Killing off business for college students

May 8, 2012

By Katy Grimes

The widening chasm of political philosophy was on display Monday in the Assembly Revenue and Taxation Committee, as one side argued for higher taxes on businesses, and the other pushed to continue with the business tax deal made in 2009.

It’s just another attempt to tax businesses for another type of California welfare program.

The best way to raise the revenue to support the luxury level of government services desired by Californians is to produce more goods and services which yield more taxes, thereby allowing businesses to thrive instead of continually increasing their taxes.

Instead, California is famous for taxing first and then assuming that economic production will catch up.  Any economist will explain that, if California wants more revenue, we have to first increase productivity.

But try telling that to California’s Democratic legislators. Assembly Speaker John Perez is pushing hard to get AB 1500 passed. The bill which would impose a $1 billion tax hike on businesses which are not headquartered in California, but have significant operations in the state.

AB 1500

At Monday’s hearing, Perez said that AB 1500 would close a loophole on “out-of-state” businesses to provide college financial aid for families earning between $80,000 and $150,000 a year.

Even with another tax in place, before any money can be spent on college kids, it has to be collected.

But the new tax will also increase taxes for some California voters and target businesses whose only apparent crime is being headquartered outside California.

The punishment

AB 1500 would raise taxes on businesses and employers who operate inside California, but are headquartered out-of-state. Unlike the previous versions of the legislation, this bill claims that the proceeds will go to creating a “Middle-Class Scholarship” for California’s public college students. This bill will become operative only if AB 1501, the companion bill which establishes a middle-class scholarship program, is also passed.

Perez said that, if AB 1500 is passed, tuition costs for California’s public universities would decrease by two thirds, and California’s Community College system would receive a $150 million infusion of funds. However, the bill is light on details about this scholarship fund.

The 2009 deal

In 2009, state law was changed and agreed to by both Democrats and Republicans to allow the use of the single sales apportionment factor to be used by businesses. The “corporate tax break,” imperative for stimulating business in the state, allows businesses to choose whether to have their income tax based on the proportion of their total sales within California — or on a combination of their total sales and operations, which includes payrolls as well as property.

AB 1500 would repeal the “elective single sales factor” provisions approved in 2009, and eliminate the “loss carry forward” and “credit-sharing” provisions approved in 2009.

Perez calls it a “loophole.”

AB 1500 is a very large tax increase on retailers and businesses, but specifically on manufacturers that create jobs for California workers. Many businesses headquartered outside of California still create jobs, pay taxes on their property, pay sales and payroll taxes and have employees who live in California.

Passage of AB 1500 will primarily discourage companies from investing and creating jobs in California, and can only serve as one more reason for businesses to pull out of the state.

Perez claims it will only target big corporations. But State Franchise Tax Board records showed that Proposition 24, the 2010 ballot initiative and predecessor of AB 1500, would have impacted 120,000 businesses, large and small.

Dorothy Rothrock with the California Manufacturers and Technology Association testified that the CMTA opposes AB 1500 because of how unfairly it targets small and large businesses, just because they have operations in California, but aren’t headquartered here.

“Many companies have significant investments of property, equipment, facilities and payroll in California, but have sales into the state that are relatively large in comparison,” Rothrock said. “Forcing them to use Single Sales Factor would be a tax increase even though they would be operating as they have for many years. Nothing justifies this increase They are imposing no additional burden on government services, nor will they be able to avoid the tax increase through reasonable in-state investments and/or hiring.”

Reneging on the deal

This is the Democrats’ third attempt to eliminate the 2009 bipartisan agreement created to encourage companies to invest in California. It was part of the deal that included then Gov. Arnold Schwarzenegger’s $13 billion tax increase. But before the ink was dry on the 2009 deal, Democrats were already working on ways to undo the law.

Last year, Democrats tried to pass this $1 billion tax increase. But ABX1 40, and SB 116 could not get enough votes in the Legislature to pass.

Similar to AB 1500, the goal of Proposition 24 was to stop several corporate tax breaks that were scheduled to go into effect in 2010 and 2012, and would have prevented eligible corporations from receiving about $1.3 billion in tax breaks per year.

