Today I am proud to announce that the BOE agreed to sponsor Assembly Bill 1506 (Anderson) yesterday at our Board Hearing in Sacramento. The bill, which was luckily revived from the suspense file on Friday, will allow taxpayers that receive IOUs from the state, to return those IOUs as payment for any obligations owed to the state.

When we agreed to accept IOUs from taxpayers at our July 21st hearing, we requested for Board staff to return on August 31st, with a legislative proposal to standardize the policy of the Board regarding registered warrants.

The Board is not currently required by law to accept state-issued IOUs, but has done so this year as well as in 1992, the last time IOUs were issued by the state. The BOE staff proposal, approved yesterday, as an amendment for AB 1506, will clarify the law for the BOE to accept IOUs automatically when they are issued in the future.

A bill being crafted in the closed-rooms of our nation’s capital raises serious concerns about interference by the Federal government in the affairs of the states, and in the lives of our citizens. This seems to be just another rush to judgment on a complex issue that impacts millions of people without their input.

The United States has recently been the victim of a rash of cyber attacks, most notably by the Chinese and North Korean governments. There is no question that cybersecurity must be increased, but that does not mean that the Federal Government, which has continuously failed to protect its own infrastructure, should be trusted with the takeover of local government and private-sector networks, least of all without broad input from the affected parties.

Declan McCullagh, of CNET News, released an excerpt of draft legislation by West Virginia Senator Jay Rockefeller which appears to authorize the President to seize temporary control of private sector networks. The bill would allow the President to “declare a cybersecurity emergency” and “direct the national response to a cyber threat.” What specifically is a cyber threat? It is defined loosely as any threat having to do with the Internet, telecommunications, computers, or computer networks.

Congratulations
Californians! Sunday marked this year’s Cost of Government Day. For 235 days
Californians worked to cover government spending – for the next week and four
months, we can finally work for ourselves.

If you
pay close attention to the cost of government, you may be thinking to yourself,
"wasn’t Tax Freedom Day, the day we finish working off our tax bill, on April
20th?" That’s right.  But, as we
all know too well, the government has a knack for spending billions of dollars
more than it takes in, and we have to pay for that too.  After eight months, we have finally
finished paying for our state’s massive over-spending problem – eleven days
later than last year. And what did you get for those eleven days? Did you get a
better DMV? Less traffic on your morning commute? Better service from the post
office? I don’t think so.

Assembly Bill 469 is supposed to “increase awareness of the California use tax and increase compliance.” This bill creates more problems than it solves. AB 469, if passed, will only confuse and intimidate taxpayers into paying taxes they don’t owe.

Under current tax law, individuals and businesses are required to pay use tax (the equivalent of sales tax) on goods purchased out of state.

AB 469 would make it a requirement for individuals to report use tax on their income tax return, and require taxpayers to put a “0” on that line if they believe they do not owe any use tax. This puts taxpayers in a difficult position. Most taxpayers do not know the purpose of use tax, where it applies, or how to report it. Worse yet, they have to sign their return under penalty of perjury.

The worst part of this bill is that for individual purchases of items less than $1,000 dollars, taxpayers are not required to have receipts from which to calculate use tax. Instead, taxpayers are expected to use a “use tax table” to calculate the use tax due as a percentage of their taxable income.

California is not only facing a budget gap, but also an
education gap.  Hans Johnson, at
the Public Policy Institute of California, recently completed a study on
education in California entitled Educating
California: Choices for the Future. 
In this study, Johnson explains that by 2025, the number of Californians
graduating from college will not be able to meet the demands of employers that
increasingly require a highly educated workforce. The gap between the demands
of the economy and the supply of college educated workers is a serious threat
to the state’s economic future.

To put it simply: California is over-regulated, and under-educated. 

In a recent post, the OC Register’s small-business columnist, Jan Norman, posted a blog entitled GM’s Seven Deadly Mistakes. These are seven classic management mistakes that took GM from a great symbol of American enterprise, to a bankrupt and nationalized failure. I thought it would be fruitful to apply these to California’s current budget crisis. Here is the list:

1. Failure to read the “tea leaves”. California’s budget crisis has been long in coming. The state’s anti-business policies in everything from taxation to environmental regulation have made California’s business environment toxic. Last year’s historic budget delay, and the $42 billion dollar budget gap the February budget was meant to close, was a “leading indicator” that further budget troubles loomed ahead.

Voters refuse to solve the state’s financial problems with gimmicks or tax increases. That’s the clear and unambiguous message from the defeat of Propositions 1A-1E. Less clear- to voters or budget planners- is where we go from here. With borrowing and tax increases off the table, where do we find a solution to the state’s $21.3 billion budget deficit?

The latest copy of the Journal of Consumer Research. Where else?

In studying consumer spending habits, economists Priya Raghubir and Joydeep Srivastava discovered that people are more likely to spend money if they are given small denominations.

"We’ve done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given," Raghubir explained to National Public Radio on May 12th.

Taxpayer amnesty…sounds good but then again, what is in a name? An elderly woman recently appeared before the Board of Equalization. Her crime? She received a refund erroneously. She even paid the money back. Sadly, that wasn’t good enough for the Board majority.

Our victim filed her tax return in 2002 with an anticipated refund. She received a check for roughly $4700 more than her anticipated refund and contacted the Franchise Tax Board to find out why the check was so much. No one at FTB knew. She held the check for three more weeks and deposited it. Her husband recently died so she thought it might have been a death benefit.

Roughly eight months later the tax man cometh wanting his money back. She promptly paid the money back. Was that good enough? Oh heavens no. FTB wants interest, a collection cost and recovery fee and an amnesty interest penalty.

When King Henry VII faced an insurmountable budget deficit, his advisor John Morton devised an ingenious, albeit paradoxical solution. British subjects, who could afford to pay higher taxes, would be forced to pay higher taxes.

His tax affordability test classified people into two categories, those who spent and those who saved. Anyone who spent money proved their means because they had extra money to spend. Alternatively, those who saved money could also pay higher taxes because they had extra money saved.

Morton’s Fork forced everyone to pay higher taxes.

Governor Schwarzenegger and state legislators have resurrected Morton’s tortured logic and unfair tax paradox in crafting Proposition 1A, a phony spending cap that raises taxes by $16 billion. Voters have been told that we have just two choices in the May 19th Special Election. We can take an immediate tax increase in exchange for a long-term spending cap. Or, we can allow Sacramento‚s spending to continue unabated and inevitably pay for the spending with higher taxes.

“Think globally, act locally.”

It’s the most fundamental principle of the modern environmental movement. But, for all the big talk from green politicians, government continues to block individuals from taking the small steps that will ultimately save the planet. Nowhere is this problem better demonstrated than in the state’s tax regulations of bio-fueled vehicles.

Bio-fuels, which include even that leftover fryer grease from McDonalds, are one of the most promising carbon neutral alternatives to fossil fuels. The LA Times reports that as many as 250,000 vehicles nationwide run on used cooking oil. In Orange County, Beach Benz has capitalized on the idea by offering vegetable oil conversion kits for its customers. Last year, state and local media outlets profiled the environmentally responsible actions of Dave Eck, a Bay Area mechanic who converted his Hummer to run on used vegetable oil.