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Will California Steal From the Rich to, uh, Buy Oil Companies?
First the good news: This proposed California initiative probably wouldn't make the ballot until 2010, hopefully wouldn't pass, and even if it does I presume courts would overturn some or all of it.
The bad news: The Golden State's circular drain of a political culture is producing awful ideas like a 55% estate-seizure tax on those who own $20 million in assets, to be spent on purchasing a 30%-51% stake in ExxonMobil, Chevron, General Motors, Ford, Goldman Sachs, J.P. Morgan Chase, and Citigroup. I shit you not.
The whole PDF file of the proposed ballot initiative is worth a read, particularly the gloriously Marxist Section 2. Thanks to the L.A. Times' Robert Greene for continuing to trawl through the zanjas of Californian democracy.
|8.6.08 @ 1:01PM|#
I think the "nuts" ratio has now surpassed the "fruits" number. Stunned, but not shocked.
Nigel Watt|8.6.08 @ 1:02PM|#
Bwahahahahaha! In a perverse way, I'd love to see this happen and the resulting clusterfuck.
Episiarch|8.6.08 @ 1:03PM|#
Ha, that's a good one Matt. You almost fooled us because we all know how nutty California is, but you ruined the joke by making it just too ridiculous.
Ska|8.6.08 @ 1:04PM|#
Lawyers and CPAs would love the increased work from setting up
trusts.
Funny thing about estate taxes - even though only 1 - 3% ( I forget
exactly what the figure is) of the population is subject to it, the
majority of the population is against it (again, I've heard poll
figures at 55 - 60%).
The dream of becoming a millionaire is enough to make many people
feel like the estate tax is unfair. That and the idea that you get
taxed on your income until you die, and then yuo're taxed on what's
left, is ludicrous.
$20 MM is a pretty large estate, I think people would be willing to
vote for this stupidity.
|8.6.08 @ 1:04PM|#
Why go through a lot of pointlessly complicated extra steps?
Just nationalize the oil companies.
Let the Good Works commence!
Other Matt|8.6.08 @ 1:05PM|#
Upon reading the PDF, I'm wondering if the original reporter got
it wrong (Gasp!). 13302(b)(4) says "Subdivision (c) of Section 2010
does not apply and the applicable credit against the tax imposed
under this part is twenty million dollars ($20,000,000)"
That to me reads as a credit against a tax amount, not an exclusion
from taxable value.
It would surely be a clusterfuck if they intended one thing and
wrote another.
Other Matt|8.6.08 @ 1:06PM|#
Lawyers and CPAs would love the increased work from setting
up trusts.
Coincidence that the guy submitting it is a CPA?
Ska|8.6.08 @ 1:08PM|#
Coincidence that the guy submitting it is a CPA?
I doubt a doctor or a plumber was going to submit it.....
Ska|8.6.08 @ 1:11PM|#
Subdivision (c) of Section 2010 does not apply and the
applicable credit against the tax imposed under this part is twenty
million dollars ($20,000,000)"
Which means whatever the asset total greater than the credit is
left is the taxable estate (without reading the full 46 page estate
tax proposal).
Warty|8.6.08 @ 1:13PM|#
Hetch Hetchy was a spectacular valley, similar to Yosemite. It holds San Francisco's water now.
|8.6.08 @ 1:14PM|#
So, you get this tax while you are still alive rather than when you die, unlike other estate taxes. Or am I reading the pdf incorrectly?
|8.6.08 @ 1:16PM|#
I don't think people are opposed to the estate tax persay.
They are opposed to a 55% tax on anything. Its a flat out statement
that the government owns half your shit; they're just kind enough
to wait until you croak to collect. That's offensive.
|8.6.08 @ 1:21PM|#
"So, rich folk, you say you'd just take your money and Chevron
stock and move to Telluride? Or the Bahamas? These guys are way
ahead of you. The wealthy would have to pay to leave the state,
whether their mode of exodus is a limousine or a pine box."
Is this even remotely constitutional?
