Proposition 23: Suspension of AB32 (Global Warming Tax)

Back in 2006, the California legislature passed AB32. This measure, which was signed by Governor Schwarzenegger, allows the state to regulate greenhouse gases such as carbon dioxide (CO2). The goal of AB32 is to reduce such gas emissions by 2020.

AB32 is a huge job-killer. It’s a huge boon for regulators and a disaster for California taxpayers. Proposition 23 on the ballot would suspend AB32 until unemployment in California was 5.5% (or less).

Whether global warming is a reality or not continues to be debated. Whether AB32 would change anything is fairly clear, though. California is not the world, and if the world continues to emit CO2 the state can’t wall itself off into its own atmosphere.

I agree with opponents of Proposition 23 that the measure would hurt California’s alternative energy industries. Of course, opponents don’t tell you that (a) Proposition 23 would save far more jobs in other industries; (b) alternative energy industries either need heavy subsidies or heavy taxes on other sources of energy to be competitive; and (c) AB32 being implemented will harm California’s competitiveness.

Remember to vote on November 2nd.

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We’re Number Two!

Congratulations, California! You have the second worst business climate in the country!

Earlier today the Tax Foundation released its 2011 report on the Business Tax Climate Index. Here are the ten worst states:

50. New York
49. California
48. New Jersey
47. Connecticut
46. Ohio
45. Iowa
44. Maryland
43. Minnesota
42. Rhode Island
41. North Carolina

Here are the ten best states:

1. South Dakota
2. Alaska
3. Wyoming
4. Nevada
5. Florida
6. Montana
7. New Hampshire
8. Delaware
9. Utah
10. Indiana

One conclusion the Tax Foundation notes is, hopefully, self-obvious:

The lesson is simple; a state that raises sufficient revenue without one of the major taxes will, all things being equal, out-compete those states that levy every tax in the state tax collector’s arsenal.

Meanwhile, “The states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.”

The report is lengthy but has numerous nuggets that all tax geeks (and policymakers) should read. Unfortunately, it is highly unlikely that any lawmakers in the Bronze Golden State will take heed of the ideas noted above.

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Amazon 1, North Carolina 0

Back in April I reported on Amazon.com’s petition for declaratory relief from North Carolina; the North Carolina Department of Revenue requested information on every purchase of goods since 2005 in the Tar Heel State. And that request was rather inclusive:

By letter hand delivered on March 19, 2010, to Amazon in Seattle, Washington (the “March Information Request”), the DOR stated that Amazon’s initial response to Question 16 of the December Information Request omitted the “Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street); Product/item code or description” (the “Customer Data”). The DOR demanded that Amazon provide this information “for examination” on or before April 19, 2010.

Well, the District Court has made its ruling in Amazon.com v. Lay

The DOR concedes that it has no legitimate need or use for having details as to North Carolina Amazon customers’ literary, music, and film purchases. In spite of this, the DOR refuses to give up the detailed information about Amazon’s customers’ purchases, while at the same time requesting the identities of the customers and, arguably, detailed records of their purchases, including the expressive content. With no compelling need for both sets of information, the DOR’s request runs afoul of the First Amendment. It bears noting, too, that the DOR’s requests for information were made solely in the context of calculating Amazon’s potential tax liability. Amazon has provided all of the data necessary to determine its tax liability, except any potential tax exemptions. The DOR has failed to articulate the compelling need to calculate these possible exemptions, particularly where it has admitted that it can and will assess Amazon at the highest rate and it would permit Amazon to “challenge the assessment and … establish that exemptions or lower tax rates applied to some products.” Even assuming there is a compelling need to calculate Amazon’s tax liability inclusive of exemptions, the DOR’s requests are not the least restrictive means to obtain the information. The request is overbroad. The Court GRANTS the motion for summary judgment.

So on First Amendment grounds Amazon wins this battle. Amazon also wins based on the Video Privacy Protection Act (the NC DOR’s request would cause Amazon to violate that act).

Note, though, that the court specifically noted that Amazon must comply with valid tax rulings. Of course, whether Amazon must collect North Carolina tax will continue to be fought….

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Proposition 22: Transportation Funding

Proposition 22 on the California ballot would prohibit the raiding of transportation funding for anything. The measure, if approved, would stop the practice of the legislature of using transportation funds (including the gasoline tax) to fund anything and everything else.

Not surprisingly, the Chamber of Commerce and California cities are generally for the measure while public employee unions oppose the measure. Cities are especially annoyed with the legislature’s annual raiding of local funding.

No matter where you stand on the measure, remember to vote on November 2nd.

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Proposition 21: State Parks Vehicle License Surcharge

Proposition 21 on the California ballot would add an $18 fee (err, tax) to vehicle license renewals to fund state parks. Shockingly, the California State Park Rangers Association is for the measure. The measure would help to fund the park system. As for boosting California’s economy (a claim of proponents), it would take money away from consumers. That’s a tax, and that does anything but help the economy. Well, it would help the economic situation of those employed at state parks….

