Paid your taxes on April 15th? Take a breath — more may be on the way

By | April 15 was Tax Day, so now you’re probably breathing a sigh of relief.

Just don’t get too relaxed.

Loren KayeMore than $15 billion in tax increases – mostly aimed at business taxpayers – await hearings and decisions in the Legislature. If the tax proposals get that far (they require two-thirds approval by the Legislature), then new Governor Newsom will have his say.

California’s treasury is awash in surplus revenues, more than $13 billion when the Governor introduced his budget in January, which is on top of a nearly-filled Rainy Day Reserve. Economic growth signals remain strong. And we haven’t seen the last of budget-brimming Silicon Valley IPOs that will boost revenues even more.

The response to this bounty of good fiscal news? Raise taxes!

Record budget surpluses have been met with record tax increase proposals. Here’s just a taste:

Massive corporate tax increase. A state senator is proposing one of the steepest corporate tax increases ever contemplated in California. It would bring the top tax rate for some companies to an eye-popping 22.26%, about 150% higher than today’s rate. It would make the California corporate tax rate easily the highest in the nation.

Were this $5 billion tax increase to pass, California would have the highest or second-highest tax rates nationally for income taxes, corporation taxes, sales taxes and motor vehicle fuel taxes.

While the author means this bill to attack alleged wage disparities and foreign outsourcing, it would likely have little effect on those objectives and more likely have the easily-anticipated effect of harming workers in California or elsewhere in the United States.

While CEO compensation is a favorite topic of class warriors, this legislation ignores the enormous responsibility placed on these individuals to maintain or improve the success of a company that creates jobs for hundreds or thousands of workers, and value for thousands of shareholders, including pension funds.

Companies have also been reshoring jobs from overseas steadily since the beginning of the recovery, with more than a half million jobs returning since 2010 because of better access to skills, favorable transportation or marketing needs.

A $5 billion tax increase cannot just be waved away by corporate taxpayers. This bill would increase revenues from this source by about a third, but would fall on just a small percentage of corporate taxpayers. The malignant effects inevitably would include reduction of workforce or constraint in workers’ pay or benefits. Another outcome could be a reduction in the value of the company, which would affect shareholders. Note that more than 20 percent of household assets are in stocks, and retirement plans own a majority of corporate stock.

Corporate tax revenues in California are at record highs, having increased by 80 percent since 2012. Federal tax reform broadened the corporate tax base and has generated more revenues for the state, and on a parallel track, the Governor has proposed further conformity to the federal tax law to bring in even more revenues.

New taxes on food, farmers and innovation. Another Senator will be proposing to eliminate a dozen tax incentives and exemptions, raising at least $8 billion in general revenues. The key changes: (1) eliminating the sales tax exemption for meat and fish, for animal feed and medicine, and for plants, seed and fertilizer used for food production, (2) eliminating tax credits that encourage companies to create innovation in California, and (3) eliminating a longstanding separate tax benefit for small business pass-through organizations (called Subchapter S firms) to help the owners minimize double-taxation.

California hasn’t taxed food for generations, or what’s necessary to grow food, so now is the right time to hit low income consumers the hardest? That one is a head-scratcher.

This bill would also repeal the research and development tax credit, which rewards innovative activity in California, which in turn is the main engine for small business growth and the creation of well-paid, middle class jobs.

According to the Milken Institute, innovation is crucial for the creation of high-quality jobs and strong economic growth, and in the global race for innovation, California enjoys advantages that others envy. California’s research credit is a crucial part of the tax environment that businesses evaluate in choosing whether to site new research activity in California or in another innovation hub.

Exhumation of the California death tax. Repealed by voters in 1982, another state senator has proposed imposing a new inheritance and gift tax at a 35% rate, on estates valued at more than $3.5 million, up to the point where the federal inheritance tax kicks in. The tax would in effect step into the void vacated by the federal tax reform, which upped the estate exemption to $11.4 million . This bill would directly affect many small business and farm owners who seek to pass along their businesses to family. The tax base is not indexed for inflation, so as time goes on will capture more estates of lower value.

But wait, there’s more. In the category of products that are unpopular or unfashionable:

  • A new tax on sweetened soft drinks, targeting a single product to pay for health programs that have many causes and beneficiaries.
  • A new tax on oil and gas produced in California that will increase costs, prices, carbon emissions, out-of-state oil imports, and cut jobs in the hard-pressed San Joaquin Valley.
  • A new tax on pain-killer pharmaceuticals, which will increase costs and potentially reduce availability of drugs for some of patients who most need pain medication.
  • A new tax on tires to pay for water pollution that comes from many sources.

Lurking in the background and awaiting launch: a new tax on business services.

Loren Kay is president of the California Foundation for Commerce and Education.

[Cross-posted with permission from Fox & Hounds.]

