California

Democrats Decry Corporate Money, Then Pick Winners With Tax Breaks

They want to punish "greedy, wealthy" CEOs to "help California's economy."

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SACRAMENTO — Shortly after Senate Democrats on Thursday met with one of the nation's wealthiest men, San Francisco hedge-fund manager and political donor Tom Steyer, they went back to the Senate floor and decried the evils of high-earning corporate executives.

"If we become an oligarchy like the oligarchies we used to decry in Central American countries and South American countries, what hope is there for the rest of the world?", asked Sen. Lori Hancock, D-Oakland, as she supported S.B. 1372, which would have significantly increased state income taxes on companies that pay their executives "too much."

The bill came well short (18-17) of the two-thirds vote needed for passage, but it sparked a lively discussion that included debates not just about oligarchs, but about Marxism and wealth creation. Deemed a job killer by the California Chamber of Commerce, the bill would have boosted one of the highest tax rates in the nation to promote income equality. (It was, however, amended to minimize the impact on corporations by allowing them to deduct the higher rates on their federal taxes and to use the new money to fund job-creation programs.)

The bill would have created a sliding scale of taxes that is tied to corporate compensation. The higher the pay of the corporate executive (as measured by the ratio of CEO pay compared to other employees), the higher the tax rate. It's a punitive formula, which sparked Sen. Jim Nielsen, R-Gerber, to complain about the Senate's simultaneous efforts to "help California's economy" even as his fellow senators "bash CEOS, these greedy wealthy CEOs."

"S.B. 1372 will encourage publicly traded companies and financial institutions to leave California, and discourage publicly traded companies or financial institutions from locating to California, which will ultimately cost California jobs and reduce much needed private sector investment in this state," argued the Chamber of Commerce.

The bill failed — but critics fear the rhetoric could give corporate executives pause.

For instance, Sen. Hannah-Beth Jackson, D-Santa Barbara, recalled the 1950s, when the federal tax rate was 91 percent for earnings above $2 million. "Now why was that?" she asked. "I think that's rather extreme, but that's what happened in this country. And you know what happened during that period of time? We built America." She said that sky-high tax rates force corporate executives to invest in their companies so that they don't have to give the money to the government.

Earlier in the week, however, a broad bipartisan coalition of legislators backed a bill — endorsed by Gov. Jerry Brown — that more than triples California's tax credits (to $330 million) to Hollywood executives so they film more movies in California.

Pundits called it a massive giveaway and pointed to a Legislative Analyst Office's (LAO) report from April about the existing $100 million motion-picture industry tax credits. It found that every dollar in tax credits returns only 65 cents in benefits. The LAO also complained that these "industry-specific tax expenditures" are inappropriate because they give one group of businesses an advantage over others.

"Our taxes are so egregious that the only way we can attract business is through tax credits," Sen. Joel Anderson, R-El Cajon, told me, as his fellow senators debated the corporate-compensation measure. Senate support for the film-tax credits was a tacit acknowledgement that lower tax rates lure businesses to California — or at least keep them from doing their work elsewhere. "So why not reduce taxes for everyone?" he asked.

Sen. Nielsen noted in his floor speech opposing the executive-pay measure that California businesses also are struggling because of the cap-and-trade system that essentially taxes them for boosting their economic production. Ironically, the subject of the Democratic senators' meeting with Steyer was climate change. Steyer is funding candidates who "will take bold action" on the issue.

Rhetoric aside, the good news is many legislators know instinctively that higher taxes on wealthy business owners are a disincentive for business growth. Why else would they support tripling the tax credit for Hollywood?

NEXT: Life in Prison for Pot and Other Travesties of Marijuana Prohibition

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  1. So this was a pro-outsourcing bill?

  2. But libertarians are the naive, simplistic children. John told me so.

  3. How, even on paper, do you have a vibrant, growing economy without anyone getting wealthy? That seems to be the goal here.

    1. A 91% marginal tax rate on the wealthy pales in comparison with what ObamaCare has in store for those earning 400% of poverty line.

      The $1 I earned over that hurdle earlier this year cost me $7200 in additional taxes: a 720,000% marginal tax rate.

      I’m a geezer, so my ObamaCare premium is higher than a whippersnapper would face. But even with lower premiums, younger people face a marginal rate north of 100,000% when they cross the 400% of poverty line threshold.

      Personally, the 720,000% blip in marginal income tax is bearable because I’m a geezer with adequate savings to cover it. I am much more concerned that the next generation of entrepreneurs faces serious disincentives from ObamaCare. I expect that many will rationally conclude that the hard work and risk of starting and growing an enterprise just is not worth it. It’s almost as if Obama, Reid, and Pelosi want ambitious young Americans to go Galt before they ever get started.