No matter how you feel about the measure, remember to vote on November 2nd.

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Proposition 20: Congressional Redistricting & Proposition 27

Proposition 20 on the California ballot would take redistricting of Congressional districts out of the hands of the state legislature and give it to the Redistricting Commission. That commission was formed as a result of Proposition 11 on the 2008 ballot; Proposition 11 took redistricting of the state legislature away from the state legislature.

Proponents of the measure argue that it will help to create fair districts. Opponents argue that Proposition 27 is the better measure and Proposition 20 would waste money.

Proposition 27 would eliminate the Redistricting Commission; essentially, it would reverse the passage of Proposition 11. That would continue the system used in 2000 that gave California zero competitive districts: Every district was gerrymandered. It’s worked quite well to help our legislature be, well, partisan.

I think you can guess how I’ll be voting on these measures. It’s interesting to see that the Sierra Club is against Proposition 20 while the AARP and the NAACP are for it.

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Proposition 19: Marijuana “Legalization”

It’s time to begin our analysis of the ballot propositions that Californians will face in one week. There’s a lot on the ballot, and several of the measures have a direct impact on taxes.

Let’s start with Proposition 19. This measure would legalize marijuana under California law. However, the measure has no impact on federal law…and marijuana use and cultivation would still be illegal under federal law. While proponents argue the measure would cause huge new tax sources, the reality is that unless and until the federal government legalizes marijuana, this ballot measure would have little or no impact. Indeed, it’s become clear that should the measure pass the US Department of Justice would likely sue California to stop the implementation of the law.

This measure does unite Democrats and Republicans; both candidates for state Attorney General, Kamala Harris (D) and Steve Cooley (R), oppose the measure. So does Senator Dianne Feinstein.

No matter where you stand on this measure remember to vote on November 2nd.

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Watching Paint Dry

I will have the opportunity over the coming week to watch paint dry…literally. My office is being painted this week, so posting will be limited. I have already written posts on the ballot initiatives on the California ballot (these will start appearing on Monday).

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Shock! Government Agencies in California Forced to Lay Off Employees

The Los Angeles Times has a story today on how government agencies in California have been forced to lay off workers. The Times calls the cuts “ravaging.” I’d call them necessary and the tip of the iceberg.

There’s a basic fact of budgeting that I and other small business owners must live with: We can’t spend more than what we take in. If I spend $50,000 more than my revenues, I’m either going to have to use my savings or tap a loan or line of credit. The latter is a short-term solution; the former causes most business owners consternation.

Government agencies have considered themselves “self-perpetuating” organizations. Some politicians talk about the “Government Sector.” The last time I checked, government is supposed to be of the people and for the people, not for the government. While I do feel sorry for the workers who have been laid off some portions of California’s government are starting to learn about basic economics.

California faces an interesting choice in the election on November 2nd. The Republican candidate for governor, Meg Whitman, touts her experience in running eBay and her business acumen. The Democratic candidate, former governor Jerry Brown, says he’s never increased taxes. The negative advertising has been loud and furious (by both candidates, and their surrogates). My mother said it’s one of the worst barrages of political advertising she can remember.

Yet there’s an obvious truth that must be noted. Jerry Brown’s biggest supporters are public employee unions. Public employees (especially their contracts and pensions) are a huge part of the problem in California. If Jerry Brown wins, will he be willing to fight the unions? Like it or not, the next governor will be faced with the choice of drastically raising taxes to pay for public employees’ largess or fighting the unions. Somehow I doubt that Jerry Brown will fight the hand that is feeding him.

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It Was Only $12 Million and You Seized it Five Years Ago, So Now You’re Filing Charges?

One of my first ever blog posts (back in 2005) was short and succinct: “Cops Moonlighting as Strip Club Bouncers Charged with Tax Fraud.” Back in April, 2005, Michael Wellek, the owner of an Elk Grove Village (Illinois) strip club called “Heavenly Bodies” and his policemen workers found themselves in trouble.

It all began when $12 million in cash was seized from a warehouse owned by Mr. Wellek in 2003. The government accused Mr. Wellek of owing $11 million in taxes, penalties and interest. The civil case drags on to this day.

However, after five years there is an update. This past week Mr. Wellek was indicted on tax charges for not filing tax returns from 1989 to 1999 while maintaining that $12 million in a warehouse. The two-count indictment alleges that Mr. Wellek obstructed the IRS and filed a false tax return in 2000. Mr. Wellek’s attorney told both the Chicago Sun-Times and the Chicago Tribune that he expects Mr. Wellek to plead guilty to both charges this week.

Sometimes the wheels of justice turn very, very slowly.

News Stories: Chicago Sun-Times, Chicago Tribune

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