Government Adds Insult By Cheating On Tax Collections

It’s bad enough that California taxes its citizens more than almost all other states, but adding insult to injury, government entities often cheat on the way that they collect taxes.

This happens in several ways. First, there are times when a government entity knows a tax is illegal but imposes it anyway either hoping no one will notice or knowing they can collect tons of revenue while the issue is resolved in court.  This author’s first experience with governments’ complete disregard of the law occurred 25 years ago in the 1994 case of Hoogasian Flowers v. San Francisco Educational Financing Authority.

In an effort to circumvent Proposition 13’s two-thirds voter approval requirement for special taxes, San Francisco created an entity called an “educational financing authority” for the purposes of imposing a supplemental sales tax. Although the Court of Appeal easily saw through the charade and struck down the tax as illegal, the only remedy that was given was a small refund for the handful of retailers who filed the suit. Thousands of businesses never received relief and the city was allowed to keep millions in illegal tax proceeds.

Taxpayers need to remain aware that government entities at all levels have no incentive to make things easy for taxpayers. Just one recent example involves the L.A. County Recorder’s Office and the implementation of Senate Bill 2, which imposes a $75 tax on documents filed in conjunction with real estate transactions.

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