
California To Hit Startup Founders with Big Retroactive Tax Bills - waderoush
http://www.xconomy.com/san-francisco/2013/01/15/california-to-hit-startup-founders-with-big-retroactive-tax-bills/
======
anigbrowl
One-sided and confused article. Whether this is an attempt to mislead readers
or a misunderstanding by the writer, I don't know. But this is not a case of
California choosing to implement an unhelpful policy. This is a case of
California's previous helpful policy being found illegal because it violates
the commerce clause; the FTB had no other choice but to impose the tax.

[http://www.mondaq.com/unitedstates/x/214234/Income+Tax/FTB+I...](http://www.mondaq.com/unitedstates/x/214234/Income+Tax/FTB+Issues+Notice+To+Retroactively+Deny+Qualified+Small+Business+Stock+Tax+Benefits+Amended+Returns+Should+Be+Filed)

[https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_an...](https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_and_Cutler_Decision.shtml)

The FTB did not 'take its ball and go home.' The Court told the FTB that it
was not allowed to favor [EDIT: investment in qualifying] California
corporations that way to begin with. An alternative would have been to extend
the tax break to all companies that do business in California and send them a
refund check for every year the QSB rule had been in place, but the FTB most
likely doesn't have that much money available.

~~~
brianoverstreet
Hi - as the author of the article, I don't think I was misleading, nor do I
think I misunderstand the issues. The FTB has a number of options and tools at
its disposal to craft an alternative to this "nuclear option". They could have
changed the rule going-forward and allowed post 2008 QSB exclusions under
revised terms. Yes, that may have cost them some $$$, but probably not as much
as you think, and certainly not as much as they will now collect. Maybe this
was the easiest remedy for them in the short term, but the remedy they've
inacted will have significant long term negative implications. -Brian

~~~
thwest
> Yes, that may have cost them some $$$, but probably not as much as you
> think,

Why didn't you report this number?

~~~
muzz
Don't assume that he knows this number.

In the original article, he didn't even mention the amount of tax breaks given
by the code thus far.

I doubt the purpose of the article is to inform, as much as it is to tell you
that you should be outraged about something anti-entrepreneurial done by
California.

------
preinheimer
As a business owner this crap terrifies me. Washington State was looking at
changing their tax code retroactively to get more money from Microsoft,
luckily level heads (and I might presume, extensive lobbying) prevailed.

I can't plan today for what yesterday's laws will be tomorrow.

~~~
rayiner
Unfortunately, I think you'll see more of these problems as states get crushed
under their existing debt and new expenditures from pension obligations, etc.

See:
[http://www.usgovernmentspending.com/compare_state_spending_2...](http://www.usgovernmentspending.com/compare_state_spending_2013pZ0d)

~~~
pc86
Perhaps defined-benefit retirement plans should not be in the public sector
since they haven't been in the vast majority of the private sector for quite
some time.

~~~
rkowalick
This is the exact same argument the supporters of Ohio Senate Bill 5[1] used.
One reason people in the public sector are willing to be paid less than their
private counterparts is because their benefit plans are genuinely better.
Saying they should eliminate one of the better benefits public sector
employees get is stupid.

[1]
[http://en.wikipedia.org/wiki/Ohio_Senate_Bill_5_Voter_Refere...](http://en.wikipedia.org/wiki/Ohio_Senate_Bill_5_Voter_Referendum,_Issue_2_%282011%29)

~~~
pc86
First of all, I don't know about you, but I don't come to HN and try to have a
somewhat intelligent conversation just to be called stupid for expressing an
opinion.

Secondly and to your point, I am only speaking of defined-benefit "If you work
here for x years you get y% of your salary." This is to say nothing of the
health care (which is generally better than the private sector), the hours
(which if you don't work for a legislator are generally better than the
private sector), the guaranteed pay raise every year, the access to jobs you
can only apply to if you _already_ have a state job, and various small perks
like free or cheap parking, food, etc. These are all benefits of the job and I
had to take a serious look at the health care and hours for a state job when
deciding between that and a corporate offer.

I'm not here to argue whether or not defined-benefit retirement plans are
inherently good or bad. I'm saying it's irresponsible and dangerous for a
state to _guarantee by law_ that they'll pay anyone a fixed amount of money
for decades at some distant point in the future. This is why it's most
dangerous. If the state gets bankrupted by some unforeseen catastrophe 30
years from now, it can't suspend, eliminate or trim pension payouts. Not even
$0.01. By definition the fact that pensions offer better retirement income
than defined-contribution plans like a 401k should be a giant red flag. The
system implodes if you can't at least break even off of it, and if it was
possible to _make_ money off of them the private sector would still be using
them.

