Taxable Talk

Proposition 82 on the June 6th California Primary Election Ballot is titled, "Preschool Education. Tax On Incomes Over $400,000 for Individuals; $800,000 for Couples...." A better name for this misguided statute is the "Preschool Education Bureaucracy. Driving Jobs from California Act." Because that's what this initiative would do.

As noted yesterday, California already ranks 40th among the states in business climate. This initiative, if passed, would increase taxes for the wealthy. It sounds great—use the money for mandatory preschool, help our kids, it only impacts the rich, etc.—but if it passes the impact would be felt only slightly among the wealthy. The true impact would be on the lower and middle class.

If you're a business owner, and you have a choice of hiring one more person in California (which will have an impact on growing your business, increasing your revenues, etc.) or hiring that employee in another state, what would you choose if the tax rate in California is quite high? I'm sure the Nevada Development Authority, Phoenix Development Authority, and the Metro Denver Economic Development Corporation are rooting for passage.

Not only is this initiative bad from a tax standpoint, it's bad for our children. Does anyone honestly believe that California needs another bureaucracy to run our childrens' lives? Don't we, the parents, do a better job of choosing what's right for our children than the state? For example, parents who want to "home school" preschool would be prohibited from doing so under Proposition 82.

I hadn't planned on writing about this initiative in late February when the primary ballot won't be until June 6th. However, two items caused me to pen this entry. First, the Wall Street Journal wrote an editorial today on this measure. Second, the measure's leading proponent, Rob Reiner, has been in the news. As Hugh Hewitt noted Reiner has taken a leave of absence from First Five, the state agency spending money from a cigarette tax. Maybe you caught the commercials that ran over the holidays, "Preschool is good for our kids." Hmmm, that's not a leading message with a ballot initiative upcoming....

The Tax Foundation today released its business climate survey of the 50 states. For the record, here are the top ten states:

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

California ranks 40th, just missing out from the bottom ten. The bottom five are Vermont, Ohio, Rhode Island, New Jersey, and New York.

The last time the Tax Foundation ran their list (2004), California ranked 45th, so the state has managed to improve. Well, perhaps. Or perhaps some other states have managed to fall below the Golden State. Here's what the Tax Foundation says about New York: "New York has the worst individual income tax in the country, in addition to the 7th and 3rd worst wealth and unemployment taxes respectively. New York receives its highest score on its business tax, 18th best." California, for the record, ranks 39th for business tax, 47th for individual income tax, 38th for sales tax, 20th for unemployment insurance tax, and 7th for wealth tax.

The report is quite illuminating, and I recommend perusing it. You can find it here.

Thanks to the TaxProfBlog for pointing this survey out.

Do you remember when Intuit and H&R Block sued each other? Well, H&R Block now has some egg on their face.

H&R Block admitted that they made some miscalculations on their own tax returns. They were only off by $32 million on their state income tax filings.

Of course, $32 million is a drop in the bucket for H&R Block. But announcing a tax miscalculation when you're in the tax preparation business in the middle of tax season is too good to pass up (for me).

Global warming, that is.

According to this article in the San Francisco Chronicle, Governor Schwarzenegger appears ready to jump on the global warming trail for tax increases.

First, some science. There's a big debate over whether or not global warming is happening. For example, you'll hear about the US having a warm winter. Well, Asia and Eastern Europe have had a cold winter. We hear that the icepacks in the Arctic and Antarctic are melting. If so, why haven't coastal cities had flooding problems?

Additionally, there have been numerous reports that Earth naturally has warm and cold cycles. Indeed, there was a recent report that Earth will soon have a mini-ice age. When I was growing up, I remember reading in Popular Science that the burning of fossil fuels would case an ice age. That was about 1970, btw.

Back to taxes. The Governator apparently will propose increasing taxes on fossil fuel to fund research into alternative fuels. Let's assume such a measure passes. Here are the impacts:
- California will be at an additional competitive disadvantage to other states;
- California will drive business away from vital industries, such as its ports and manufacturing;
- Tax increases are passed on to consumers. Always. So this will ripple through other areas of the economy.

I could continue in this vain but I think you get the idea. This is a bad plan that deserves to be shelved immediately.

Hat Tip: GOP Bloggers

I have a few clients in Oakland. They'll probably be paying a bit more for that Big Mac or other fast food; the Oakland City Council passed an ordinance Tuesday that imposes a fee of between $230 to $3,815 on fast-food businesses. The city plans to use the money to reduce fast-food litter; according to Councilwoman Jane Bruner the fee was imposed as a last resort. Before becoming law, the ordinance must be approved on a second reading (most likely on February 21st).

However, the tax may be illegal as different businesses will be charged differing amounts. Some fast-food restaurants will be exempt because they are in business improvement districts; others are exempt because they already have "litter control programs." And the California Restaurant Association is considering a lawsuit to stop the ordinance from going into effect. Johnise Downs, of the CRA, is quoted by the Associated Press, stating, "[The businesses are] basically being penalized and targeted just for doing business in the city of Oakland." A similar law was overturned in Chicago as being unconstitutionally vague.

News Stories: Contra Costa Times; Associated Press Story