
IPOs Bring Tax Jackpot for California; Can Lawmakers Resist? - prostoalex
https://www.nytimes.com/aponline/2019/05/05/us/ap-us-california-budget-enticing-ipos.html
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Zanni
For those who didn't (or can't) read the article, the question being posed is
--can they resist committing to additional recurring expenses in the face of a
one-time windfall, _not_ can they resist imposing a windfall profits tax on
IPOs.

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whoisjuan
They are rubbing their hands because they see these high taxes on individuals
as the bonanza of their low corporate tax policy. The problem is that people
hate paying taxes more than companies do.

I have many friends that work in late stage startups who are planning to move
to secondary offices in Seattle or Austin just to escape an eventual
California taxation once they can convert their options because of an IPO or
an acquisition.

This by itself it's not a big problem, but California is so damn expensive
that it starts looking pretty unattractive to future prospective entrepreneurs
that can opt for other less expensive states to run their business.

~~~
shereadsthenews
Everybody has an anecdote, but the fact is that California continues to enjoy
net domestic in-migration in the highest income group. Rich people do not
avoid it because of taxation. They avoid other states because other states are
terrible and they can afford to live here.

~~~
whoisjuan
That's true partially. At least you have to segment extremely wealthy
individuals from high-middle class individuals who don't care too much about
this. Again this also anecdotal, but most people I know simply want a good
quality of life at a reasonable cost.

At a certain point that stops being feasible if the cost of living keeps
increasing and additionally you're taxed at the highest rates.

Also from an economic perspective, people will move close to where the jobs
are. You hear a lot about startups hiring in the Bay Area but almost never
hear the big incumbent businesses expanding there. Quite the opposite.

As with any macro-economic trend, it would pass years until you see the
effects of these things, but I do believe that this doesn't play well for
California's economy in the long-term.

Fortunately for California, there is more than Bay Area, so it's also possible
that this is just a phenomenon applicable to the economic behavior and impact
of the tech industry and tech employees.

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brd529
Related - Some SF Supervisors are going to put a retroactive 1.12% stock
compensation payroll tax on the November ballot:
[https://www.sfchronicle.com/politics/article/Here-come-
the-I...](https://www.sfchronicle.com/politics/article/Here-come-the-IPO-s-
and-here-comes-a-proposal-13790280.php)

~~~
umeshunni
Can I retroactively vote against those supervisors?

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purplezooey
An article about CA taxes always has to include someone from the Howard Jarvis
Taxpayers Association. This is the wonderful group that brought us Prop 13 and
would turn us into Alabama if they had their way. Howard Jarvis stands for
everything bad in CA. Gentrification, HOAs, paranoid city councils, and why
the schools are so hit-or-miss. I wish journalists would let them fade away
like Mr. Jarvis's acting career.

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gumby
> The state budget relies heavily on the wealthiest earners; in 2017, the top
> 1% were responsible for more than 47% of the state's income tax collections.

Until I saw it in action (2001, 2008) I hadn't realized that a tax regime
could meaningfully be _too_ progressive. But this statistic quoted in the
article results in a tax receipts whipsaw in hard times. If you have a lot of
money and your income declines dramatically for a couple of years you don't
need to lose sleep over it -- it'll come back and meanwhile you can live of
your assets. The same doesn't apply to entities that need to live off their
tax receipts: such a time calls for increased spending just when the money
isn't coming in.

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aston
Should lawmakers resist? There's no lack of housing and infrastructure
projects worth spending on, state-wide.

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defen
$180 billion in unfunded CalPERS liabilities, too...

~~~
jdavis703
I reckon I'll need a couple million to retire in the next several decades. As
I'm still pretty young I have a personal pension liability of a couple million
dollars.

My point here, what's the practical impact of this number? It's a scary number
that's thrown out a lot, but is this number going to break the budget, or will
pension spending as a fraction of the total budget be fairly stable?

~~~
twblalock
The CalPERS money is invested. In recessions, the pension fund shrinks and tax
revenues shrink at the same time. The fraction of government spending needed
to cover pensions increases as a result.

~~~
refurb
You forgot to mention that Calpers also assumed an 8% annualized return for
their funding purposes. Slightly optimistic.

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swalling
Taxing founders and employees even more (on top of CA's very high income tax
and capital gains) seems like a ridiculous proposal when corporate net taxes
are low or zero in many cases.

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cortesoft
Where do you see that proposal? The article never mentioned anything about
taxing more.

~~~
tdhoot
Probably the proposed San Francisco 'IPO tax':
[https://www.nbcbayarea.com/news/local/SF-Supervisor-
Proposes...](https://www.nbcbayarea.com/news/local/SF-Supervisor-Proposes-IPO-
Tax-on-Tech-Companies-509032951.html)

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epistasis
California rewards property speculation and rent seeking with Prop 13; this is
an untouchable source of inequality because landowning wealth is fiercely
anti-tax.

The more tax-friendly stance of tech wealth means that tech money funds much
of the state, while those who hoard land reap many unearned profits from rent
seeking and increased property values, which directly pushes our so many of
those with lower incomes.

Meanwhile the general attitude of the state is that tech is the source of the
problems, rather than the conservatives who are unwilling to share their
neighborhoods with new residents. It's quite an upside down view of the world.

~~~
olliej
Prop 13 was heavily pushed by businesses under the guise of “saving your grand
parents from excessive taxes”.

What it actually is, is a tax cut for businesses (they don’t generally sell
property, and so don’t ever pay tax on the actual property value), and land
owners who rent/lease out property (because they can increase revenue in line
with market value, while only paying taxes on increasingly far from market
value properties). Given property taxes are generally used to fund a lot of
public services (police, fire, schools, roads, etc) and a lot of those have
costs determined by market value of property (eg cost of rent/mortgage is a
significant determining factor for income), you end up necessarily pushing
those costs on to individual tax payers. Businesses can easily incorporate out
of state and so choose yet another cheap tax rate, pushing all of the costs
into individuals.

Prop 13 must be revoked.

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JumpCrisscross
> _Prop 13 must be revoked_

It might be easier, politically, to add carve-outs.

Not your primary residence? Assessed value rises with CPI. Renting it out?
Assessed value increases capped to _e.g._ 5% per year. Businesses with more
than X in revenues or Y in employees? No price protection. Home value more
than Z? No price protection. _Et cetera_.

~~~
deepakhj
Also we could defer taxes for elderly and charge the deferred taxes when they
pass away. That way they don't lose their home.

~~~
shereadsthenews
That's what we always did before Prop 13. Nobody was being turfed out of their
homes. The counties were just putting liens on properties.