~~~
illuminate
"First of all, I don't know about you, but I don't come to HN and try to have
a somewhat intelligent conversation just to be called stupid for expressing an
opinion."

He didn't call you stupid for expressing an opinion, he called that particular
view stupid.

~~~
13rules
Saying that a particular view is stupid without offering any additional
information or another viewpoint is... well...

This isn't 7th grade — come up with another word that really means what you
want to say. There are a lot of ways to disagree with someone and/or an idea
without the derogatory language.

~~~
illuminate
I don't think it was intended to be persuasive, but I don't believe it was
meant as a targeted insult either.

------
jey
Can we just hurry up and address the real problem: California's constitution?
We should just burn that flawed thing and start over. As I understand it, one
of the major problems with California is that the reasonable-sounding idea
that citizens should be allowed to amend the constitution through a ballot
proposition has backfired and led to all sorts of special interests amending
the constitution to protect their own interests by lobbying the public.

[http://ballotpedia.org/wiki/index.php/California_constitutio...](http://ballotpedia.org/wiki/index.php/California_constitutional_convention#Reasons_for_a_convention)

[https://en.wikipedia.org/wiki/Constitution_of_California#Dif...](https://en.wikipedia.org/wiki/Constitution_of_California#Differences_from_other_constitutions)

[https://en.wikipedia.org/wiki/California_Proposition_13_(197...](https://en.wikipedia.org/wiki/California_Proposition_13_\(1978\))

~~~
nostromo
I also think states and locales should be able to declare bankruptcy and
restructure their obligations. Currently there is no clear way to get out from
under prior bad governance. Here's a good article about how San Bernardino is
trying: [http://www.reuters.com/article/2012/11/13/us-bernardino-
bank...](http://www.reuters.com/article/2012/11/13/us-bernardino-bankrupt-
idUSBRE8AC0HP20121113)

> a third of the city's 210,000 people live below the poverty line, making it
> the poorest city of its size in California. But a police lieutenant can
> retire in his 50s and take home $230,000 in one-time payouts on his last
> day, before settling in with a guaranteed $128,000-a-year pension.

> In 2009, patrol lieutenant Richard Taack retired at the age of 59, after 37
> years of service. He took home $389,727 that year, including $194,820 in
> unused sick time and $33,721 for unused vacation time, according to city
> payroll records. Shortly after Taack retired - on an annual lifetime pension
> of $128,000 - he was hired part-time by Penman's city attorney's office, at
> $32 an hour.

~~~
bubbleRefuge
Doesn't feel like residents of California are getting a value for the % of tax
that we pay overall. If you are self-employed and make say 150K you are going
to be paying around 35% fed + 6% SS employee + 6% SS employer side + 9%
Califonia. total = 55%. ( Granted the taxes are applied on a graduated basis
so the effective tax rate would be less.) In Europe, they pay on the order of
50% with free healthcare and a great transportation system. In the bay area,
we get charged higher insurance rates based on the zip code with live and we
get to drive on 101.

~~~
stevenwei
Just crunched the numbers to see what the effective rate actually is. Assuming
self-employed and single in California for 2012, with standard deduction and 1
exemption, your taxable income on $150,000 total income is $131,416, and your
federal income tax is: $30,257. Your self-employment tax is: $15,468. Your
state income tax is: $10,373.

Total effective tax rate is: 37.4%

A bit higher than I thought it would be overall, but not quite close to 55%.
Of course, if you're at that level of income you should probably set up an
S-corp to save on SE tax and dump some money into a 401(k) to further reduce
your taxable income.

------
legitsource
I would not have thought that retroactive tax bills were legal. Are there any
other common examples or is this a new precedent?

~~~
jivatmanx
The SC ruled that the retroactive immunity given to telecom companies was
legal.

