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California To Hit Startup Founders with Big Retroactive Tax Bills

xconomy.com

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Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#171

Post by c1u »

refurb wrote: post #147
c1u wrote: post #118

Earlier quoted context omitted.

"50% marginal tax rate started around $65k" I think your friend has very poor math skills. http://www.ey.com/CA/en/Services/Tax/Tax-Calculators-2012-Pe... $65K gross income in BC nets nearly $52K; a ~20% average tax rate. This is before any eligible deductions. Even if your friend was making $1,000,000 gross salary, they'd still pay less than 42% tax on average, and that's ignoring several legal tax shelters availabl…

Note, he said "marginal" not "overall" tax rate. Don't forget that BC has 12% sales tax and monthly premiums for health insurance. Income tax is only one of the many taxes.

ok, the highest marginal tax rate for a $65K gross salary is ~30%. Everyone gets the first ~10K tax-free, then it's ~20% (in BC) off the next ~$40K, then ~30% off the next ~$40K. Only the last ~$15K gets taxed at 30%, and you can easily reduce that to zero with available legal tax-shelters/deductions/credits.

BC health premiums are $65/month for a single person. Sales tax is a consumption tax and not really relevant.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#172

Post by nostromo »

jey wrote: post #110

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…

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...

> 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.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#173

Post by 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.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#174

Post by randallsquared »

tjic wrote: post #107
sliverstorm wrote: post #69

Earlier quoted context omitted.

Shove them (States) in between a rock and a hard place, and they pretty much run out of options. Not surprising.

They've got tons of options. They could, for example, cut back the bloated private sector. ...but the governments are on the side of the government workers (most government workers are unionized and these funds lobby the politicians). The result is that it becomes an "us vs them" fight, and while common citizens may theoretically have political power through the ballot box, in practice power is mostly exercised throu…

> They could, for example, cut back the bloated private sector.

Isn't that what they're trying to do? :D But I guess this is a typo for "public sector"...

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#175

Post by 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.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#176

Post by chimeracoder »

btilly wrote: post #40
rayiner wrote: post #19

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

Thanks, but no thanks. I've experienced New York's laws on intellectual property ownership. Any programmer who thinks that they should have any right to have "their own time" and "side projects" should leave for a more friendly state. Like California. I am not joking.

> Any programmer who thinks that they should have any right to have "their own time" and "side projects" should leave for a more friendly state. Like California.

In New York, you can negotiate a contract to get this clause - it's quite common. The only difference is that contracts without the exemption (ie, total assignments) are considered enforceable, whereas in California, they aren't. That doesn't mean that Californian contracts don't sometimes include those clauses anyway - from a legal strategy standpoint, it's in the company's best interest to do so.

Furthermore, my understanding is that this Californian precedent is rather limited in practice, since it's easy for a company to claim that your product is related to something that the company is doing or is planning on doing (and hard to prove otherwise), and similarly easy for them to claim that you've used company resources and/or time to do the project, as people sometimes do without thinking about it. When you start picking it apart, the Californian exemption is very narrow in letter, and even more so in practice.

In short, you're definitely not missing out on anything automatically by coming to New York, because it depends on what kind of a contract you negotiate. And Californian law won't get you home free either, because there are too many other variables at play, and too many other ways for them to wiggle around the law - they just need the incentive to do so.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#177

Post by w1ntermute »

MaysonL wrote: post #170
w1ntermute wrote: post #100

Earlier quoted context omitted.

> Some things about the US still surprise me. In "socialist Sweden" (as it's sometimes called) retroactive taxation is unconstitutional. The difference between the US and postage-stamp-sized European countries like Sweden is that there is great political and cultural variation between different parts of the US. California is chock full of socialists/liberals.

Given that Sweden is about 10% larger than California, albeit with less than a third the population, it's hardly "postage-stamp-sized". Given that we elected Reagan, Schwarzenegger, and David Dreier, California's chock full o' wingnuts as well as socialists/liberals.

> Given that Sweden is about 10% larger than California, albeit with less than a third the population, it's hardly "postage-stamp-sized".

I already addressed this point below in response to another reply: http://news.ycombinator.com/item?id=5062138

> Given that we elected Reagan, Schwarzenegger, and David Dreier, California's chock full o' wingnuts as well as socialists/liberals.

I'm not familiar with Dreier, but there's no doubt that Californians have a soft spot for actors.

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#179

Post by SomeCallMeTim »

rgbrenner wrote: post #140
jstalin wrote: post #63

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 low…

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...

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...

Re: California To Hit Startup Founders with Big Retroactive Tax Bills

#180

Post by rayiner »

w1ntermute wrote: post #145
flagnog wrote: post #78

Earlier quoted context omitted.

and you can't legally buy a Big Gulp. Seriously, and city/county/state govt that would do that, you can't trust them with your livelihood.

Under Bloomberg, NYC has turned from a police state into a full-fledged nanny state.

To be fair, it's also much nicer to live in (at least for white people) than it ever has been. New York before it became a police state was basically Gotham City.
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