FTB tax grab an acid test for ‘business-friendly’ Jerry Brown

Jan. 26, 2013

By Chris Reed

There’s finally some mainstream media coverage of the astounding decision of the Franchise Tax Board to rewrite a tax break and go after profits accumulated by some business owners that date back to 2008. The U-T San Diego story by Chris Cadelago only makes the money grab seem all the more outrageous in that it is depicted as something that was conceived of and executed solely by FTB bureaucrats, without the knowledge or consent of elected officials.

“SACRAMENTO — About 2,000 small business owners and investors across California are being forced to retroactively pay the state four years of assessments totaling $120 million plus interest, based on a decision by the Franchise Tax Board.

“In December, the state agency that administers personal income and corporate taxes ended a nearly 20-year-old tax incentive designed to spur investment in startup companies and small businesses, citing a court ruling. The benefit allowed small business investors who sold their stock at a gain to exclude half the profits from their income taxes. …

“The decision was made at the staff level, not by the three members of the Franchise Tax Board — John Chiang, state controller; Jerome E. Horton, chairman of the Board of Equalization and Ana Matosantos, state finance director.”

The article notes that Sen. Ted Lieu, D-Torrance, and Assemblyman Jeff Gorell, R-Camarillo, are upset with the FTB and may seek a reversal of the ruling, but where’s Jerry Brown?

For more than a year, our governor has sold himself as a critic of bureaucracy and mindless regulation and a champion of a business-friendly state government. He did so again in his State of the State address.

The FTB money grab is an acid test of whether it’s just more Moonbeamian hot air or whether the governor really believes what he says.








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  1. Richard Rider
    Richard Rider 26 January, 2013, 10:52

    I discovered this amazing multi-year retroactive tax increase last week — someone referred me to a young techie entrepreneurs’ blog. Many of the commenters on the story apparently were young Democrats — stunned by the ruling.

    One old saw is that “a conservative often is a liberal who’s been mugged.” Well, for these start-up folks, it was more like they had been raped. Say “hello” to rapacious California.

    The lesson is clear — at least for many. Start-up businesses are a crap shoot, hoping to hit it big. Taking big risks only to have the state come in and grab huge chunk of the profits — CHANGING the rules — is unacceptable.

    California has nothing but disdain for business owners — large or small. First we got Prop 30, and now this amazing FTB ruling.

    From a number of the posters on the board, it became apparent that they many have concluded that the best answer is, from this point forward, found your start-ups in states that VALUE your effort — NOT California.

    There are a number of tech centers around the nation that provide the infrastructure, atmosphere and employees needed by such companies. These states actually ENCOURAGE this economic effort — or at least don’t stand (too much) in the way.

    California politicians often give lip service to the “Silicon Valley” success, but the state’s crushing tax, regulatory and litigation burden has become too much to bear for many our brightest young business people.

    California has become the engine of prosperity — for the other 49 states.

    Reply this comment
  2. Claude Slagenhop
    Claude Slagenhop 26 January, 2013, 12:18

    I say you should pay your fair share and shut up. You rich fat-cat bastard. We need your money and we intend to have it one way or another.

    Reply this comment
  3. loufca
    loufca 26 January, 2013, 12:28

    Nice Claude! I can’t tell if it’s sarcasm or honesty on your part. If it’s honesty, you need to go back and live in Russia in 1919. You’d be a good fit.

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 26 January, 2013, 14:14

    Claude Slagenhop says:
    I say you should pay your fair share and shut up. You rich fat-cat bastard. We need your money and we intend to have it one way or another.

    Thank you Claude, Im still chuckling 😉

    Reply this comment
  5. DavidfromLosGatos
    DavidfromLosGatos 26 January, 2013, 23:27

    Claude – Exactly!

    Reply this comment
  6. Richard Rider
    Richard Rider 27 January, 2013, 00:48

    RE: Claude — I give him the “sarcasm” card. But sometimes you really DO get such responses as serious “rebuttals.”

    Reply this comment
  7. Richard Rider
    Richard Rider 27 January, 2013, 10:58

    One more thought on this: I think this story is SO outrageous that the Dems will pass a corrective law, cancelling out/forgiving this retroactive tax — at least for past years. The ONLY area of the CA economy the progressives can cite as positive is the tech/bio start-up industry. Crush that remaining flower, and the CA business landscape would be COMPLETELY barren.

    Understand that the Dems won’t rectify this injustice because it’s the right thing to do. They will fix it because doing so is just good politics — particularly since the Dem Party has many supporters in this industry — both start-ups and established companies.

    Reply this comment
  8. Hondo
    Hondo 27 January, 2013, 21:20

    Jerry Brown knows exactly what happened and has done nothing. He has promised everybody the moon and needs to pay for it and this is just more money. These actions don’t happen in a vacume. The guv new about it within a day and did nothing. That should answer all your questions about his ‘honesty’.

    Reply this comment
  9. David
    David 23 February, 2013, 19:19

    Claude Slagenhop, a fat-cat is someone who has more than you. Compared to a street beggar…you are a fat-cat…or maybe, you are a street beggar Claude.

    Reply this comment
  10. David
    David 23 February, 2013, 19:22

    Jerry Brown is faced with appealing to the RICH if he steps in, and we all know that’s likely not gonna happen. If this doesn’t get fixed, then more business will move out of the state..and then the middle class with shrink even smaller.

    Reply this comment

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