Posted in California Legislature, Gavin Newsom, Taxes | Leave a comment

Fullerton City Hall is closed today for another three-day weekend

City Hall Closure Dates and
Observed Holidays

January –1*, 11, 25
February – 8, 18*, 22
March – 8, 22
April – 5, 19
May – 3, 17, 27*,31
June – 14, 28
July – 4*, 12, 26
August – 9, 23
September – 2*, 6, 20
October – 4, 18
November – 1, 11*, 15, 28*, 29*
December – 13, 24*, 25*, 26^,27^, 31*

*Holiday observed
^Winter Closure

Fullerton City Hall

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No, California’s finances are not back in the black

By Patrick Gleason, Forbes | It’s happening again. People who should know better are pointing to California’s current budget surplus as proof that the state, the world’s fifth largest economy, is in sound financial shape. That figure is also being used to support the claim that California’s relatively high tax burden and onerous regulations are not too problematic, as CNBC’s Robert Frank did on Squawk Box the morning after Tax Day.

Patrick GleasonThe surplus figure cited by Frank and others has two problems: it’s both misleading and paints an incomplete picture of the Golden State’s finances. The truth is that there is no revenue surplus had by California state government. In fact, the state’s long-run obligations far exceed projected revenue collections to the tune of $1 trillion in unfunded pension liabilities alone. When factoring in the cost of non-pension benefits for state workers, such as health care for retired government employees, the debt facing California taxpayers rises further.

“Combining California’s debt with publicly held federal debt, we estimate a total debt-to-GDP ratio of 125% (or 153% using the broader definition of federal debt),” California Policy Center report released in 2017 points out. “This level places California distressingly close to peripheral Eurozone countries that faced financial crises in 2011 and 2012. Portugal’s 2015 debt-to-GDP ratio was 129% and Italy’s was 133%.”

Bill Fletcher and Marc Joffe, authors of the California Policy Center report, breakdown how much of this debt each Californian is on the hook for and find a burden of “$33,000 per resident and $74,000 per taxpayer – excluding their share of federal debt.”

This massive unfunded pension liability, which California taxpayers are on the hook for, is something that state legislators in Sacramento continue to ignore, acting as though the problem will go away on its own (or, more likely, that the federal government will bail them out at the end of the day).

State and local unfunded pension liabilities are pegged at $5 trillion nationwide, with California accounting for about a fifth of that total. States where unfunded pension liabilities are the worst (states like Illinois, New York, and California) are the places where there is the least amount of political will and interest in addressing the issue.

To read the entire article, please click here.

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Watch last night’s city council meeting

To watch the six-hour meeting, click here.

Fullerton City Council Meeting

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Tonight’s city council meeting agenda

The AgendaTo read or download tonight’s detailed council meeting agenda from the City’s website, please click here.

The public participation portion of the meeting begins at 6:30 with presentations and awards. Actual city business normally doesn’t start until 7:00 or 7:30 . . . or even later.

And you can also watch it at home on cable Channel 3 (Spectrum — formerly Time Warner Cable).

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Rich people who want higher taxes should pay more

By Doug Bandow, The American Spectator | Tax Day is here, a dreadful occasion for most Americans. But it is pure tragedy for the rich. That is, those who believe government should take more. Stephen Prince, whose company makes plastic gift cards, told the New York Times that he was “pissed off about” the Trump tax cut.

The reason? He’s paying $3 million less than before. “People like me are not all greedy.” That’s certainly good to know! He added: “We have to show that we have some concern for the country, and that we’re willing to pay some taxes.”

Doug BandowOf course, only the most obtuse and greedy right-winger verging on fascism doesn’t realize that it is his/her patriotic duty to hand Nancy Pelosi and Chuck Schumer, as well as Kevin McCarthy and Mitch McConnell—more money to squander, er, “invest” in America’s future. This sentiment predates President Donald Trump. The informal “Patriotic Millionaires” group was founded back in 2010 by Morris Pearl, formerly with BlackRock.

In recent years PMs have visited Capitol Hill, urging higher taxes on the rich. “We’re very concerned about this huge inequality thing” said Pearl. The retiree said he was paying less taxes than working people: “It’s a pretty good deal if you can get it, but it’s not good for the country.”

Investor and professor Eric Schoenberg argued that “our tax system is a monstrosity” which has “been perpetually slanted toward the rich.” The financial benefit to him of the Trump legislation “is completely secondary. The whole thing is legislative malfeasance.”

Warren Buffett once appeared to be an honorary member of the “stick it to the rich” political club, urging a minimum tax on the wealthy. But he may have fallen out of the group last year, when he applauded the Trump tax cut, calling it a “huge tailwind” for business.

What will the outraged rich do with their unfair windfall? The undertaxed rich are divided. Pearl dismisses it as just making his “pot of money… somewhat larger than it might otherwise have been.” John Driscoll plans to give more cash to his favorite political causes: “The unnecessary and fiscally imprudent reduction in the individual income tax rate gives me more income,” which he will use “to invest more in candidates who don’t put the income of wealthy people ahead of people who need help.”