Fluffy|8.6.08 @ 1:22PM|#
I think the word "estate" is throwing some people off here. This isn't a transfer tax being assessed on assets moving through probate. This is a one-time wealth tax to be applied to anyone, living or dead, in possession of assets above a certain amount.
|8.6.08 @ 1:23PM|#
I don't think people are opposed to the estate tax
persay.
They are opposed to a 55% tax on anything. Its a flat out statement
that the government owns half your shit; they're just kind enough
to wait until you croak to collect. That's offensive.
Add to that a well justified fear of incrementalism that seems to
affect nearly all areas of government.
Today it is a tax on estates of $20 million or more. A few years
from now, when another fiscal crisis hits, the bar might be lowered
to $10 million estates, and so on...
|8.6.08 @ 1:27PM|#
My first thought was that it would be a disaster if California
was in charge of Exxon. Exxon would probably then work about as
well as Mexico's state owned oil company.
My second thought was that I was worrying needlessly because the
politicians would never save enough money to buy these companies,
they would spend it all, first.
My third thought is perhaps this is what they intend to do from the
start.
thoreau|8.6.08 @ 1:31PM|#
Oh, they'll still buy the companies, even if they do spend the
money first.
They'll just borrow it.
|8.6.08 @ 1:32PM|#
How could they prevent the wealthy from leaving the state by charging them, if the initiative hasn't been passed yet? The tax is on what, Jan 1, 2011? So they would get charged for leaving between the time of the passing and the actual assessment of the tax? If the bill is getting voted on in 2010, that doesn't seem like a large window of time.
|8.6.08 @ 1:34PM|#
My first thought was that it would be a disaster if
California was in charge of Exxon. Exxon would probably then work
about as well as Mexico's state owned oil company.
Maybe they can hire Hugo Chavez as a consultant.
Other Matt|8.6.08 @ 1:36PM|#
My first thought was....
MY first thought was "Gee, how much was it again to get economic
citizenship in El Salvador or one of those places?"
I retract my 1:11 comment, as I have read what I quoted and see
your point.
I know, I read it a couple times till it parsed right myself. If
you took $20M/0.55, that would make the value subject to the tax
$36M. It's going to get fun if they do pass it, figuring out just
what they want to do vs what the law actually says.
short, fat bastard|8.6.08 @ 1:44PM|#
It has become obvious that California is too dangerous to remain in the union. We can no longer rely of them to succeed, so we must throw them out as soon as possible.
Guy Montag|8.6.08 @ 1:51PM|#
How could they prevent the wealthy from leaving the state by
charging them, if the initiative hasn't been passed yet?
1. If they want to keep their wealth, they need to sell the portion
in CA to bring it with them to their new home.
2. They either lose a great deal of that wealth, because most
buyers know of the upcoming tax, or the new people holding the
property get whacked with the tax.
Now, there are plenty of variations on this, like dividing up
property until the portions are below the price ceiling, but the
thing is, there is plenty of property in CA worth over $20M that is
hard to chop up and retain the original value.
Johnny Nowhere|8.6.08 @ 1:55PM|#
Section 2, paragraph (f):
This act proposes to restore a measure of balance in wealth
between persons living in California, to salvage the global
ecosystem from ongoing destruction and to restore public
supervision and influence over the nation's largest financial
institutions.
They left out cleaning up all the poop on Rainbow Puppy Island.
Won't get my vote until they clear up that serious oversight.
|8.6.08 @ 1:57PM|#
Why so much chatter about the estate tax? Did nobody notice the massive increase in the income tax proposed by this initiative? The "additional" (by which I presume to mean on top of California's existing 9.3% income tax) 17.5% tax on incomes above $150k, 35% above $350k (both if single). Unlike the wealth tax, this tax isn't described as "one time". In addition there's a one-time tax of 36-54% (wow!) on incomes above 10 million if you die or leave California.
thoreau|8.6.08 @ 1:58PM|#
So, if CA were looking to buy 30% of various large companies,
that would seem to drive the demand for those companies up. I'm
guessing that 30% of the stock doesn't change hands on a daily
basis. So it would be a good idea to buy stock in those companies
in anticipation of CA coming to buy.
