Taxes: July 2009 Archives

The Governor says, "all the rich people are living the state" because of taxes.

We tackled the myth that businesses are leaving the state because of taxes a couple of weeks ago.  (Hint: they seem to be leaving every state -- at least they seem to be leaving the ones where conservative think tanks used the same talking points...)

And we pointed out that a 2% tax increase on incomes above $500,000 means that people making $600,000 after all deductions would pay an additional $38.42 per week (which is deductible from federal taxes).

So are rich people are leaving the state over $38.32 per week?

According to a Wall Street Journal op-ed, the rich are leaving lots of states,

"California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon"

The op-ed goes on to claims that,
 

"more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio"

So 1,100 rich people every day are leaving these states!  That's a lot of yachts being moved to the Nevada desert!

But wait!  PPIC Report Finds Poor Leave California At Much Higher Rate Than Rich.

I guess no one will be left in California soon.  

Well, the Republicans got their way. The state's budget (read: services provided to the state's people) has been cut and cut again.  Services to the disabled are cut again.  State workers suffer a huge pay cut through furloughs.  The state's universities and colleges are cut dramatically.

Corporations got a big tax cut. 

All of this, of course, is for today.  In a few weeks we will get another reduced estimate of revenue and the process starts again.  And because so many things were just kicked into next year - including interest owed in borrowing - it will be even worse.  Citizens will see a 10% increase in withholding, which will all come back, but which reduces their ability to pay mortgages, etc.

All so that oil companies won't be asked to pay for the oil they take and sell back to us.  All so people making $600,000 will not be asked to pay $38.42 more per week in taxes (which can then be deducted from federal taxes).  All so businesses will not be asked to pay property taxes at current rates.

The LA Times on Sunday, Pat Brown's California takes a beating in Sacramento,

The visionary governor swept into office in 1959, and by the time he was swept out eight years later, he had created the 16-dam, multiple-aqueduct state water project, devised the three-tier college and university system, constructed nine major campuses and built more than 1,000 miles of freeways to connect regions of his burgeoning state. To this day, much of what gets us where we are going -- literally and figuratively -- stems from what he did in his two terms.

[. . .] In Brown's California, there was a broad consensus that government was a competent force for good. Now, among Californians of all political ideologies, there is the opposite: a repudiation of government and, even more, of any confidence in the governor and the Legislature to act competently. On that matter, at least, California as a whole has shifted to the right.

[. . .] "The whole spectrum has shifted so far to the right that today's Democrats are yesterday's Republicans. Yes, the state is more Democratic, but it is by no means liberal."

I'm not sure I agree that the people of the state are behind this at all.  The Republicans depended on that infrastructure that was built up in the years of good government, before the conservatives tore government down.  Now the public will start to see what it means to not have the government there for them.

So they reached a budget deal.  The gap was closed entirely with cuts to essential service, schools, health care, etc.  Democrats had to cave out of fear that elderly people literally would not have oxygen tanks.

And to add insult to injury, instead of paying for the oil they take from the state the oil companies receive waivers to allow them to drill offshore!  In the last deficit-fix deal big corporations got a huge tax cut and now oil companies get more of our oil for free.  And we will suffer more pollution of our coasts.  (It's pretty clear from deals like these who is in control of the Republican caucus.  The citizens get services taken away, the big corporations get perks that increase the deficits.)

This is a Republican budget deal, entirely on their terms.  Make them own it.

Here is how you make them own it: Make them vote for it.

Before any Democrat votes for this deal, every single Republican has to vote yes.  When the voting start, just sit there.  Wait.  And then when the Republicans have all voted, ONLY THEN should Democrats start voting, but not before. 

If we are going to have to live with a budget forced on us by Republicans and oil companies, then the Republicans have to show up and vote for it.

I looked around and found that "businesses are leaving the state because of taxes" is one of those drumbeats that the corporate conservatives are using.  (Also, FYI the wealthy are leaving, too, parking their yachts in Salt Lake I guess.

I wrote about this myth the other day, basically you pay taxes on profits and you certainly don't pack up and leave profits behind.  I wrote,

Oh, one more thing for the slower-thinking Republicans out there: profits are a good thing, not a bad thing.  And when you are making a profit the last thing you do is pack up your business and leave behind the circumstances that enabled making that profit.