However, none, reported the Times, planned on doing the obvious: writing a check to the U.S. Treasury.

To read the entire article, please click here.

Posted in Doug Bandow, Income Tax | Leave a comment

Is California really a low property tax state?

By Jon Coupal | To hear progressives tell it, California’s property tax is way too low and needs to be increased to fund the critical needs of schools and local governments.  But the notion that Proposition 13 – enacted 40 years ago – has somehow “starved” local governments is nothing more than urban myth.  In virtually every year since 1978, the growth in property tax revenue has exceeded the combined growth in inflation and population.

While the consistent growth in property tax revenue is indisputable, that has not deterred Proposition 13’s detractors from arguing that, relative to other states, property owners in California aren’t paying their “fair share.”  Eschewing for the moment what constitutes “fair,” a part of the debate involves whether California is a high or low property tax state. And it is here that the saying “lies, damn lies and statistics” comes into full play. The reality is that there are many ways to measure tax burden and most can be manipulated to support some desired narrative.

A weekly column by Jon CoupalThose who argue that California’s property tax burden is too high might be tempted to point out that California collects far more property taxes than any other state.  That is true, but it is also intellectually dishonest.  Our size and population is what generates the tax revenue and aggregate dollars collected simply do not reflect a fair measure of tax burden.

One measure, certainly more accurate than total dollars collected, is per capita property tax collections.  This is simply aggregate property tax revenue collected divided by population – a relatively easy calculation. Using this metric, it is clear that California is not a low property tax state.  The authoritative Tax Foundation ranks California 17th highest among the fifty states, which puts us almost in the top third in burden.

To read the entire column, please click here.

Posted in Howard Jarvis Taxpayers Association, Jon Coupal, Prop. 13, Property Taxes | Comments Off

Will California’s taxpayers ever pay enough?

By Jon Coupal | Every day it seems like the California Legislature careens further off the rails, and we’re not just talking about the state’s infamous high speed rail project. The rapidity of tax increase proposals that would punish both citizen and business taxpayers is breathtaking. Particularly astounding is the fact that new revenue simply isn’t needed given our highest-in-the-nation income tax rate, state sales tax rate and a litany of other tax metrics that cause residents of other states to fall to their knees in gratitude that they don’t live here. (That is especially true for the millions of former Californians who have escaped to lower tax states).

A weekly column by Jon CoupalEven more ironic is that these tax increase proposals are being advanced in a state with a massive $15 billion budget surplus and a recent series of corporate IPOs that will bring billions more into state coffers. When is enough enough?

Since January, new tax increase proposals include a tax on soda (AB138); car batteries (AB142); residential water use (AB217); firearms (AB18); automobile tires (AB755); pain medication (AB1468); oil severance (SB246); inheritances (SB378); and a sales tax on services (SB22). Combined, these proposals, plus several more, would impose hundreds of billions of dollars in higher taxes on Californians. If state politicians are trying to depopulate the state, they’ve come up with a pretty good plan. It is unknown how many of these tax hikes will advance all the way through the legislative process to enactment. A significant hurdle is Prop. 13’s requirement that taxes imposed at the state level receive a two-thirds vote of both the Assembly and Senate. But with Democrats having achieved that threshold in the 2018 elections, the odds are better now than they have been in 40 years.

To read the entire column, please click here.

Posted in Howard Jarvis Taxpayers Association, Jon Coupal | Comments Off

How California’s newly created tax agency could bankrupt small businesses across the country

Steven GreenhutBy Steven Greenhut, The American Spectator | Those of us who live in California are used to the state’s aggressive tax-collection policies. Despite record-setting budgets, the state never has enough revenue to fund all the programs it wants to create or expand so the tax authorities have to shake every last dime out of residents’ pockets. But now, thanks to confusion over how to collect online sales taxes, California’s tax-collection agency may be coming for you — even if you sell a few items from your kitchen table in Kansas.

The newly created California Department of Tax and Fee Administration (CDTFA) has been sending collection letters to small businesses that sell products via online retail platforms such as Fulfillment by Amazon. The agency claims that such third-party sellers owe eight years of back taxes because they are considered to have a physical presence in the Golden State. The agency threatens tens of thousands of dollars in fines and imprisonment of up to three years.

It’s a frightening proposition. As California Treasurer Fiona Ma noted in a recent letter to Gov. Gavin Newsom, she’s heard from a Washington state third-party seller who is “distraught and frightened” after receiving a letter from California telling her that she’s “facing tens of thousands of dollars in back taxes, penalties and interest” — something that “will force us out of business and into bankruptcy.” The seller has complied with California tax rules and signed up for a California business license, but now our state wants uncollected sales taxes going back eight years.

How can a Washington business potentially be forced into bankruptcy by Sacramento taxing authorities?

To read the entire article, please click here.

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School and pension costs in California: What can be done?

Posted in CalPERS, CalSTRS, Fullerton Joint Union High School District, Fullerton School District, Pensions | Comments Off