Proposition 24 was overwhelmingly defeated despite being sponsored by the California Teachers Association. “With our schools being slashed by $17 billion over the past two years and 26,000 teachers potentially facing layoff, now is not the time for the state to be giving tax breaks to large corporations and oil companies,” said CTA President David Sanchez. “Teachers want big businesses to pay their fair share in these dire times of deep cuts everywhere.”

At the hearing Monday, Sen. Kevin de Leon, D-Los Angeles, testified on behalf of Perez, and once again claimed that Democrats didn’t fully understand what they were voting on when they passed the 2009 law.

A succession of students at the hearing called for more spending on higher education and cuts to the fees that are forcing more and more students into debt. “Businesses aren’t educating their employees any longer because they can’t afford to,” one student said.  The student was correct about one thing. Businesses can’t afford to help educate employees because they have to pay such high taxes, and are penalized through restrictive regulations.

Another student testified that she has to work 20 hours each week and will still have student loan debt upon graduation.

Working 20 hours a week while going to school is hardly torture, and in fact will probably make this young woman far more marketable than her non-working classmates.

Following the students in support of AB 1500 was a succession of labor unions, teachers unions, state employee unions, and the firefighters union.

Loophole or not?

The use of the word “loopholes” would suggest that out-of-state corporations have an escape clause, allowing them to avoid paying proper taxes to the state. But this is just rhetoric.  “Companies, therefore, that make products in other states and ship them here for sale would tend to pay more taxes under mandatory single sales,” the LAO wrote in 2011. “While it is very difficult or impossible to project the precise overall effect of switching from optional to mandatory single sales for the state’s economy, it is clear that different companies would be affected differently depending on their circumstances.”

Rothrock explained that the 2009 tax agreement allowed a new option based solely on sales receipts, because not all companies are structured the same. She explained that the single sales factor penalizes manufacturers of bulky, expensive products and fails to recognize that many out-of-state companies have made significant investments of property, equipment, facilities and employees in California.

Rothrock said that businesses have been operating this way for more than 40 years in California.

California’s tough climate

California businesses, and businesses operating in the state, have remained and continued to do business, even during the worst economic downturn in the state’s history, based on the anticipated tax savings. Democrats and Republicans agreed to the 2009 tax law changes during critical budget negotiations.

Representatives from International Paper, Kimberly Clark, General Motors and Chrysler testified that AB 1500 is a tax increase that unfairly punishes some companies while favoring others.

“By moving to a mandatory single sales factor, AB 1500 punishes taxpayers who neither supported SSF, nor ever planned to use it,” Rothrock said. “This will further erode California’s ability to attract and compete with other states for business investment and hiring.”

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  1. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 May, 2012, 09:36

    Here is an idea-tell Porky Perez to cut the prison spending to 1985 levels, when it was 3% of the budget, and take the difference, which is 8%, (11%-8%=3%) and put it back in the CC, CSU and UC system which is where it was stolen from in the first place. Problem solved.

    Just take it from the prison guards.

    Reply this comment
  2. Hondo
    Hondo 8 May, 2012, 10:06

    Mr. Perez and his other Democrats are saying they didn’t ‘understand’ the tax bill they voted for. Their excuse ,apparently,is that they are too stupid to understand what they were signing. Or they were too incompetent to bother to read or study the measure. I think both are true.
    Kalifornia has the worst business climate in the country and they want to make it worse. If there are no jobs for the collage graduates, whats the point of going to collage.

    Reply this comment
  3. Beelzebub
    Beelzebub 8 May, 2012, 10:09

    Very informative blog. Let’s call this what it is. The Ca politicians stealing from out of state enterprises and businesses to create more student debt slaves (53% of whom under 25 can’t even find a damn job) in order to make the college executives and staff wealth – and to enrich the corrupted banksters who process these loans and who never have to eat a $$$loss$$$ that results from making a BAD BUSINESS DECISION by giving a loan to a POOR RISK who cannot pay back the principle and interest.


    And, as Katy pointed out, what does it do??? It eliminates MORE badly needed jobs in the State of California so that the students graduating cannot find work!!! heh.

    Katy, could you look into something for us??? I talked to a neighbor just yesterday. He has a college-aged daughter who needs financing for school. He told me that there was a recent change that NOW REQUIRES the parents to co-sign on the student loans – so if the kid can’t pay it back they can squeeze it from the parents. What the hell is going on here? If the kid is 18 years old he or she is old enough to make adult decisions. The kid should be SOLEY responsible for paying back his or her college expenses. Now they are MANDATING that the parents sign on too even though the kid is past the age of majority? This is highway robbery!!!

