a willingness to pay more. If they get their fill contributing to local government budgets, will they draw the line with efforts to raise state revenue?

The success of the local measures will encourage those who want to raise state taxes. The battle will be drawn.

The question is: When will the California voters hit their breaking point? We may find out in the 2016 election.

This article was originally published by CalWatchdog.com. 

Measure R El Cerrito

 

Billions Of Taxpayer Dollars Are Spent … Collecting Taxes

If Americans understood how much it costs the IRS to collect taxes, and how much it costs for taxpayers to file them, they might demand change, an economics lawyer said Friday.

“We’re talking about a massive amount of money,” Dan Mastromarco said at a Heritage Foundation event on tax compliance. “If we put that into a cure for childhood diabetes, cancer — pick your poison — space exploration. What we could do with that money that we just literally throw away.”

The vastness and complexity of the tax code contributes to high compliance costs, a huge number of people intentionally or unintentionally failing to pay the right amount of taxes, and a costly burden on the economy. The IRS reports it spends 41 cents per $100 to collect taxes, but the true cost is closer to $45 per $100, or $978 billion, when those factors are accounted for, according to research compiled by Mastromarco.

The code, which consists of 4 million words, is so complex, even the IRS can’t understand it, he said, pointing to a list of questions the IRS’s own taxpayer advocate service was unable to get the answers to. And the IRS could only answer 30 percent of more than 90 million requests for assistance in 2010.

“We really haven’t made this very clear to the American people,” he said. “They don’t see it. They don’t feel it. They don’t understand what this equates to — this is a huge amount of money. This is a good year of economic growth. This is beyond the GDP of many of the world’s countries.”

Mastromarco called for the IRS to disclose a more accurate accounting of the cost of its code to taxpayers, which might wake them up to the costly reality of the tax code.

“The reason nothing’s been done about this, is because we’ve gotten really good at making the pain gradual — making it so that we can’t see it,” he said. “We’re effectively numb to it.”

“Our goal should be to make compliance costs understood and transparent, and painful to the American people,” he added.

Mastromarco is a lawyer who has represented Fortune 500 companies, and has worked as assistant chief council for tax policy at the Small Business Administration and special U.S. trial attorney at the Department of Justice’s tax division.

Tax reform is an issue that may be taken up the new Republican-controlled Congress next year.

This article was originally published on The Daily Caller News Foundation.