      1. How the Democrats got to be considered the champions of the middle class is beyond me.

        I try to avoid politics with California proggies, but on occasion I mention how a favored policy would squeeze the middle class, they either get angry or basically admit they don’t care.

        1. They do it by convincing the poor that they are, in fact, the middle class, and then they do everything they can to make as many people poor as possible.

  4. Memo to Silicon Valley:

    The problem with the progs you’ve supported so completely for so long is that, eventually, they will run out of other people’s money.

    Sincerely,

    Maggie

    1. “And they’ll come for yours.”

  5. Those damn corporations are forcing goods, services, and worst of all jobs onto society!

    They must be stopped!

  6. Where’s barfman these days?

  7. Sen. Hannah-Beth Jackson, D-Santa Barbara[…]said that sky-high tax rates force corporate executives to invest in their companies so that they don’t have to give the money to the government.

    Actually, sky-high tax rates would entice corporate executives to search and apply new and ingenious ways of declaring their income (to lower their tax burden) and hiding their assets. Just like they all did back in the 50s.

    1. Actually, sky-high tax rates would entice corporate executives

      to leave the fucking state.

      I say, go for it, CA. Every company you drive out of state is a company that might come to Tucson.

      1. so, thanks to CA’s “leadership,” Toyota moved their HQ to TX and Tesla’s going to build a battery plant in… guess what? NOT California!

        Go figure.

        Jerry Brown will have to enact Directive 10-289 pretty soon, before there’s not even anyone left to turn out the last lights there.

        Such stupidity!

  8. Why else would they support tripling the tax credit for Hollywood?

    Because the other CEOs do not throw cool parties like the Hollywood execs?

  9. Bill Clinton never had a job that paid more than $35K before he got into politics, and now he’s worth north of $50 million. Jack Brooks moved all his worldly possessions in a pickup truck from East Texas to Washington, DC, and when he retired from Congress was worth millions and had an ownership interest in every bank in East Texas. Eric Cantor got primaried, and just got a cushy $2 million a year no-show job.

    Get back to me after the grotesque compensation of politicians is fixed. Personally, I think that politicians and retired politicians should be subject to a 101% income tax on salaries, wages, and pension income in excess of, say, five times median US income. The same should apply to career bureaucrats and political appointees. There is no way a dork like Eric Cantor is worth $2 million a year unless his function involves exploiting political contacts for venal purposes.

    Private CEO compensation might be too high, but it is the result of voluntary arrangements. If the State wants to put the squeeze on CEO compensation, it ought to remove the legal impediments to hostile corporate takeovers. Of course, one of the many reasons that pols get corporate support is that they assure that such impediments will be maintained and strengthened.

  10. the subject of the Democratic senators’ meeting with [Tom] Steyer was climate change. Steyer is funding candidates who “will take bold action” on the issue.

    You can bet the house and your children that Steyer will not help bail out the State once its pension liabilities blow up in everybody’s faces after wasting time with climate change initiatives.

  11. “If we become an oligarchy like the oligarchies we used to decry in Central American countries and South American countries, what hope is there for the rest of the world?”, asked Sen. Lori Hancock, D-Oakland”

    She said as she rushed to support a bill making California just like those shitty Central and South American countries.

    1. Yup, Dems are completely irony-impaired. Or shitty liars, take your pick.

      1. Can I go with “Stupid”? I wanna pick “Stupid”.

  12. I am much more concerned that the next generation of entrepreneurs faces serious disincentives from ObamaCare.

    What? Massive disincentives to investment and entrepreneurship wrapped up in a government ribbon?

    Shocked, I am.

  13. Why else would they support tripling the tax credit for Hollywood?

    Bribes? Kickbacks?

    But of course you expected us to fill that in mentally so you wouldn’t be explicitly accusing anyone even collectively of corruption.

    1. Bribes? Kickbacks?

      High class hookers.

  14. my roomate’s ex-wife makes $64 an hour on the laptop . She has been laid off for 6 months but last month her payment was $19084 just working on the laptop for a few hours. read the full info here…..

    =============== http://www.netjob70.com

  15. “She said that sky-high tax rates force corporate executives to invest in their companies so that they don’t have to give the money to the government.”

    Soooo….how is this different then now, when most of their compensation is in the form of stock options? Even cash will mostly go into their investment accounts. I mean, I’m sure they spend their fair share on blow and hookers, but for some reason I’m thinking that doesn’t have a significant effect on the economy at large.

    1. The increse in the hooker economy will have a trickle down effect.

      Just don’t ask what’s trickling down.

  16. my friend’s sister makes $73 an hour on the internet . She has been fired from work for 5 months but last month her check was $18121 just working on the internet for a few hours. read….

    ???????? http://www.netjob70.com

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