    The student loan debt in America has now surpassed ONE TRILLION DOLLARS. A full 27% of that amount is AT LEAST 30 days pastdue (meaning at least $270 BILLION worth!!)

    They are creating debt slaves, Katy!!! That young girl from U of Utah is one of the smart ones. SHE GOT THE HELL OUT BEFORE SHE WAS OWNED LOCK, STOCK AND BARREL!!!!

    Reply this comment
  4. Beelzebub
    Beelzebub 8 May, 2012, 10:43

    The colleges create these basket weaving curriculums knowing that the kids who are enrolled in them won’t be able to find a job to save their lives unless they have an ace in the hole or a connection to open a door. It’s a scam. That’s why 53% of those under 25 w/ a college degree can’t find a job! ANY JOB! They are overeducated to work the fry basket at Mickey Dees and, besides, those jobs are saved for the illegals who collect child tax credits with their ITIN’s! $3.2 billion worth in 2010!!! heh. Did you know that 85% of college grads are MOVING BACK IN WITH THEIR PARENTS AND STAYING THERE AFTER GRADUATION? Otherwise they would be living under freeway bridges with the homeless.

    The whole system is designed to be a scam. You have a choice to either opt in or opt out. My hat comes off the the U of Utah student. She is definitely one of the smart ones. The population of educated idiots in America grows bigger and bigger with each passing day!!!

    Reply this comment
  5. CalWatchdog
    CalWatchdog Author 8 May, 2012, 12:15

    Supply and demand also works in education. California’s public universities and colleges have made a mockery of education, and now we are going to graduate even more uneducated boobs.


    Reply this comment
  6. Beelzebub
    Beelzebub 8 May, 2012, 13:05

    Exactly, Katy. This is how the system INTENTIONALLY dumbs down the population. I have lived in Europe. Over there education actually means something. If you have the equivalent of a bachelor’s degree in most european nations – it is really the equivalent of a master’s degree here in the US. Over there every Tom, Dick or Harry who graduates high school is not entitled to go to public university. They take only the cream of the crop. The others go to trade school. It is a system that make MUCH BETTER SENSE than what we have here. Plus, when the euro students graduate they don’t have a ton of debt to pay back. Whenever someone tells me that they are a college graduate from an American university I NEVER assume that they are well read or smart. I have to talk with them for an hour or so to figure that out on my own. There are SO MANY IDIOTS in America with college degrees it’s pathetic!!! The purpose of higher education in America is not to educate – IT’S TO TURN PEOPLE INTO DEBT SLAVES TO ENRICH THE BANKSTERS AND THE POLS FROM KICKBACKS COLLECTED FROM THE BANKSTERS!!!

    Seriously, Katy. Education is a farce in America. They’ve turned it into a joke. An assembly line which produces idiots. 🙂

    Reply this comment
  7. Beelzebub
    Beelzebub 8 May, 2012, 14:14

    And the euro system demands that you have mastered your high school academics before you step foot in their institutions of higher learning. The euros scoff at the fact that American universities provide remedial training in high school skills for incoming students. So do I for that matter. If you haven’t learned what you supposed to learn in high school – then go back to high school, tell them you were shortchanged and you want to be made whole. But don’t go to the unversities and expect them to resolve your high school deficiencies. If you haven’t mastered your high school studies you don’t belong in college. Go learn a trade.

    Reply this comment
  8. Beelzebub
    Beelzebub 8 May, 2012, 14:42

    Well, I see that the UC system has threatened to hike tuition rates by 6% unless the tax hike measure passes in November.

    Yep. The extortion game w/words begins. Either turn over the loot or else. This is only the start. Watch it heat up from here. Watch them prod the school children to march with signs and cry on cue.

    Goebbels was a piker compared to the professional propgandists who manufacture what we are about to see.

    Reply this comment
  9. Beelzebub
    Beelzebub 8 May, 2012, 15:23


    Remember when Chiang and Clown told us that they expected good numbers for April due to tax revenue???? 😀

    April’s revenues were $2.44 BILLION below projected estimates!!!