I'm pretty sure "Ex Post Facto" is dead.

~~~
rayiner
Ex post facto is not synonymous with "retroactive."

See the post by David Redden in this thread:
<http://www.connorboyack.com/blog/ex-post-facto-law>.

"Secondly, while there’s some evidence that some of the “framers” thought “ex
post facto” included civil laws, it’s well-established that the most
influential federalists in the late 18th Century understood an “ex post facto
law” to mean a law that was 1) criminal, 2) functioned retroactively, and 3)
worked to the detriment of the accused. (See Crosskey, The True Meaning of the
Constitutional Prohibition of Ex-Post Facto Laws, 14 U.Chi.L.Rev. 539
(1947))."

------
basseq
I did a quick google and found a discussion of retroactive tax laws (applying
to gift taxes in 2010):

[http://www.assetprotectionsociety.org/the-likelihood-and-
enf...](http://www.assetprotectionsociety.org/the-likelihood-and-
enforceability-of-a-retroactive-tax-2/)

Potential arguments include due process, "wholly new tax", lack of notice, ex
post facto (with the same caveat as mentioned here about applicability only to
criminal cases), and the fifth amendment taking clause.

Conclusion: it's hard to fight.

~~~
lisper
> applicability only to criminal cases

Where do you get that? The Constitution says simply:

"No Bill of Attainder or ex post facto Law shall be passed."

Period, end of story. Just because someone on the Internet says this applies
only to criminal law doesn't make it so.

~~~
bradleyjg
How about the US Supreme Court:

See Carpenter v. Pennsylvania, 58 U.S. 456 (1854):

"The debates in the federal convention upon the Constitution show that the
terms "ex post facto laws" were understood in a restricted sense, relating to
criminal cases only, and that the description of Blackstone of such laws was
referred to for their meaning. 3 Mad.Pap. 1399, 1450, 1579.

This signification was adopted in this Court shortly after its organization in
opinions carefully prepared, and has been repeatedly announced since that
time. Calder v. Bull, 3 Dall. 386; Fletcher v. Peck, 6 Cranch 87; 33 U. S. 8
Pet. 88; 36 U. S. 11 Pet. 421."

~~~
lisper
The Court gets things wrong occasionally. They got this wrong. Legislative
intent does not trump the clear unambiguous wording of the law. This is why,
for example, minting the trillion dollar coin would be legal despite the fact
that this was clearly not the intent of the legislation.

~~~
bradleyjg
ex post facto isn't English, it's not even really Latin. It's a legalism. The
go to source of meaning for Anglo legalism in the late 19th century was
Blackstone's "Commentaries on the Laws of England" . It's the Blackstone
definition that the Court adopted.

~~~
lisper
I stand corrected. Wow, this sucks.

------
mturmon
A lot of the comments are characterizing this as a money grab by the state.

To me, it sounds more like the unintended consequences of a clever lawsuit
and/or a poorly-crafted piece of tax-break legislation. People should be
advised that California has a lot of clever lawyers who work to find and
exploit holes in legislation.

~~~
mudge
But to make the cancellation retroactive for 5 years makes it seem to be a
money grab to me. Why not just cancel for now and in the future?

~~~
SoftwareMaven
For the same reason people can appeal their conviction if the law they were
convicted of was found unconstitutional: it's as if the law never existed.

------
jstalin
Come to (western) Michigan. We have new corporate tax reforms that
dramatically reduced liabilities (6% rate for C-Corps, flow-through taxation
for LLCs and S-Corps, personal income tax rate of 4.3%), we have a 6% sales
tax, low property taxes, very cheap housing (compared to much of the nation),
well-educated workforce, and liberal gun laws (for the guy who wouldn't move
to NY). Our 4.3% income tax rate is still lower than CA's QSB credit rate.

