
Shame on me for voting for a retroactive tax in Prop 30 - danielodio
http://danielodio.com/shame-on-me-for-voting-for-a-retroactive-tax-in-prop-30
======
mturmon
"When our politicians do something like this to us, it makes me want to become
more conservative, and just never vote "yes" to anything that could have --
and in this case, did have-- hidden gotchas no matter how principled the ideal
might be."

It sounds like you're looking for reasons to become more conservative.

It has been quite clear to all residents that the state of California has been
in trouble for a couple of years now. Teachers being let go en masse, school
districts seeing cuts in state funds, and state services from campsites to the
DMV being cut.

The text of the Prop. 30 tax increase was originally finalized in March 2012,
was sponsored by the Governor, and received a big push from him. The original
text of what became Prop. 30 was developed by the Governor in 2011
([http://ag.ca.gov/cms_attachments/initiatives/pdfs/i1035_11-0...](http://ag.ca.gov/cms_attachments/initiatives/pdfs/i1035_11-0090.pdf)).

If you're significantly affected by this increase in marginal tax rates (an
extra 1% for individuals over $250K/couples over $500K, up to 3% for
individuals over $500K/couples over $1M), you should be aware of these issues,
or be paying someone who is.

~~~
cdellin
While your points may be entirely true, in my opinion they are no excuse for
failing to make clear the retroactivity of the proposition.

~~~
mturmon
The real WTF (that you, me, and the OP probably agree on) is the California
initiative process, which forces/allows citizens to act as legislators.

But to your point, the first substantive link off the official Prop. 30
summary page (<http://voterguide.sos.ca.gov/propositions/30/analysis.htm>)
makes clear in several places that the increases will take effect starting
Jan. 1, 2012. ("Because the rate increase would apply as of January 1, 2012,
affected taxpayers likely would have to make larger payments in the coming
months to account for the full-year effect of the rate increase.")

If the OP was worried about taxes, he should feel lucky that 38 failed ;-).

~~~
cdellin
"The real WTF (that you, me, and the OP probably agree on) is the California
initiative process, which forces/allows citizens to act as legislators."

I definitely agree with this (-:

You're right, in that a reasonably informed voter should have known the nature
of the proposition. Unfortunately, due to the broken initiative process, those
weighing the options tend not to be sufficiently informed. In my opinion
(though not that of the US Supreme Court, see Calder v Bull), such ex-post-
facto tax laws should be as prohibited as similar laws are in criminal
circumstances.

~~~
mturmon
We're continuing to digress, but I have to imagine that the framers of the
(generally successful) US constitution must be having a laugh at the expense
of the framers of the (less successful) California constitution regarding the
initiative process.

------
mikeyouse
Almost everything I heard about Prop 30 mentioned that it would affect all
income earned in 2012. It's hinted out in the summary that the OP posted and
spelled out more concretely just below that overview:

"Increases Personal Income Tax Rates From 2012 Through 2018."

(from <http://voterguide.sos.ca.gov/propositions/30/analysis.htm>).

While it is unfortunate that some feel mislead, the impact is quite small in
'real' terms. The married filing jointly bracket up to 500k will see a 1%
increase in state income tax, up to $600k will see 2%, and above a million
will see 3% incremental.

If you sold your company and got a million dollar check, you'd see something
like $10k in additional taxes (which is then partially offset by claiming them
on your federal tax forms). Price of doing business in a high-tax state I
suppose.

------
tarr11
It appears that the author is upset that his post-liquidity tax planning has
been up-ended by prop 30.

His argument only applies to entrepreneurs who have had an exit in 2012, and
little to no income before that. This is a pretty narrow group.

As an entrepreneur who moved back to California recently - the poor school
systems of California were more of a deterrent to living here to me, rather
than tax burden. Prop 30 addresses that.

The referring article by Ethan Anderson [1] tries to extend this group of
entrepreneurs to early employees of Facebook for example. However, most early
employees do get paychecks and didn't have to "sacrifice" any more than
employees at non-pre-IPO companies.

[1] [http://allthingsd.com/20121204/what-proposition-30-means-
for...](http://allthingsd.com/20121204/what-proposition-30-means-for-
californias-entrepreneurs/)

~~~
jacoblyles
Prop 30 doesn't address the bad schools in California. We have a big union
problem: [http://www.bloomberg.com/news/2012-04-23/new-california-
taxe...](http://www.bloomberg.com/news/2012-04-23/new-california-taxes-pay-
for-pensions-not-schools.html)

High taxes, big deficits, and bad public services - California state
government achieves the trifecta of suck.

~~~
xxpor
You don't have a union problem, you have a direct democracy problem.

~~~
jacoblyles
None of the big unsustainable pension increases involved ballot measures, as
far as I know. The unions are the biggest spenders in California election and
incumbency is rampant even when the state is going down the tubes.

~~~
xxpor
Then tell your local officials to grow a backbone.

If incumbency is rampant, that's a structural problem with your redistricting
process, not the unions.

If BigCo Inc is allowed to spend a ton of money in elections, why can't the
unions?