    Income tax revenues were $1.96B short of estimates!!! No wonder!!! These cro-magnum men are chasing businesses from the State!!!

    The Year to Date revenue shortfall so far is now $3.5 BILLION below projections.

    Way to go, Mr. Clown!!! You’ve done it again!!! You couldn’t estimate the number of eggs in a dozen!!! heh. 😀 You and your entire staff are bottom feeding knuckledraggers!!!

    And the ship continues to sink!!! 😀

    Reply this comment
  10. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 May, 2012, 18:17

    Way to go, Mr. Clown!!! You’ve done it again!!! You couldn’t estimate the number of eggs in a dozen!!! heh

    They over-estimtae tax revenue and under estimate expenses on purpose. They know exactly where the numbers will come in at.

    Come on, this is a $100 billion budget, you don’t think that with that kind of money they could/would be so far off?????

    They all do it, all the gov’s, going back decades, same with the Presdient/s.

    Reply this comment
  11. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 May, 2012, 18:19

    Tell Jerry Clown this-FREEZE all employee spending, all of it, for 5 years.

    NO raises for 5 years. F

    reeze hiring, no new employees for 5 years.

    Problem solved.

    You won’t see that kind of management, not in gov.

    Reply this comment
  12. Beelzebub
    Beelzebub 8 May, 2012, 18:32

    “Come on, this is a $100 billion budget, you don’t think that with that kind of money they could/would be so far off?????”

    Of course, rex. It’s all pre-orchestrated. When they devise these budgets it’s done willfully knowing it’s all numbers fraud. It’s not only gimmick accounting – it’s pulling numbers out of their hind ends that couldn’t possibly materialize on their own. These are the people who pull the strings. They are the one who we depend on to create a semblance of quality of life for the California citizens. We are so screwed. So thoroughly screwed. 🙁

    Reply this comment
  13. Hondo
    Hondo 8 May, 2012, 18:56

    There was a classic photo from ‘Occupy something’ where some poor girl held up a sign that said something like
    “92 thousand in student loans for my degree in ‘hispanic transgender gay lesbian bisexual studies and I can’t find a job”
    I actually feel for her (And I don’t have any problem with her sexuality). Some counselor led her on to believe she would get a job with that degree. But where?
    Who wants to hire someone who was taught you are a racist, no matter who you are. Teaching jobs at collages and public schools everywhere are drying up. Who else will hire someone with that degree. And she isn’t the only one with a useless degree.
    I was interviewing this one guy who just graduated from collage with a degree in Philosophy. He didn’t take one class in math all four years. I was renting him an apartment and was pro-rating his rent to the first and he couldn’t follow my math calculations. This is 9th grade math. He looked at me as if I was trying to explain Newtonian differential calculus. It is astonishing to me how many collage graduates can’t divide 700 by 30 without a calculator. In a liberal art degree you are supposed to take a well rounded set of classes. There are millions of students taking out loans for degrees in sociology, psychology, etc, who have no hopes of getting a job. There was this one girl who was majoring in latin which is truly a dead language now. I asked her why not Spanish? No real answer. But shes got 30 thou in student loans in Latin.
    Other tenants of mine are living off their student loans. They are going to school to just get the checks. They can’t seem to leave the nest. They can’t bear getting a job with a boss. Teachers are easier to deal with. My communist tenants(admitted communists, got the Lenin posters and everything) are too politically correct to get a job.
    The greatest education in my life has been managing apartments. You can learn more about human nature and business in at this job than you could ever learn at Haaaavahd or Yale.

    Reply this comment
  14. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 May, 2012, 21:53

    In defense of some of the less economically useful degrees, many jobs just require a degree, in any field, becuase MOST of the time you’re going to get someone who is well rounded and has a good solid general education background, and most could divide 700 by 30 in their head- I know I can.

    Reply this comment
  15. Beelzebub
    Beelzebub 8 May, 2012, 22:07

    Rex, that’s not very comforting to over 53% of the college grad under 25 who owe tens of thousands in student debt and can’t find a friggin’ job. Probably 40-50% of the ones who found a job are working jobs that only require a HS degree. A college degree in the humanities, arts, social sciences, etc… are worth squat. Even engineers are being pushed out of the job market by foreigners coming in who will work for lower wages. I don’t think we really understand the struggle these kids are going through, Rex. It’s a much different world than when we graduated and I assume you’ve been out of college for at least 20 years.