I have a get rich quick scheme....
Nigel Watt|8.6.08 @ 2:00PM|#
thoreau, you're right - this would essentially put a price floor on the company prices (and thus make the executives loaded) for as long as the State of California has to purchase this amount.
short, fat bastard|8.6.08 @ 2:02PM|#
This act proposes to restore a measure of balance in wealth
between persons living in California, . . .
Penis envy
robc|8.6.08 @ 2:05PM|#
thoreau, Nigel,
Basically the same thing that happens when a company gets
added/dropped from the S&P 500, because of all the index
funds.
Only on a much bigger scale.
Guy Montag|8.6.08 @ 2:06PM|#
This reminds me of that crackpot idea in the 1980s for 'Conservatives' to buy CBS and become Dan Rather's boss.
|8.6.08 @ 2:09PM|#
Today it is a tax on estates of $20 million or more. A few
years from now, when another fiscal crisis hits, the bar might be
lowered to $10 million estates, and so on...
First they came for the twenty-millionaires...
|8.6.08 @ 2:18PM|#
They want to tax you if you move?
Hmmm that sounds like a violation of the Right to Travel. I doubt a
state can shake your ass down for moving your domicile. Only the
Feds can do that.
|8.6.08 @ 2:21PM|#
Is it thinking like this that causes hip,exciting Californians to drive up real estate prices in hip,exciting Montana?
pfjo|8.6.08 @ 2:21PM|#
Well isn't this just fantastic.
Let's not forget about the fact that few people in the upper income
levels just have 50% of their wealth just sitting around - imagine
the economic collapse that would follow as all of this wealth hit's
the market at the same time.
Of course this measure won't make the ballot... at least not this
time, but in the course of my life? Maybe.
Naga Sadow|8.6.08 @ 2:31PM|#
First of all, you can't tax someone for wanting to move. I'm
pretty sure Congress would get pissed at the state for stepping on
their interstate commerce turf.
Second, wouldn't a loud announcement like this drive the price of
the aforementioned stocks up requiring massive borrowing to meet
their goal.
And third, HOLY SHIT!!! Do they not notice the concentration of
wealth they mention started about the time of LBJ and his Great
Society programs?
MikeB|8.6.08 @ 2:41PM|#
Actually they are not taxing a person for moving. They are making the tax retroactive to a date prior to the passage of the bill (1/1/2010). The bills author even notes that this may be thrown out by courts and provides an alternate date (1/1/2011).
Colin|8.6.08 @ 2:48PM|#
If this somehow passes, I bet the stocks of those companies
would skyrocket.
Regardless, it's not particularly easy to buy such large stakes in
such huge multinationals. And if they're calculating those
percentages based on current market value, they're dreaming.
Just like to see them try to tax someone for leaving the state.
Guy Montag|8.6.08 @ 2:51PM|#
Is it Constitutional to kick a state out of the
Union?
Idunno, but it sure sounds good.
Invisible Finger|8.6.08 @ 2:51PM|#
ExxonMobil, Chevron, General Motors, Ford, Goldman Sachs,
J.P. Morgan Chase, and Citigroup
WTF? No one looking to make money would buy these companies, they'd
be shorting them.
Or maybe that's the point - these companies are begging a large
state to buy big chunks of shares to fuck the short sellers.
Dagny T.|8.6.08 @ 2:51PM|#
"So, rich folk, you say you'd just take your money and
Chevron stock and move to Telluride? Or the Bahamas? These guys are
way ahead of you. The wealthy would have to pay to leave the state,
whether their mode of exodus is a limousine or a pine
box."
You're closer than you realize.
Somewhat unrelated: on the federal level, they've changed the
foreign tax credit/income exclusion rules so if you left the
country after June, 2008, your foreign earned income is taxable if
given as a gift or bequest to a US citizen (among other shitty
aspects of the new law; called HEART, I think, and intended to give
lots of prezzies to vets, or fluffy bunnies, or something).
Sorry, no link. I got this as a work-related bulletin a couple days
ago. It's gotta be online somewhere, though.
