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How Entrepreneurs Overturned California's Retroactive Tax On Startup Founders
waderoush writes "Startup founders in California can breathe a little easier today — they won't be getting bills from the state for up to $120 million in back taxes. On Friday California Governor Jerry Brown signed a bill prohibiting the state from levying retroactive taxes on founders and other small-business investors who took advantage of a tax break invalidated last year by a state appeals court. California Business Defense, a coalition of entrepreneurs, spent most of 2013 trying to reverse the California Franchise Tax Board's interpretation of the court ruling, under which it planned to hit Californians with new tax bills on the sale of small-business stock going back to 2008 (a story that Slashdot picked up in January). Two bills on the matter reached Governor Brown's desk in September, one fully restoring the investment incentive through 2016, the other partially restoring it. Brown signed AB1412, the bill granting full relief. 'For a bunch of political greenhorns operating in an environment where political partisanship is at an all-time high, we did all right,' writes Brian Overstreet, one of the co-founders of California Business Defense. 'But it should never have been this hard.'"
Sometime soon they will remember that they failed to tax your hindquarters ten years ago and make a tax bill for that, which will require a new round of lobbying for repeal.
Time Bomber the Book coming soon.
Capital gains taxes need to be raised up to parity with income. And yes that means you guys making over $250K. 39%
Courts close loophole...... paid off politician gives amnesty to everyone who used loophole..... and rich people always win.
Government fails the 99% yet again.
What probably happened in both places is that businessfolks in IT, particularly entrepreneurs, don't have a lobbying presence in the state capitols like the old-line manufacturing and service business do. So when state government is hurting for cash, and they often are, they know they can't disappoint their friends who just wined and dined them in a skybox at the big game. By contrast, software and IT looks like a big cash cow, ripe for the plucking.
A few rich guys who don't want to pay their taxes get together to do something about them. They have the resources to lobby a bill almost full time for nine months. In the end, they get their bill passed but whine that democracy is broken because they had to work really, really hard at it.
Must be nice. Some of us have day jobs.
I live ze unknown. I love ze unknown. I am ze unknown.
What?!?! The tax RETROACTIVELY took money that people had earned years ago. You work 80 hours a week for several years, then sell the business, finally reaping the rewards of your hard work. With the money, you pay off the credit cards or other debts you incurred while getting the business going. Two years later, the state comes along and says they want that money.
How is ceasing that nastiness a "state subsidy to people who don't need it"? Are you high?
are bullshit
Pray tell: what, in your opinion, is the crossover point between being an entrepreneur who has worked long hours to build your business from your garage up into a stable entity that someone else wants to invest in and you finally some reward for your time and hard graft, and being a rich prick?
Mark Zuckerberg.
Anybody who reads the actual story will realize that this is a fight with out-of-state companies, not with the state. They want to extract a bunch of money from California and will probably take this to the courts to try to get it.
Basically California offered a tax break to in-state entrepreneurs that it did not offer to people who lived out-of-state. For some reason this was declared unconstitutional. The outside groups are now claiming that unless California charges the in-state people retroactively then they must get refunded the same amount.
I assume the bill is some sort of legal thing to undermine this claim. Note that everybody is paying the same tax now.
Um, because you're completely wrong? It was a retroactive tax CREDIT, not a retroactive tax.
Just another example of the rich raping are this once great country. We need that money to close the hole in the budget for the schools and social services. Also to bring back redevelopment districts to prevent urban sprawl and the blight it brings. The people running start-ups don't need it. They are started by wealthy people from top tier schools. The janitor struggling on the minimum wage isn't going to start anything. He needs the services that government provides through adult education and unemployment.
Nai Modnar
But in an ostensibly capitalist country it neesd to be ok to be a capitalist, otherwise the people with the capital flee the country. I think if taxes were simplfied rather than remain the incredibly complex morass of laws and regulations we have now, we might have a better chance at collecting them.
The rich will flee to where? To Somalia - the land with no taxes!
The whole argument 'if you tax the rich, they will flee' is nonsense perpetrated by the rich. They are in California, New York or Paris for a reason - these are good environments to be with your wealth.
Why do the rich Russian oligarchs buy property in London and other Western cities...its not because of their new found love for British monarchy, kidney pie or Shakespeare, its because of the quality of living and the 'rule of law' which may not be usurped by the Politicians in power if you fall out of favor. Only democracies can guarantee that to some extent - at least until you turn against the state in a serious way.
Tat Tvam Asi
Even poor people can find loopholes, in fact poor people tend to take advantage of the system a lot more than rich people, why? Because they are the ones leaching off of tax dollars. The second thing is that there are tax breaks for everyone in any industry even without an industry. It's nobody's fault but yours if you don't know how to invest your money or find these loopholes, hell... Just hire an accountant and they will do just that for you. Anyhow, people tend to be outraged at these mega corporations that provide jobs and stability for millions but they forget about the lazy that do nothing but suck up the economy dry.
The second thing is that California is nuts with taxes. Startups can't startup in California anymore, their taxes are too high and you have to renew every year and not just a few dollars either. There's a good reason why corporations and startups are all moving out of state, it's because it's easier to just go to silicon valley if need be for investors and keep your HQ out of state. The price of an airline ticket or two is pretty cheap compared to the annual taxes that they charge LCC's and S-Corps. California is edging itself closer to complete bankruptcy and they only have themselves to blame. Over taxing and over regulating kills business and when businesses are hurt; jobs are lost and big corporations get even bigger because they can survive through it (or move overseas if need be). Startups barely have enough capital to pay for a pizza usually when no investors are helping.
I compare this to the cable company: "You ordered basic cable and have been paying for it; we mistakenly enabled the super-deluxe package, so you owe us back charges." No. If the service was set up wrong, that's the service's error, not the customer's fault. If the state had a tax rule, and taxpayers were complying with the rules as specified, and then the rules turned out to be invalid, that is not the taxpayers' fault.
My bigger problem with this kind of thing is that when government makes an error, they present it as if the people were cheating. Also when people set up legitimate plans based on the current rules, and the rules change, should the plans be grandfathered or not? Card or board games where the rules change in the middle can be amusing, but changing rules would be annoying in sports, and ruinous where money and law are concerned.