EDIT: Michigan's new corporate income tax also has an alternative rate of 1.8%
for Qualified Small Businesses... those with net income under $1.3 million. If
your corporation operates outside of Michigan and has no activity in Michigan
itself, there is no corporate income tax.

~~~
rgbrenner
Maybe you and the OP should come to Colorado instead... 4.63% flat-rate
personal and corporate tax rate, and the 3rd best educated workforce in the
country.

[http://www.foxbusiness.com/personal-
finance/2012/10/15/ameri...](http://www.foxbusiness.com/personal-
finance/2012/10/15/americas-best-and-worst-educated-states/)

~~~
SomeCallMeTim
Boulder in particular was named "America's best town for startups" [1]. And if
you're coming from California, you'll be right at home with the high property
costs. ;)

[1] [http://www.businessweek.com/stories/2010-04-22/why-
boulder-i...](http://www.businessweek.com/stories/2010-04-22/why-boulder-is-
americas-best-town-for-startupsbusinessweek-business-news-stock-market-and-
financial-advice)

------
nugget
Vote with your feet; it's the only vote that matters in California these days.

------
DannyBee
We can't effectively manage a budget, give us more money!

~~~
Aloisius
Actually, California's budget is balanced and it expects a surplus in two
years.

[http://www.nytimes.com/2013/01/11/us/california-balances-
its...](http://www.nytimes.com/2013/01/11/us/california-balances-its-
budget.html?_r=0)

~~~
DannyBee
Only after doing things such as threatening to cut 300 million from education
unless folks raised taxes (retroactively as well).

If your method of balancing the budget is always asking for more money, you
haven't really balanced the budget.

What are you going to do in a few years when those tax hikes expire, and you
suddenly lose the same amount of revenue? I look forward to a few years when
we begin to hear the claim in that we need to make the temporary hikes
permanent, because we are running out of money again.

(This is, btw, fairly similar as to how the federal income tax was created. It
was originally temporary)

As for the surplus claims: Of course the guy who supported the ballot
initiative is going to say it's going to run a surplus.

However, even the ballot initiative booklet mentioned the surplus claims are
possibly false, as the kind of revenue they are depending on is _very_
transient and hard to predict.

~~~
Aloisius
_As for the surplus claims: Of course the guy who supported the ballot
initiative is going to say it's going to run a surplus._

The independent Legislative Analyst's Office, which had previously said
Brown's budget would have had a $1.9 billion shortfall in November, now says
that it is roughly in balance due to changes in income tax:

[http://lao.ca.gov/reports/2013/bud/budget-overview/budget-
ov...](http://lao.ca.gov/reports/2013/bud/budget-overview/budget-
overview-011413.pdf)

 _If your method of balancing the budget is always asking for more money, you
haven't really balanced the budget._

How is increasing revenues not a valid way of balancing a budget? And always
asking for more money? _Reagan_ raised the top income tax bracket in
California from 7% to 10%. It now stands at 10.3%.

 _What are you going to do in a few years when those tax hikes expire, and you
suddenly lose the same amount of revenue? I look forward to a few years when
we begin to hear the claim in that we need to make the temporary hikes
permanent, because we are running out of money again._

Considering most of the budget deficit is mostly due to California's
substantial social safety net being engaged by the Great Recession, as long as
the economy continues to improve, California will probably get by fine with
the increased revenues of more people working and lessened burden of people
applying for medicaid and unemployment insurance.

~~~
beagle3
> The independent Legislative Analyst's Office,

I have no knowledge of the LAO, but the federal CBO (which I believe has a
similar function, and is supposedly similarly independent) continuously makes
projections that are worthless.

One of the reasons for this is that their mandate requires them to assume the
current taxation regime; which means that whenever you do tax cuts (e.g.
Bush), you do them "temporarily", which means that CBO estimates will
necessarily assume they expire. Then you extend them, and -- tada, CBO is
never right regardless of how well they do their work.

Politicians hacking the rules they set themselves. If it wasn't sad, I'd say
it was entertaining.

------
ryguytilidie
I guess the way I see it is this. I imagine most startups don't have much
profit, so therefore they won't pay much in taxes. If you are making a lot of
profit and paying a bit more in taxes, it seems like the system is working. If
these people are selling millions of dollars in stock options and complaining
about having to pay more taxes on them, I have a hard time having sympathy.
I'd love for my biggest problem to be figuring out how much more in taxes I
owe on all the millions of dollars I made.

~~~
jacoblyles
Capital gains taxes are going up by 50% in CA this year. That's a big hit to
future angel rounds. I wrote about it here:
[http://jacobexmachina.blogspot.com/2013/01/the-fiscal-
cliff-...](http://jacobexmachina.blogspot.com/2013/01/the-fiscal-cliff-
silicon-valleys.html)

------
twakefield
Am I missing something or has California crossed over into absurdity?

I don't understand why the VC and tech community in California stand for this
stuff [1]. There should either be more lobbying by the seemingly powerful tech
and vc community or mass exodus out of the state. I don't see either happening
and I wonder why. Perhaps these things just take time.

Is CA killing the golden goose here?

[1] I am guilty too by living here at the moment, but I am a relative new
comer to the state. The situation is completely baffling to me after being
here for almost two years and am exploring other states at the moment.