Naga Sadow|8.6.08 @ 2:52PM|#
Hey! I copied the pdf and sent it to my accounting friend in
Colorado. She just sent my a text message saying to stop spamming
her with made up shit!
*Napoleon Dynamite voice*
Freakin' Sweet!!!
short, fat bastard|8.6.08 @ 2:57PM|#
Is it Constitutional to kick a state out of the
Union?
If it ain't, I would bet that you could get plenty of other states
to ratify an ammendment allowing it.
|8.6.08 @ 3:08PM|#
Is it Constitutional to kick a state out of the
Union?
Seriously, it's time. California is the loudmouthed, always drunk
neighbor who never cuts his grass or bring in his dogs, never sends
his kids to school, invites himself to your parties and never
leaves, plays loud music at 3 AM during the week and steals eveyone
else's newspapers instead of getting a subscription of his
own.
Don't let the door hit you on the ass on your way out of the
union.
|8.6.08 @ 3:19PM|#
Someone explain to me again why I haven't moved out of this fucked up state. Oh yeah, that's right. The tech jobs...
short, fat bastard|8.6.08 @ 3:21PM|#
The tech jobs...
There are other states with vibrant tech communities.
Mike Laursen|8.6.08 @ 3:25PM|#
Meh, crazy initiatives and bills come up all the time in all of
these fifty states. You'd drive yourself nuts worrying about all of
them. These guys do get points, though, for getting "Oceans
Preservation" into the title -- that would get them quite a few
votes in California.
Who is this Paul McCauley, C.P.A. guy, anyway. From Google it looks
like he's the accountant for the Sheet Metal Workers Local Union
105 in Glendora, CA.
bubba|8.6.08 @ 5:25PM|#
This is just a nutjob proposal from Joe Nutjob.
This is not a serious proposal from anyone who matters.
|8.6.08 @ 5:58PM|#
Aside from the stupidity of the basic proposal, these don't seem
like great places to park a lot of assets right now.
GM and Ford have a fair chance of being worth nothing in 5-10 years
(losing market share, enormouns pensin burdens, can't fire
under-performing workers etc...).
Citigroup still has a huge mortgage overhang to overcome.
Goldman and JP Morgan might be good bets but aren't super cheap
anymore, and as we have seen investment banking is a super-volatile
and levered busienss.
|8.6.08 @ 6:21PM|#
No one mentioned that they intend to take over all those companies in order to stop drilling off the coasts of not only California, but also Oregon, Washington, Alaska, and oh yeah Canada. WTF? I live in LA and I am completely embarassed by this. Sorry everyone.
Geotpf|8.6.08 @ 7:23PM|#
Pretty much anybody can create a proposition. Now, getting in on the ballot is a little harder (you need a fair number of signatures). If you have money to pay signature gatherers, that's not too difficult, although if you create something like this, it will be. Usually these nutball initivates never make it to the ballot. Even if they do, they never pass-the default position on propositons by most California voters is voting no.
|8.6.08 @ 10:13PM|#
Just goes to show you what a land of fruits and nuts yields. A Stalinist politburo and gulags for the capitalists.
|8.6.08 @ 10:38PM|#
Is it thinking like this that causes hip,exciting
Californians to drive up real estate prices in hip,exciting
Montana?
NOOOOOOOOOOOOOOOOOOOOOOOO11111!
Eleutherian|8.7.08 @ 4:47PM|#
Related post:
http://friendsofatr.blogspot.com/2008/08/california-wants-to-replace-rich.html
|8.8.08 @ 9:12AM|#
"Today it is a tax on estates of $20 million or more. A few
years from now, when another fiscal crisis hits, the bar might be
lowered to $10 million estates, and so on..."
They wouldn't need to, they'd just do it the way our own government
did, here in Sovietic Socialist Repulbic of France: wait for
inflation to 'fix' that for them. We've had an estate tax for
decades, but the inflation from the 80s-90s and the surge in
real-estate market value has caused an incredible number of people
to be suddendly hit with the fiscal sledgehammer, some of them
being poor retired farmers who just happen to own a piece of barren
land in a prized residential neighbourhood.
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