------
migueldeicaza
People are so cute when they threaten to leave California because their taxes
are a little bit higher.

He is likely taking advantage of the long term capitals gain tax already,
reducing his taxes from 35% or so to 17% or so.

~~~
aliston
That was my reaction as well, but after reading a bit more about it, it
appears California taxes capital gains as regular income. This bill might as
well have been called the "taking money from Facebook investors" bill...
combined with the federal capital gains rate, most startup IPO beneficiaries
are going to pay ~30%.

------
dpe82
Wisconsin faced a similarly grim[0] fiscal situation three years ago - high
public union labor costs and years of structural deficits plus the recession
resulted in a deficit of over 20% of the budget.

It was ugly and underhanded, but as many will remember the Governor
successfully pushed through very unpopular[1] public union and budget reforms.
It sucked, but it worked. We're now firmly in the black[2].

There are probably negative consequences that we'll learn about at some point,
but at least the state resisted the urge to just raise taxes and not deal with
its largest problem. California could learn a thing or two.

[0] <http://www.jsonline.com/news/milwaukee/69771807.html>

[1] <http://en.wikipedia.org/wiki/2011_Wisconsin_protests>

[2] [http://www.jsonline.com/news/statepolitics/state-to-
release-...](http://www.jsonline.com/news/statepolitics/state-to-release-
projections-that-will-be-framework-for-twoyear-budget-fm7nihk-180173611.html)

------
hvs
TL;DR: "I voted in favor of taxes on people making more than $250,000 per year
because I thought it wouldn't include me."

~~~
danielodio
@hvs, not accurate.

More like:

TL;DR: "I voted in favor of taxes on people making more than $250,000 per year
because I thought it wouldn't apply retroactively to decisions made in the
past."

------
mpyne
I can see now why one would assume differently, but it has always kind of been
my assumption that if a change to the tax code was approved before the end of
the tax fiscal year, that the changes would possibly affect my taxes for that
tax year. After all I always received tax breaks in the same year that they
were approved.

------
DannyBee
We're very bad at managing money. The only solution is to give us more money,
while we hold your children's education hostage.

------
redcircle
Being a proposition, does the legislature have any responsibility involved in
the unfairness of this retroactive tax? Isn't the responsibility of a
proposition in the hands of the voters, thus making it really important for
voters to do their research? The blog post should be laying the blame on us
voters.

~~~
jalanco
This is interesting because, since it was a referendum vote, the people who
passed it will likely not be affected by it, unless the average income in
Calif. is much higher than I would assume.

~~~
Moto7451
Yes, that's likely a good part of why this was voted in and why Prop 38[1],
with its tax increases on anyone making 7,316 or more, wasn't.

[1]
[http://ballotpedia.org/wiki/index.php/California_Proposition...](http://ballotpedia.org/wiki/index.php/California_Proposition_38,_State_Income_Tax_Increase_to_Support_Education_\(2012\))

This is obviously not the first or last time this type of measure will be
passed ;).

~~~
jalanco
Now that makes it even more interesting (not shocking, but interesting). I
wonder how many examples of referendum-style laws are approved in CA where
voters are voting against self-interest (or at least with non-trivial skin in
the game) for Utilitarian benefit.

------
eridius
I didn't realize this was a retroactive tax either, but does that really
change anything? I mean, if you made a bunch of money in 2012, would you have
decided to _not_ earn that money simply because of a slightly higher tax
burden? I keep hearing this argument that entrepreneurs would decide not to do
such-and-such action that makes money if the taxes on that money were raised,
but that's never made sense to me. I mean, they still _make money_. They make
slightly less with the taxes raised, but that slightly less is still a vast
improvement over the near-zero interest rate on just letting your money sit in
a savings account.

~~~
bmelton
I know that when Obama originally threatened the progressive taxation, there
was a contingent (I don't really know how large) of people whose incomes were
'on the bubble', or had incomes of between (let's say) $250-$255k who would
have netted more bring home money by grossing less.

I mean, the 'more money' argument certainly applies once you've crossed the
bubble threshold, but if you're making $251,000, if the additional tax is only
1%, that translates to $2,510, which takes your gross to under the $249,999
you could have made and been exempted from the increased tax.

For the self-employed, who have more control over their direct income, it
might be more beneficial to take a slight pay cut and come home with more
until you're able to give yourself a significant enough raise for it to not
matter.

Edit: I've been corrected by others who are more savvy on taxes than myself. I
admittedly am not in the >250k tax bracket, but regardless, there is a
contingent of people who are also wrong, and are working their taxes in the
way I described.

~~~
0x0
That sounds pretty insane, I thought the standard thing for a progressive tax
system would be to apply the extra tax% only on the income above the treshold?
So an increase in income would never result in a decrease in net income, only
a slightly "slower" increase in net income?

