This evening I attended continuing education (required for professional tax preparers) and heard about changes in California tax law. As I was reading the material, I thought there was a typographical error on one item:
“Seventy-five percent of punitive damage awards adjudicated by June 30, 2006 (filed after August 15, 2004) must be paid to the state.”
My first thought in reading this is that California passed a law enacting a 75% tax on damages and I never heard a word about this, even from the trial lawyers? Then I asked myself how many lawsuits filed after August 15, 2004 will be resolved through a court judgment by June 30, 2006? The answer is easy: 0. The court system in California is so backed up it takes, on average, five years for a case to reach trial.
So why was this provision passed as part of last year’s budget? As I found tonight, it was the only item that the Governor and the legislature agreed to on the first go round of eliminating the $8 Billion deficit. On paper this provision added $450 Million in revenues to the state. Of course, all parties knew that this was just a budgeting trick, and that no revenues would ever come through this tax. I wonder what other similar items are out there — but I probably don’t want to know.