Taxable Talk

As a tax accountant I know of several deadlines that fall on June 15th. If you were out of the country on April 15th, June 15th is the deadline to file your tax return (or file an extension). June 15th is also the date of the second quarter estimated tax payments for individuals and corporations. This year, though, June 15th is yet another deadline.

That’s the day that California needs to have a balanced budget or the state will be unable to borrow funds according to Governor Schwarzenegger. California faces a $24 billion deficit for the 2009-2010 fiscal year that begins on July 1st.

I doubt we’ll see a budget deal done by the deadline. Democrats are continuing in their normal ways of pandering to their constituents (unions). Senator George Runner’s commentary on AB656 shows that at least one Democrat has no comprehension that higher taxes lead to lower sales.

Unfortunately, until the elected officials feel pain I don’t think we’ll see a resolution to the crisis. Democrats are floating the idea of getting bailed out by Washington. As long as they think that’s a possibility meaningful cuts in California’s budget won’t occur. I hope I’m wrong about this but I doubt it. I expect this budget mess to drag on into the fall.

Back in November California voters passed Proposition 8. This constitutional amendment to California’s constitution declared that the only legal marriage is between a man and a woman. The California Supreme Court upheld Proposition 8 today.

The impact of this is minimal. For federal tax purposes a same sex couple cannot file as married; for California tax purposes a registered domestic partnership or a same sex couple married during the five months when such marriages did occur will file a married return.

California voters rejected Propositions 1A-1E yesterday. Voters told Sacramento in no uncertain words it’s time to cut programs, and spend only the money you have. It will be interesting to see if the Democrats in control of both houses of California’s legislature get the message.

Given the economic climate borrowing money—especially given the likely $23 billion budget deficitg@mdash;will be difficult. Still I expect the Democrats to propose a budget that is equal parts budget cuts with equal parts of smoke and mirrors.

Republicans are going to propose a series of bills that would appear on paper to go after the causes of the problems. We’ll have to wait and see if they (a) actually get looked at by the Democrats and (b) if they do what they appear to on paper.

In one piece of good news California’s elected officials will be getting an 18% pay cut next fiscal year. Commissioner Kathy Sands said, “I think they should share in the sacrifices that everyone else has had to encounter.” Hurrah for some common sense.

Unfortunately, common sense hasn’t pervaded everywhere. The Los Angeles Times had a headline this morning, “California voters exercise their power — and that’s the problem.” The analysis piece blames California voters for demanding too much in service while not being willing to vote for tax hikes. Most of the spending increases were thrust upon the state by our liberal legislature, not the voters.

California voters said one thing very clearly yesterday: It’s time for a change. It may be a few months before we know whether our legislature got the message.