One Ray of Sunshine Amid the Darkening Gloom

Posted on February 14, 2010 by Russ

California’s tax revenues were $1.2 billion higher than expected in January according to the Department of Finance. Democrats in the Legislature are unfortunately delusional about what $1.2 billion does to a $19.9 billion deficit. From the Mercury-News:

“There is a reasonable scenario by which we can get through this budget with minimal pain,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento, noting “hopeful signs” in the state’s economy after four years of multibillion-dollar deficits.

“As difficult as this budget is,” Steinberg said “we’ve been through the worst of the worst.”

Meanwhile, the Department of Finance and the Legislative Analyst’s Office both note that things aren’t rosy. The Department of Finance has warned that something must be done before April or California will run out cash. The latest news hasn’t changed this. “It doesn’t lessen the urgency of taking action,” said H.D. Palmer, spokesman for the governor’s Finance Department.

I’m hopeful that Governor Schwarzenegger will follow the lead of New Jersey Governor Christie and cut, cut, cut. The problem isn’t revenues, it’s spending. But it appears that the Democrats who control the state legislature haven’t figured out that there really isn’t that much difference between a $19.9 billion deficit and an $18.7 billion deficit.

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Colorado Loves California Day

Posted on February 14, 2010 by Russ

A news story out of Denver notes:

Colorado lawmakers were incredulous after Gov. Bill Ritter declared that today is “Colorado Loves California Day.”

Republican Rep. Jim Kerr of Littleton said, “Are you kidding me,” after he found out it wasn’t a joke.

Rep. Kerr apparently doesn’t understand that California businesses pay high taxes, face high regulations, and must operate in an unfriendly business environment. The Metro Denver Economic Development Corporation ran an advertisement in the Los Angeles Times touting Denver.

However, I’m annoyed with Metro Denver. They sent chocolate valentines to Fortune 500 companies and ‘clean tech businesses’ in California but I didn’t get any. I’m a chocoholic, and I feel spurned!

In any case, as the budget situation likely deteriorates this summer in Sacramento, expect more businesses to flee California. Some will definitely land in Denver.

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I Only Got 54 Years Last Time

Posted on February 14, 2010 by Russ

We have yet another nominee for the Bozo Tax Offender of the Year award. Let’s head to Albuquerque, New Mexico. Back in 2005 Gayle McIntyre pleaded guilty to 36 counts of state tax fraud. She was sentenced to 54 years in prison, but the prison time was suspended; Ms. McIntyre instead received probation and had to make restitution of $127,000. Back in 2005 Ms. McIntyre told the judge, “Living is expensive.”

Let’s fast forward to last week. Ms. McIntyre made the news again, for all the wrong reasons. She’s being accused of 23 counts of tax fraud, forgery, and identity theft. Ms. McIntyre, who used to work for New Mexico’s state tax agency, allegedly filed seven phony tax returns for $7,400 in refunds last summer; she’s also accused of depositing one refund of $1,700 into her own bank account.

These are just allegations at this point; Ms. McIntyre’s trial is set for August 12th. But if you’ve committed tax fraud in the past, wouldn’t you realize that you’d be under special scrutiny? Judge Michael Vigil knows what could happen: “One year could be added to each of those counts because you’re a habitual [offender]…You’re looking at almost 100 years, if everything got stacked.”

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Reality Hits the Swamplands

Posted on February 11, 2010 by Russ

I poke fun at New Jersey. The politics in the Garden State have been high on corruption and low on common sense. But in a shock (a very welcome and surprising shock) last November New Jersey residents said enough. Governor Chris Christie told New Jersey that the state is basically broke and that, “Today, the days of Alice in Wonderland budgeting in Trenton end.”

Hallelujah! A politician understands that whatever you take in, you must spend less. His entire speech is well worth perusing. Governor Christie announced cuts to 379 programs, including not making a $100 million contribution towards pensions. Of course, expect the public employee unions to yell foul and complain that Governor Christie is harming children, etc.

There’s a simple problem: You can’t spend money you don’t have. Government needs to be limited in scope and size. Unfortunately, most states operate like they have printing presses. And please don’t talk to me about the current administration in Washington.

It will be interesting to see how far and fast budget reality spreads. It will be spreading as there aren’t any other real options. Unfortunately, California figures to be among the last to grasp reality.

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Another Early Nominee for Bozo Tax Offender of the Year

Posted on February 9, 2010 by Russ

It’s only February and we have our second nominee for the Bozo Tax Offender of the Year award. Via the TaxGirl comes the sorry story of Jonathan Wiktorchik, Jr.

Mr. Wiktorchik lost his Chiropractic license in 2007. He had pleaded guilty to insurance fraud after he submitted 1800 phantom claims for $90,000. He ended up going to prison and had to pay $50,000 in restitution.

Meanwhile, the IRS was investigating him for 2005. So what did Mr. Wiktorchik do? Did he hire a good tax attorney? Did he get his records in order? Or did he allegedly burn down his office to destroy his tax records while blaming it on phantom gang members?

Well, the indictment handed down by a federal grand jury on Monday alleges that Mr. Wiktorchik did just that. Besides arson, he’s also accused of lying to the IRS (never a good idea) as his tax records were apparently not destroyed in the fire. The indictment states they were at his home. The fire, on March 30, 2008, not only destroyed his office but four neighboring businesses as well. If convicted, Mr. Wiktorchik is looking at 15 years at ClubFed and a mandatory $1,505,000 fine.

Needless to say, this is a sterling example (if true) of what not to do if you find yourself in tax trouble.

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Bureaucracy Run Amok

Posted on February 8, 2010 by Russ

Every so often I think that bureaucracies can’t sink to new lows. I should never underestimate the stupidity of bureaucracies.