    Reply this comment
  16. Beelzebub
    Beelzebub 8 May, 2012, 22:15

    “I was interviewing this one guy who just graduated from collage with a degree in Philosophy”

    Hondo, unless that guy gets hired by the government he’s screwed. The very best he’s going to do in the private sector is punch a cash register somewhere – and that’s only if he bones up on his math skills and can figure out how to make change without a calculator. What they are doing to these kids is borderline criminal….I am telling you. They goad them to enroll by giving them free money (that someday they have to pay back), teach them worthless crap and is useless in the real world, give them a diploma and wave goodbye as they say “You’re on your own”. How is that kid going to pay back $50,000 with a $11/hr job??? Really sad.

    Reply this comment
  17. Ted Steele, Associate Prof.
    Ted Steele, Associate Prof. 9 May, 2012, 07:18

    My undergrad degree is in Philo— and I did pretty well. It’s a good liberal arts base for critical thinking training.

    Reply this comment
  18. queeg
    queeg 9 May, 2012, 08:00

    Teddy…knew you were the voice of reason and enlightenment on this gloom and doom site!!!

    Reply this comment
  19. Beelzebub
    Beelzebub 9 May, 2012, 08:33

    “My undergrad degree is in Philo— and I did pretty well”

    Why am I not surprised? Aren’t you career government? Thanks for being a real life example of my point of view on this subject matter. You made my argument. Much appreciated.

    Reply this comment
  20. Beelzebub
    Beelzebub 9 May, 2012, 08:38

    “Teddy…knew you were the voice of reason and enlightenment on this gloom and doom site!!!”

    Disappointed you didn’t choose the option that I suggested. I want you to be happy.

    Reply this comment
  21. queeg
    queeg 9 May, 2012, 08:42

    Teddy…be kind….no need to bash in kind…..your too much of a sage….leave the sour gutter posts for others.

    Reply this comment
  22. Beelzebub
    Beelzebub 9 May, 2012, 11:18

    I would love to have a sitcom comedy on TV called “Frick ‘n Frack” about two unlikely pals with different political weltanschuangs yet have developed a cozy partnership nonetheless. It would be hilarious. If I were a Hollyweird producer I would patent the rights to it. It would be more popular than ‘Seinfeld’. I would model it after ‘The Odd Couple’s’ Oscar and Felix except along political lines. It would be absolutely falling down funny. I got the idea right off these boards too! 😀

    Reply this comment
  23. Sean Morham
    Sean Morham 9 May, 2012, 13:01

    LOts of complaining, lots of criticisms. What are we going to do about it, or do we all wait till the lid blows? Yippee. Perez and Steinberg get their day of justice as 21st century Farmer Generals. Basket futures are trending up.

    Reply this comment
  24. Rex The Wonder Dog!
    Rex The Wonder Dog! 9 May, 2012, 17:57

    Beelz, I think Queeg is a Teddy Steal sock puppet.

    Reply this comment
  25. Rex The Wonder Dog!
    Rex The Wonder Dog! 9 May, 2012, 17:57

    Katy-are Teddy and Queeg both using the same IP address when they post???

    Reply this comment
  26. Beelzebub
    Beelzebub 9 May, 2012, 18:01

    “Beelz, I think Queeg is a Teddy Steal sock puppet”

    I don’t think so, rex. One is much more stupid than the other. It’s really hard to fake stupidity. I have seen people fake being intelligent and actually get away with it for a period of time. But it’s damn hard to fake being stupid. That’s the reason I think we are talking two separate entities here.

    Reply this comment
  27. Ted Steele, Associate Prof.
    Ted Steele, Associate Prof. 9 May, 2012, 21:51

    Poodle boi—- I gotta laugh—- you have no clue……well…….as always.

    Keep trying geniuses!

    Like Beezyboob you need to struggle to limit your posts to non insulting posts relative to the article above.

    God Bless!

    Reply this comment
  28. queeg
    queeg 10 May, 2012, 08:40

    Teddy….insulting posts drive people away from the blog…offensive, sophmoric, ignorant.

    It’s alarming minds exist harboring such hate of humankind.

    Reply this comment

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