What happens when tax rates increase? Tax Collections decrease. That’s been shown time after time.
So what has happened when California raised sales tax rates statewide on April 1st? Bill Leonard is reporting that collections fell 12% in April. Of course, this being California expect the Democrats in the legislature to ask for another sales tax increase when Proposition 1A falls next week.
Quite a bit more on the tax evasion front this last week. As a Cubs fan I’m used to seeing strike outs (Cubs pitchers have led the league in strike outs recently). Here are two individuals that have struck out (in tax evasion). The final story is baseball related.
Let’s start in Lutherville, Maryland. Henry Cole was a Realtor specializing in commercial property. He reported over $2 million in capital gains on his tax return. Luckily, he had quite a bit of losses to offset those gains. One problem: The gains were really ordinary income. A second problem: He forgot $98,000 more of income. A third problem: The IRS discovered this. That’s three strikes, and Mr. Cole, guilty of filing false tax returns and tax evasion, was sentenced to three years at ClubFed.
I’ve said many times that if it sounds too good to be true, it probably is. Back in 2002 the IRS and Department of Justice obtain a civil injunction against Joseph Sweet and EDM Enterprises. Mr. Sweet’s program was a book on creating a trust; his materials noted, GOOD NEWS For FORM 1040 Filers: Your Compliance is Strictly VOLUNTARY! BAD NEWS For The IRS! Everything You Ever Needed to Know About the Income Tax That the IRS Is Afraid You’ll Find Out. The injunction put a stop to Mr. Sweet’s business. Mr. Sweet sold a book on trusts and also the trusts themselves that purported to shield your income from the IRS. In reality, all those trusts did was enrich Mr. Sweet.
Now if you or I were told to stop selling something we’d likely get the idea and move on to something else. Well, you can’t keep a good man down…or a bad one (in the view of the DOJ). The IRS and Department of Justice accuse Mr. Sweet of not taking the hint of what an injunction means. As reported in the Bradenton Herald, the new indictment—a criminal indictment—reports that Mr. Sweet told an undercover IRS agent that the permanent injunction issued in 2002 “…was a joke and had no bearing on his activities.”
The new indictment is for criminal contempt. It appears that the IRS taped Mr. Sweet allegedly attempting to market his untrustworthy trusts. Mr. Sweet is facing a very lengthy term at ClubFed if found guilty.
Finally, Jerry Koosman had a lengthy career as a pitcher in the major leagues, mostly with the New York Mets. Mr. Koosman is facing a misdemeanor charge of failing to file a tax return and will plead guilty later this month in Madison, Wisconsin. Mr. Koosman’s attorney, Robert Bernhoft (you may remember that Mr. Bernhoft was also one of Wesley Snipes’ attorneys and that we corresponded following the verdicts in the Snipes case) noted that he would be much freer to discuss the case following the pleading. I do want to note that Mr. Koosman is cooperating with the US Attorney, and while he could be sentenced to up to one year in prison I suspect that the sentence will likely be probation and/or a fine.
Earlier this year I reported on Thomas Jimenez. Mr. Jimenez, of Plantation, Florida, created a company, and then generated a $2.8 million capital gain in the stock of that company. Unfortunately, he forgot to report that gain on his tax return. He pleaded guilty to tax evasion earlier this year.
Last week Mr. Jimenez was sentenced to three years at ClubFed, with a year of supervised release to follow his stay.
When I last wrote about former strip club owner Jon Adams, he had been convicted of two counts of tax evasion. Mr. Adams received eighteen months at ClubFed. One of the two counts was later thrown out by an Appeals Court so he returned back to Jackson, Mississippi to be re-sentenced.
In a deja vu all over again moment, Mr. Adams received eighteen months at ClubFed. He’ll begin serving his sentence on July 7th.
At least the title isn’t deceiving. And that’s about the only good thing to say about this measure.
The impartial analysis by the Legislative Analyst notes, “Because there is uncertainty over how the Constitution would be interpreted in its current form, it is unknown how Proposition 98 funding would work in the future under current law. As a result, it is difficult to know how this measure would change the state’s finances.” And it also depends on Proposition 1A (my analysis of that measure will appear tomorrow).
The Legislature and Governor can also overrule Proposition 1B, and fund less or more than the limits in Proposition 1B.
This measure is a complex mishmash designed to appeal to the education industry’s proponents. While education is good, spending run amok isn’t and that’s where California is today. This measure, in my view, does not lead toward a solution of California’s fiscal problems. I’ll be voting against it. If you’re a Californian, make sure your vote is heard on Tuesday, May 19th.
The Pruzan Law Firm began in 1938 in Brooklyn, New York. That’s about the only thing you’ll find on their web page.
Even that may be a thing of the past soon. The Department of Justice has filed a lawsuit to compel the Pruzan Law Firm to pay their back taxes…all 45 quarters they’ve skipped. That takes them back to 1997. As I’ve said many times in the past, a sure way to get yourself in trouble is to not pay your Trust Fund Taxes.
Joe Kristan has more.
If any of the ballot initiatives pass this month—and that’s not likely—expect lawsuits challenging the wording of the initiatives. The language used is supposed to be non-partisan, neutral, and to accurately represent the matter being voted on. By far the worst of the bunch is Proposition 1C.
If you looked at the title you’d think it’s a measure that would change how the lottery works. “Maybe the equipment is being modernized” would be a reasonable guess.
It’s a lie.
The reality is that this measure is really all about borrowing up to $5 billion from the lottery to be used to help balance the budget. There have been such ballot measures in the past, and they’ve all fallen to defeat. This one deserves the same fate.
When the lottery was first passed in California it was supposed to be additional funding for the schools. While all lottery funds are used for education, whatever is raised through the lottery is removed from the general budget. More smoke and mirrors out of our legislature.
Additional borrowing and debt isn’t the way to solve the crisis. California needs to cut programs on a large scale, cut and/or restrict pension plans, and cut all spending so that it matches revenues. The 15% cut in spending passed in February was a 15% cut in the rate of spending increase, not a cut in spending.
Proposition 1C does nothing to solve the crisis. I believe it should fail. No matter if you agree or disagree with me, remember to vote on May 19th.
The Legislative Analyst’s Office reported today that California’s budget deficit could balloon to $23 billion if Propositions 1A-1E fail at the ballot box. Even if they pass, the deficit could rise to $17 billion.
I’ll keep repeating what I’ve said for several months: California needs to drastically cut spending. Will our Legislature do this or devise yet more smoke and mirrors? I think Louis Renault knows the answer to that.
Like Proposition 1E, Proposition 1D taps a “protected” source of funding to help balance the budget. If Proposition 1D passes, $610 million will be taken from the Children’s Services Funds (a $0.50 tax on tobacco products) in 2009-2010 and $268 million from 2010-2011 through 2013-2014.
Other than the horribly biased ballot language (“PROTECTS CHILDREN’S SERVICES FUNDING. HELPS BALANCE STATE BUDGET.”) which, if the measure passes, could be an issue if an a court appeal is filed, I have no opinion of this measure.
No matter how you feel about the measure, make sure you vote on May 19th.