~~~
DrPizza
It is. The poster is just parroting moronic right-wing talking points.

~~~
bmelton
I was misinformed. It happens.

Thank you for your understanding.

------
jggonz
It sounds to me like this person didn't read the proposition before voting yes
on it. I voted 'NO' for the proposition because it was going to be retroactive
and because after discussions over the proposition with my friends, I decided
that these additional taxes would only have negative effects on the
Californian middle class. ($250k is middle class in California!)

There is no excuse for being lazy. Sorry to be so harsh, but yes, shame on
you.

~~~
xxpor
>$250k is middle class in California!

You might think this is true, but you're wrong.

~~~
talmand
As usual, depends on where you live. Most of the time when I see that $250k
tossed around it's in reference to couples. Typically for a single person it's
$200k. So a couple only has to reach $125k income each to be taxed at that
rate. In some parts of the country it's not hard to imagine that two people
can reach that and not be particularly wealthy based on local cost of living.

But as you say, I would imagine for most of California this isn't an issue.

~~~
mturmon
You're off by a factor of 2.

The extra 1% tax kicked in at $250K for individuals, $500K for couples filing
jointly.

That's very well-off anywhere in CA. Median household income in SF County is
$73K, and SF County is quite rich compared to the state median of $61K.

------
gojomo
This idea of retroactive taxes may have legs. Rich people can often
reconfigure their future earnings in response to upcoming changes. But they
can't change past income – or even better, _income from years whose returns
have already been filed_. Perhaps the revenue-hungry states will discover that
the only tax increase that can't be skillfully avoided is one on already-
admitted income, say from 2009. Or to pick a real bumper year for California
tax revenues, 1999.

~~~
talmand
If this happened in a large enough scale the result of the lawsuits surely to
be filed to combat it would be interesting.

Scary thought though, considering being able to assign a retroactive tax in
such a way. Doing a retroactive tax that reaches back to the beginning of the
current year is one thing, reaching back to previous years after taxes filed
and paid are another.

------
ghouse
Yes, CA has a reputation for poor public schools and for large class sizes.
And yes, CA now has the highest, or among the highest both personal income tax
and sale tax. Where does all this money go? Are other states able to do more
with less?

~~~
rprasad
All those fantastic public K12 schools in red states are made possible with
federal education spending that is made possible by California (and to a
lesser extent other blue states like New York and Massachussetts).

California receives back less than $1.00 in federal spending for every dollar
its citizens pay in taxes, while the smaller states receive back in federal
spending significantly more than $1.00 for every dollar their citizens pay in
federal taxes. In effect, California's largesse subsidizes the rest of the
nation. If California received back in federal spending its fair share of the
federal taxes its citizens paid, it would have a multi-billion dollar surplus
each year.

~~~
druiid
Yep... I think it's like 75 cents on the dollar (which I wrote a bit earlier).
Pobre California.

~~~
krakensden
Although arguably it's a good thing that we're not setting Missouri on fire
until they pay us back the way Germany is treating Greece.

------
bialczabub
I really don't see Prop 30 as the entrepreneurship killer its critics make it
out to be.

Why does nobody point out that in the event of an exit, an entrepreneur has
control over the timing of their income? Sure, I suppose some subset of people
who sold an inordinate amount of stock in 2012 now have to pay more, but how
much more? Doing the math, it seems this tax likely increases ones tax bill by
roughly 5%.

If you believe a 5% decrease in take-home proceeds from successful outcomes
will stop entrepreneurship, I've got some swampland in Florida to sell you.

~~~
jacoblyles
If you move your company to Portland or Austin one year before your exit,
you'll take home an additional 13%, I think. That's significant.

------
fotbr
Because your site won't take a guest comment, I'll leave it here:

"Smaller amounts of additional revenue would be available in 2011-12" should
have been a clue that something hinky was going on.

This is why you always read the full text of a bill, not just the summary
prepared by someone with an agenda that you may or may not be aware of, and
may or may not be in agreement with.

------
jfb
The real error is voting on any proposition on the California ballot, full
stop.

~~~
druiid
I give your troll-fu a -5. There are good propositions and bad propositions.
The onus is on the voter to decide what, if anything they should be voting on.
In a state as large and as diverse as California the prop system is both a
huge benefit or danger. I think it's much like a democracy in general.... you
get out of it what you put into it.

~~~
jfb
Voting on propositions is a cause of California's sclerotic politics. The
legislature is no longer capable of governing because its fiscal hands have
been tied by the initiative process. If you think California is well governed
then by all means keep signing the petitions and voting on the referendums.

~~~
druiid
Well let's get something clear here. Are you hating on prop-13 or something
else? I don't think there are many people at this point that think prop-13
is/was a good idea, but look at it this way... we have the prop system, let's
get our act together and get it changed (and use the good part of having it).

~~~
jfb
I don't admit that the public has a direct interest in setting fiscal policy.
That is what our republican representatives do. Except, in California, they
are prevented from doing anything useful by a) term limits and b) the
constraints placed on governing by the imbecilic initiative process.

I would vote on the initiatives that set the ground rules for governance --
things like redistricting. But the idea that modifying the state constitution
as cheaply and easily as it can be modified would lead to better government,
well … no.