First, from South Carolina comes the word that anyone who wants to overthrow the United States Government must register with the South Carolina Secretary of State for $5. Frankly, this whole idea is plain Bozo. Can’t you just imagine a terrorist saying, “Well, before I blow up that building I better send that $5 off to Columbia, South Carolina.”

Then we get into bureaucratic nit-picking. Via the Tax Guru comes the story of how cities use fines to raise money. Most individuals, when they receive a fine, just pay it. New York City is desperate for money, so fines are going up, up, and up. The New York Post reported that the New York Budget Office, “…found most violations cost more to issue and collect than they raised.” The fines went up, more employees are needed, so all is well. It’s just another incident of bad budgeting.

Finally, many of you may have seen this advertisement on the Super Bowl broadcast:

The advertisement was (I hope) intended to poke fun at the current Green Movement. However, here in California many of these measures are real. Some cities have fines for missorting garbage. (Indeed, that was one of the fines noted in the article on increased fines in New York City.) While incandescent light bulbs are being phased out for sale by 2012 throughout the United States, they’ll soon be illegal in California.

These are all prime examples of why we need a far smaller, limited government.

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“I am not a crook.”

Posted on February 7, 2010 by Russ

New York will soon have a ‘racino’ at Aqueduct Race Track in Queens, New York. (A racino is a race track that also has slot machines.) Governor David Paterson chose Aqueduct Entertainment Group to build and run the racino. New York Assembly Speaker Sheldon Silver is quoted in the New York Post as saying that no investor could have a felony conviction, “or any other crime or offense involving . . . misappropriation of funds, or tax evasion.”

It turns out that one of the partners in AEG is Queens developer Darryl Greene. Mr. Greene, according to the Post doesn’t have any convictions. However, companies he’s involved in owe $1 million in state income taxes.

Well, that’s still not a conviction…

This has apparently been a big story in Albany. The process is clearly political and with elections coming up this Fall, expect the Republicans in the New York legislature to hold hearings and make this into a political football.

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The Cubs Tax

Posted on February 7, 2010 by Russ

I’m a Cubs fan. I grew up in Chicago, and I loved going to games at Wrigley Field. The Cubs will start spring training in a couple of weeks in Mesa, Arizona. And that’s what this story is all about.

The Cubs stadium in Arizona, Hohokam Stadium, is old (by Cactus League standards). The training complex isn’t up-to-date either. So the Cubs want to modernize, and the estimated cost is $119 million. The Cubs and other private entities would contribute $60 million; the public (in Arizona) is being asked to contribute $59 million.

That $59 million would come through bonds and be paid back through new taxes: a higher car rental tax and a surcharge on spring training tickets. Legislation to put this into law will be introduced in the Arizona House on Monday by Majority Leader John McComish (R-Ahwatukee Foothills).

The legislation is opposed by 14 of 15 Cactus League teams according to Derrick Hall, the President of the Arizona Diamondbacks. (Presumably, the Cubs are in favor of it.) The Cubs are the biggest draw in the Cactus League, with games at Hohokam drawing nearly 11,000 fans while the average Cactus League games draws 6,400.. “The Cubs are the linchpin of the Cactus League, McComish told the Arizona Republic.

Of course, there is some irony in all of this. Jerry Reinsdorf, owner of the Chicago White Sox, criticized the Cubs’ deal. Scott Smith, Mayor of Mesa, noted, “Is this the same Jerry Reinsdorf that skipped out on Pima County taxpayers who had spent tens of millions of dollars to provide him with a taxpayer-funded stadium, to come to Glendale, where Maricopa County taxpayers provided him a Taj Mahal spring-training facility?”

Given the current budget and anti-tax increase climate, it will be interesting to see how this plays out.

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What €2.5 Million Buys You

Posted on February 7, 2010 by Russ

You can buy a lot with €2.5 Million. That’s about $3.41 million, about the salary of a typical major league baseball player. It can also buy you one cd, normally priced at about $0.35 (or about €0.26). Why the mark-up? The data on the cd, of course.

The German government bought the cd; it supposedly has information on 1,500 individuals who have evaded German taxes at Credit Suisse’s Zurich offices. The Süddeutsche Zeitung says that the cd contains information on 1,500 individuals evading €400 Million. (It’s unclear from the news story whether that’s €400 Million in income or tax being evaded.)

The files on the cd were allegedly stolen from Credit Suisse. Wolfgang Schäuble, the German Finance Minister, noted that when similar data was purchased on Liechtenstein it resulted in 200 court cases, including the conviction of the former chairman of Deutsche Post, Klaus Zumwinkel. There is some good news for Germany. This cd cost only €2.5 Million; the Liechtenstein data cost €4 Million. It appears that the price for data on German tax evaders is falling.

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Falling from the Summit

Posted on February 7, 2010 by Russ

Roger Shoffstall ran the Summit Telephone and Telegraph Company in Alaska. The company serviced areas north of Fairbanks. As I reported last September, Mr. Shoffstall wanted his after-tax profit to be the same as his before-tax profit. That’s tough to do when you have a profit.

Mr. Shoffstall’s methods were decidedly illegal. He mailed tax protester garbage to the IRS. He lied on his W-4 forms. He put a stop on the IRS levying his wages by being President of the business.

The comes the moment that cements Mr. Shoffstall’s nomination to the Bozo Taxpayer Hall of Fame. “[W]hile attempting to come to a settlement with the IRS, purchased a $225,000 house and other items on installment plans to keep the IRS from collecting the property.” Mr. Shoffstall was found guilty of felony tax evasion; he’ll be sentenced in April.

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