Politics

Will California Steal From the Rich to, uh, Buy Oil Companies?

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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.

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  1. Staggering. Massive.

  2. I think the “nuts” ratio has now surpassed the “fruits” number. Stunned, but not shocked.

  3. Bwahahahahaha! In a perverse way, I’d love to see this happen and the resulting clusterfuck.

  4. 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.

  5. doom
    Dooom
    DOOOOM

  6. 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.

  7. Why go through a lot of pointlessly complicated extra steps? Just nationalize the oil companies.

    Let the Good Works commence!

  8. 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.

  9. Lawyers and CPAs would love the increased work from setting up trusts.

    Coincidence that the guy submitting it is a CPA?

  10. Also, WTF on the Hetch Hetchy Valley? Anyone know what that’s about?

  11. Coincidence that the guy submitting it is a CPA?

    I doubt a doctor or a plumber was going to submit it…..

  12. 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).

  13. Hetch Hetchy was a spectacular valley, similar to Yosemite. It holds San Francisco’s water now.

  14. Where’s that damn earthquake already?

  15. I retract my 1:11 comment, as I have read what I quoted and see your point.

  16. 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?

  17. 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.

  18. “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?

  19. 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.

  20. 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…

  21. 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.

  22. Oh, they’ll still buy the companies, even if they do spend the money first.

    They’ll just borrow it.

  23. 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.

  24. 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.

  25. 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.

  26. 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.

  27. 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.

  28. 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.

  29. 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.

  30. 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….

  31. 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.

  32. This act proposes to restore a measure of balance in wealth between persons living in California, . . .

    Penis envy

  33. 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.

  34. This reminds me of that crackpot idea in the 1980s for ‘Conservatives’ to buy CBS and become Dan Rather’s boss.

  35. 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…

  36. 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.

  37. Is it thinking like this that causes hip,exciting Californians to drive up real estate prices in hip,exciting Montana?

  38. 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.

  39. 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?

  40. 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).

  41. Is it Constitutional to kick a state out of the Union?

  42. 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.

  43. Is it Constitutional to kick a state out of the Union?

    Idunno, but it sure sounds good.

  44. 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.

  45. “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.

  46. 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!!!

  47. 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.

  48. 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.

  49. Someone explain to me again why I haven’t moved out of this fucked up state. Oh yeah, that’s right. The tech jobs…

  50. The tech jobs…

    There are other states with vibrant tech communities.

  51. 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.

  52. This is just a nutjob proposal from Joe Nutjob.

    This is not a serious proposal from anyone who matters.

  53. 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.

  54. 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.

  55. 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.

  56. Just goes to show you what a land of fruits and nuts yields. A Stalinist politburo and gulags for the capitalists.

  57. Is it thinking like this that causes hip,exciting Californians to drive up real estate prices in hip,exciting Montana?

    NOOOOOOOOOOOOOOOOOOOOOOOO11111!

  58. “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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