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Legislature protects corporations while sticking it to small guys

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POSTED May 15, 2010 2:09 a.m.
Decades of lip service, adding on programs and regulations willy-nilly to appease special interest groups whether they are corporate campaign contributors or advocacy groups, and the use of accounting mirrors and borrowing in advance against revenues are about to come to a head.

There is a $19 billion deficit facing California in the next fiscal year. Our elected leaders have done nothing since last year’s $22 billion deficit to alter the course of government except to wish and hope. As a result a lot of so-called “safety nets” are about to get the ax.

And if you think California can tax their way out of this, guess again.

• The current budget depends on the accelerated collection of income tax from the fiscal year that starts July 1.

• Last year, the legislature approved one of the largest tax increases in state history as they raised personal income and sales taxes as well as the vehicle license fee.

Having said that, if you think the Republican position of “no taxes” is the right position, guess again.

Did you as an individual Californian or small business get a tax cut in recent years from the state? The answer is “no.” But corporations got tax breaks to “generate jobs” which doesn’t explain how our unemployment rate has skyrocketed from 8 percent to 12.6 percent when the tax breaks went into effect. Not wanting to take a shot at Meg Whitman, but she is also advocating more corporate tax breaks to generate jobs. Ask yourself this question: If California corporate taxes are so draconian, how could her former post at eBay enable her to generate enough wealth to blow $150 million running for governor while the rest of us have been scaling back our lifestyles to try and make ends meet?

The answer is simple. Whitman, the Republicans and their cohorts in the California Chamber of Commerce have conspired to prevent real tax reform.

They have used the line “no new taxes” repeatedly to scare the rank and file taxpayers into blocking real reform that would make corporations pay their fair share of the state’s tax burden.

Proposition 13 is a prime example. When a house is sold, it is reassessed. The same can’t be said of a lot of commercial property. That’s because corporation can use legalese to wriggle around what constitutes “selling” when property changes hands. As a result, home owners now have a greater share of property tax burden than they did before Proposition 13 passed in 1978.

Every time a move comes up to make the tax burden more equitable by eliminating legal breaks for major corporations, the California Chamber types and Republicans go into Chicken Little overdrive to tell homeowners that Proposition 13 is under assault and they will lose their protection. It just isn’t true. Of course, the California chamber doesn’t really look out for the interests of the small guys who sell businesses more often and consequently are assessed at higher value as they do the big ones that can come up with ways to have someone maintain small ownership shares after a transaction is completed to avoid any changes in assessment.

You buy a house assessed at $40,000 under Proposition 13 rules for $150,000 at market value, as the new owner your tax bill goes from $400 that the guy you bought the house from was paying to $1,500.

Macys could sell a store for $20 million that had a Proposition 13 value of $2 million and it can be structured so the new owner is paying Macy’s Proposition 13 tax burden at $20,000 a year versus the $200,000 the new market value would dictate. Corporations nimble with the bookkeeping and the state law can keep changing hands and selling for bigger profits without having a change in their Proposition 13 assessment.

You may be right in thinking that the Democrats aren’t doing you and I any favors by wanting to raise our taxes.

But then again, the Republicans aren’t doing us any favors either by giving corporations special tax treatment.

Studies have shown as much as $2 billion more a year in property taxes would be paid by corporations to support primarily schools. That doesn’t sound a lot given the deficit, but going back in time the taxes corporations have avoided year in and year out have added to the deficit.

Yes, we need to rethink and cut down the size of government and our dependency on Sacramento. At the same time, we need taxes that are fair and equitable.

We are not getting that with the Republicans nor – for that matter – are we getting it from the Democrats.

In the end, they are all beholden to the folks who grease their campaigns. And in California that means the so-called “left” for Democrats and the so-called ‘right” for Republicans.
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