~~~
rdl
I think part of the problem is there isn't a single other place which is
objectively better than SFBA on every metric which matters to startup people,
and yet people would prefer to stay together/have a critical mass of people.

Seattle, Boulder, and Austin are probably the most viable options right now,
if you want more libertarian/sustainable government combined with the same
overall feel of the Bay Area. It would be better if there were one place which
was head and shoulders better than all the others.

Nothing really touches SFBA for VC, though, and Stanford is probably the
world's best university for applied CS with startup involvement.

------
gcv
Does this apply to a Delaware corporation which happens to have offices ("do
business") in California?

~~~
macey
I doubt it - although you would still need to pay CA franchise tax ($800
minimum yearly). That's always been the case.

------
rayiner
Come to New York! We're rolling in so much finance money we don't need to hit
up small businesses.

~~~
kyrra
Your state's gun laws prevent me from ever living there.

~~~
untog
Don't come to New York, then. If your access to rifles is more important than
the tax codes your startup may or may not face, stay where you are.

~~~
Osiris
To other child post: FUD. What the heck does NY have to do with the federal
constitution? It takes 3/4 of states to pass a new amendment, so it's not like
NY can do it on it's own. The second amendment limits the _federal_ government
from passing certain kinds of laws.

~~~
elliptic
Completely false. Like much of the rest of Bill of Rights, the second
amendment has been incorporated (see Chicago vs McDonald), and thus held to
apply to the states.

It slightly irritates me when people say this, because usually those people
have no problem accepting that other amendments that they hold to be more
important (e.g, the 1st) apply to the states.

~~~
nthj
> It slightly irritates me when people say this, because usually those people
> have no problem accepting that other amendments that they hold to be more
> important (e.g, the 1st) apply to the states.

Heck, people try to apply the 1st amendment to private corporations & online
forums set up by 14 year olds.

------
bbwharris
Austin, TX would love to have you.

------
jibjaba
To me this is a symptom of the twisted politics around taxation in the US. You
have one very powerful group that is continually fighting to lower or
eliminate taxes and another somewhat less powerful group that wants to bring
in enough tax money to fund government services. One side cuts taxes or
refuses to raise them and the other side finds new things to tax or other
taxes to raise.

Normally such a tug of war is not an issue and is basically a natural
consequence of a functioning democracy but in the US it has gone to the
extreme.

Personally I blame the anti tax group. They seem to have no use for logic or
evidence and only demand more cuts regardless of the previous ones or the
consequences. They are refusing to provide the funds necessary to run a modern
government.

~~~
jacoblyles
In California, our money goes to retired union worker's pensions, not current
public services. Our most powerful lobbying group by money spent is the state
teacher's union, followed by the state and municipal employee worker union. We
have the highest taxes in the nation, poor public services, and massive debt.

Pro-tax types should stop carrying water for bad governance. I am one of those
anti-tax people you say "has no use for logic and evidence", and I am happy to
pay taxes when I feel it is going to good use. But I am not willing to pay
taxes so that politicians can turn around and give it to the unions that own
them at the expense of the public good.

It's funny that most of the world's entrepreneurship is in my country, where
people can keep most of their money earned to fund new ventures (for now).

------
stevewilhelm
Taxes have zero impact on my decision to start a company in California.

~~~
billpaetzke
How come?

~~~
nvader
Perhaps for other more compelling reasons he has decided to start a company
elsewhere.

------
forgingahead
Houston, we have a spending problem.

