Taxable Talk

State Senator Don Perata would like all Californians to have health insurance. Having everyone covered isn't a bad idea. Senator Perata would do this by mandating that all businesses provide health insurance for their employees (with minimum coverage guarantees), or they would have employees and employers pay into a state fund that would purchase health insurance, with the hope that the state would be able to negotiate low rates. Oh yes, and everyone would have to submit proof of coverage on their tax returns, turning the Franchise Tax Board into the policeman in this effort.

Hmmm, this looks like a tax on employers. And if it walks like a duck, talks like a duck, and looks like a duck, it probably is a duck.

The Orange County Register editorializes on this misguided measure today. And Jon Coupal, head of the Howard Jarvis Taxpayers Association, has an op-ed piece in the Metropolitan News-Enterprise today.

Read them both, and let your legislators and the Governator know your view.

Just a reminder that the first installment of property taxes for Californians must be postmarked today. Alternatively, most County Assessor/Treasurer offices will remain open late for you to make payments.

California's Legislature passed domestic partners tax legislation earlier this year. For 2007 (not 2006), qualified domestic partners are required to file as Married, Filing Jointly on their California state tax returns. However, they must continue to file as single on their federal tax forms.

What can possibly go wrong?

Yesterday, a "Town Hall" meeting was held in Sacramento. Participating in it were tax practitioners, a software programmer from Intuit's Lacerte division, gay and lesbian advocates, and staffers from the Franchise Tax Board. The San Jose Mercury covered the meeting.

Here is just one of the gems that the Mercury reported:

"This saga is only beginning rather than ending," said FTB attorney Pat Kusiak. "This is an evolving issue. It will be many years before issues are resolved, and they may need to be resolved by litigation."

As the Mercury noted, domestic partners will have to compute a California joint AGI that will be hypothetical. For domestic partners who have very simple returns this won't be a problem. However, if you have complex returns, this is going to be a nightmare. Gregg Gamble of Lacerte is quoted as saying, "It's the most ridiculous thing I've ever heard."

It's probably not the most ridiculous thing I've ever heard, but it's close. And it's not an issue that can be postponed—tax preparers will need to begin tackling this when we calculate estimated tax payments for 2007 for Californians impacted by this.

Additionally, it will likely be the domestic partners who will be paying for the additional work. Tax preparers charge based on the complexity of the returns—really, the amount of work (time) spent on the return. If I have to prepare two returns, it's going to take me significantly longer than if I have to prepare one return.

Unfortunately, I don't have high hopes for the California Legislature to address this issue. I hope I'm wrong, but don't bet on it.