So I looked around for "businesses are leaving the state" articles.  Here are a few:

A Republican member of the Assembly writes, Governmental Restrictions, High Taxes Driving Businesses & Jobs Out Of California.  Oops, the example company didn't leave, it started in Nevada, and it wasn't because of taxes it was because they wanted "freedom" to dump toxins into the environment.

Businesses and wealthy individuals flee state because of taxes. Oops this is another company that started in Nevada.  This time it was an income tax avoidance scheme where Californians set up the company in Nevada - but still live here.  So it's a PO box, not employees, etc.
 
This one quotes a Republican Party official,

"The high cost of living that continues to force Californians out of state should serve as a powerful reminder of the effect high taxes are having on our society," said Ron Nehring, the Republican state party chairman.

But doesn't give any examples, and in fact shows how California has very favorable business conditions, credits, and is the only state that doesn't ask oil companies to pay for the oil they take.

California's High Taxes and Burdensome Regulations Drive People and Businesses Away -- scary title, lots of scary words, but no examples of businesses actually leaving the state.

Another Company Leaving California because of High Taxes, Regulations  - Oops, this one is leaving the state because they want to pollute the air, not because of taxes.  Nice title, though. Scary.

We went through a flurry of this a few years ago, too.  Did any leave then? Let's see what we can find.

Companies Can't Leave CA Fast Enough - A title insurer left the state.  The 2003 article doesn't explain why but mentions retail energy rates.  Remember Enron, Bush, all that?

California proves too costly for departing businesses,

Coast Converters is spending $800,000 to move to Las Vegas, but the Los Angeles plastic bag manufacturer will save enough on workers' compensation, electricity and other costs to recover that in less than a year, CEO Mitchell Greif says.

"It's really an unfair business practice to allow companies to move to Nevada and sell into California," Greif says. "But I'm doing it."

Nope, not taxes.  And how do you like living in the desert, Mitchell?  Another 2003 electricity-costs thing.  You want deregulation?  Deregulating energy costs worked out great, no?

Nation's Business.  Oops, the headlines are misleading, they are leaving because of costs.  Yes, it costs more to live here because people are coming here, not leaving.  Also,

... 10 percent of the 90 Southern California companies responding said they "definitely" plan to move some or all operations from California within a year, and an additional 13 percent said they would "probably" do so.

OOPS, this one is from 1993, before the huge business boom.  Sorry.  I guess all the businesses left California.  Oh, wait...

Wait, here are some more articles:

New York's Taxes Send People and Businesses Out Of State -- Maybe they're coming here.

Are Millionaires Leaving Maryland to Escape Higher Taxes? -- Maybe they are passing California's millionaires going the other way.

Leaving Oregon, and its taxes, behind

Executives say firms may leave state if computer services levy is not repealed (Maryland)

Poll shows many mull leaving state (Buffalo)

NY's High Taxes Drive Small Business Away, Too

I guess all the businesses are leaving ALL the states!

Republicans like to claim that businesses leave California because of having to pay taxes.

I used to own and run a business, and I have some news for Republicans:  Businesses only pay taxes on profits.  You don't pay taxes unless you are making a profit.  Paying taxes means you are making a profit.  Making a profit is a good thing, and California businesses pay a small percentage of the profits to the state to help cover the expenses that enabled you to make that profit.

I'm not sure how many different ways I can say it.  You pay taxes after you make a profit.  At the end of the year you add up your revenue and you subtract your expenses and other deductions and then you know what your profit is.

Oh, one more thing for the slower-thinking Republicans out there: profits are a good thing, not a bad thing.  And when you are making a profit the last thing you do is pack up your business and leave behind the circumstances that enabled making that profit.

I understand that Republicans hate government and are enraged by the idea of actually giving something back to the community to help pay for the roads, bridges, courts, police and fire protection, educated citizenry and the other parts of the state's infrastructure that created the environment that led to the ability to make a profit.  Yes, they hate that.  I understand.

But the fact is that businesses do not pack up and leave when they are making profits.  So if Republicans want to trick people into supporting tax cuts for the big companies that shelled out so much cash put them in office they really do need to come up with better stories than trying to claim that businesses pack up and leave the state because they are making too much profit.