~~~
rplacd
It's got nothing to do with increasing tax revenue - it's petty overreaction
on behalf of the responsible state body - the FTB. I quote liberally from the
article:

> It turns out that a few years ago, someone sued the Franchise Tax Board over
> being denied the right to claim the QSB benefit [Cutler v. Franchise Tax
> Bd., 208 Cal. App. 4th 1247 (2012)]. The company at issue in that lawsuit
> did not meet one of the QSB requirements—that it maintain 80 percent of its
> employees and assets in California. In August of 2012, the California Court
> of Appeals sided with the plaintiff, ruling that denying him the QSB
> exclusion based on the “80 percent requirement” was an unconstitutional
> violation of the interstate commerce clause.

> Since the FTB lost the case, you might think that they would strike the
> unconstitutional requirement and keep the rest of QSB statute intact. Not a
> chance.

> What the FTB did instead was to take their ball and go home. They decided
> that since they could not impose the “80 percent requirement,” no one would
> be entitled to the QSB exclusion. They put out an announcement terminating
> the Qualified Small Business exclusion and retroactively disqualifying all
> exclusions and deferrals going all the way back to 2008.

~~~
_delirium
That's actually fairly common in decisions striking down agency
interpretations. Sometimes a court will order a specific remedy, but other
times they only rule that the existing regulation was illegal but leave open
multiple ways of curing it. In the case where the problem was that a
regulation impermissibly distinguished between groups that the law didn't
allow distinguishing between, there are two ways to fix it: put everyone into
bucket A, or put everyone into bucket B. And in fact in either case you _have_
to do it retroactively, to fix the ruled-invalid error of treating the two
groups differently.

~~~
dragonwriter
This is not a decision striking down an agency interpretation.

The decision explicitly found that the _statute_ supplying QSB benefits in
California "is discriminatory on its face and cannot stand under the commerce
clause". Had an agency interpretation been struck down, it would be fair to
say that (within the bounds of the court decision and the governing statute)
the FTB was free to come up with a new interpretation. But when a statute is
struck down, it can only be fixed by the _legislature_. An administrative
agency can't fix constitutional defects in statute: they have no authority to
do so.

(The court could have severed the unconstitutional provision and preserved the
rest of the statute, and there is some indication in the decision that they
probably would have done so rather than ruling the statute facially invalid if
they had been reasoning clearly and consistently. But they didn't, and the FTB
isn't really free to apply what the court _should_ _have_ ruled instead of
what the court _actually_ ruled.)

------
maxmax
The FTB had two choices: allow the deduction for every QSBS that didn't
qualify due to the 80% rule, or retroactively impose the tax on all who
claimed it. I'm sure somebody did the math, and found a huge liability for the
state if all the previously non-qualified QSBS' were given the deduction. Keep
in mind the FTB can't allow the status quo: if they allow the previous
claimants keep the deduction, they must grant the same ability to the
previously non-qualified. They chose then to disqualify the previous claimants
and fight with them on a case-by-case basis, rather than pay.

------
jacoblyles
On a related note - California capital gains tax is going up by 50% this
year[1] (24.3% to 37.1%). That's a big jump and I haven't heard many people
talk about it. In the short term it doesn't have much effect but in the long
run it will reduce the amount of capital in the Valley available for angel
investment and bootstrapping.

[1][http://jacobexmachina.blogspot.com/2013/01/the-fiscal-
cliff-...](http://jacobexmachina.blogspot.com/2013/01/the-fiscal-cliff-
silicon-valleys.html)

~~~
kevinpet
That's completely misleading. The capital gains tax paid by some Californians
may be going from 24.3% to 37.1% but only 3% of that has anything to do with
California. This is important because changes that affect other states as well
do not affect the relative desirability of CA vs. other states.

------
viggity
Serious question, can one "retroactively" move out of the state? Isn't it kind
of bullshit I wasn't afforded the opportunity to move out of the state before
I sold my stock?

------
danielweber
I thought this was the "taxes changed during 2012 for the whole 2012 tax year"
issue, but this seems to extend back to previous years.

------
azarias
I also found this section interesting...and I didn't know about it before:

"Per amendments in the new “fiscal cliff” law, if you started or invested in a
QSB between September 28, 2010 and January 1, 2013 and ultimately sell stock
under the federal QSB provisions, you’ll pay no federal capital gains tax, and
in some states, no state taxes."

------
protomyth
If we're all recommending states, then how about ND. Yeah it gets cold and
hot, but we have a budget surplus, wicked fast fiber, and low taxes. Fargo(1)
is an ok town (Microsoft has a place there).

1) Fargo in no way resembles anything from the movie of the same name. That
would be MN home of high taxes and no off-sale after 8pm.

------
tesmar2
A lot of the discussion arounds this makes me think that the joke "The
Republic of California" is not just true of CA, but for Washington, too. Is
the talk of high taxes just limited to those two Western states or is it a
bigger trend in other parts of the West Coast?

------
redm
I'm not sure I would recommend Texas either. Use tax means you pay annual
taxes on everything you own, plus sales tax on any affiliate deals; franchise
tax will hit you hard even if your not making a dime because it's based on
'net worth' and not on profit.

It's a tough place to be.

