Back in January, severe winter storms impacted California. Much of the state was declared a federal disaster area; these declarations are always county-by-county. As of today, only two counties in California (both in the northeastern corner of the state) are not federal disaster zones. The IRS rightly extended tax filing deadlines from April 18th to May 15th.
But on February 24th the IRS announced that they were again extending California deadlines from May to October. Why was this done? The announcement doesn’t specify a reason, and almost all other disaster zones didn’t get this treatment. For example, victims of the horrific tornadoes in Mississippi are looking at a July 31st deadline. Indeed, Broward County (Florida) was just declared a federal disaster zone due to massive flooding in April; their tax deadline was extended only to August 15th. I have a theory, and it has nothing to do with taxes and everything to do with politics.
President Biden recently formally announced he’s running for reelection. (It’s been clear for a while he’s running.) One of his biggest rivals in the Democratic Party is California Governor Gavin Newsom. Governor Newsom recently toured other states and gave the impression (at least, to me) that he’s considering running for President. Meanwhile, California faces a budget crisis–there’s at least a $22.5 billion deficit. And that figure likely understates the problem: the tech industry is not doing well, and that (a) drives personal income tax collections in California (the top 1% of taxpayers pay about half the state’s personal income tax, and many of that 1% are technology industry executives) and (b) personal income tax collections make up about two-thirds of California tax collections.
Suppose you were running for reelection and you wanted to make sure a rival couldn’t run against you. A budget crisis right at the time the rival would be announcing his candidacy would sure hurt him. California was forced in January to extend its own deadlines for tax filing to May (state law mandates conformity to federal disaster extensions). Delaying payments five more months would cause problems to California’s finances–and given the current state of the tech industry might kneecap a rival from running. (When the IRS extended the deadline to October, California did conform.) All good political reasons for delaying the deadline another five months. Of course, the IRS is supposed to be an apolitical organization; however, one thing I’ve learned from the Lois Lerner scandal is that most political appointees within the IRS absolutely, positively look at the political spin on almost everything they do.
Now, I have no proof of what I’ve written. It’s a theory (some might even call it a conspiracy theory). It does, though, conform to the facts of the situation and there’s no evidence that I can find to refute my theory. I hope I’m wrong about it, but like investigators looking at a troubling situation I suspect I’m correct.
Tags: 2023.Tax.Season