~~~
tarice
No state income tax, much cheaper housing costs than the national average, and
cheap gas make it a pretty good place to live and work. Plus, because of all
that, you can pay your employees much less (than California) and still provide
them an equally-good standard of living.

And Tex-Mex! I don't see how people in other parts of the country could live
without Tex-Mex food.

~~~
redm
That's great if you are making money. If you are loosing money and still
paying taxes then it's not so great.

------
brown9-2
I'd be curious to know how many California taxpayers this decision affects.

------
victorhn
Come to Mexico, beautiful beaches, good weather, what else do you want?

~~~
thebooktocome
A lack of institutionalized corruption and organized crime?

~~~
mindcrime
The USA has plenty of institutionalized corruption (see: Washington D.C.) and
organized crime too, so how much worse can Mexico be?

~~~
rgbrenner
"so how much worse can Mexico be?"

That's sarcasm right?

Mexico: 3rd highest number of murders in the world (only India and Brazil are
worse). Nearly 5x the murder rate in the US - nearly 2x the total number of
murders.

[http://en.wikipedia.org/wiki/List_of_countries_by_intentiona...](http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate)

~~~
mindcrime
I was referring, specifically, to the issues of corruption and organized
crime. But even considering the general murder rate, I'm going to go out on a
limb and guess that your likelihood of being murdered in Mexico vary
tremendously depending on where in Mexico you are. Maybe I'm wrong, but I'm
guessing there are some areas that are pretty safe and some areas that you'd
have to be brain-dead stupid to walk into.

~~~
rgbrenner
1\. Most of the murders in Mexico are from drug cartels. Are you saying that
the cartels are NOT a form of organized crime??

2\. If you go to the URL I posted, Mexico and the US are broken down by
states. The are only 3 states in Mexico with a murder rate below the US
average.

------
scarmig
The repeal of the exclusion actually seems like okay policy (at least sans the
80% requirement).

The retroactivity, not so much.

------
not_that_noob
we unfortunately don't have enough votes to influence their thinking on this.
this is sleazy but not out of character for california. you can try shaming
them with some media exposure (which is what you are embarking on) and hope it
kinda works. good luck.

------
ooorion
Come to New Mexico. Cost of living is cheap and we have great weather.

------
zem
even if the tax break was found unconstitutional and retroactively revoked,
how is the "interest and penalties" bit in any way legal?

------
nvk
Come to Toronto!

~~~
slajax
Even better, come to Vancouver. You get SRED and no snow. Just rain.

~~~
dubfan
Except when it does snow, and the entire city shuts down because they don't
know how to deal with the snow (same thing happens in Seattle and Portland)

------
shail
Some people in this world are just plain ridiculous. Who runs the country like
this?

I really want to know who really thinks so stupidly while making/amending
laws.

~~~
thecurator
unfortunately, those in charge choose to vilify success and growth. rather
than lauding the greatness of america, they choose to tax, burden and encumber
it. i'm not sure there are good alternatives on either side of the aisle.

------
thecurator
a prime example of fiscal policy going array. i hope our revered leaders
figure out the fact that innovation is the key to the greatness that is
America.

------
binarymax
ex post facto, surely?

~~~
rayiner
The prohibition against retroactive laws only applies to criminal laws. See
Calder v. Bull (1798).

~~~
petercooper
So, theoretically speaking, could California retroactively increase the state
income tax and claim billions from most of the populace?

~~~
forgingahead
This is exactly what happened when Prop 30 passed last year:

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

