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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

#61

Post by 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.

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

#62

Post by run4yourlives »

jiggy2011 wrote: post #58
run4yourlives wrote: post #53

Earlier quoted context omitted.

That will work until one of the Microsofts of the world decides it's more cost effective to move everyone 2 hours drive north to Vancouver than it is to pay this giant bill. The US is quickly going to learn that there is a rather modern country to the north that isn't in the same financial distress as Europe or most states are. I'd imagine given that, this line of thinking would probably play itself out pdq.

But I thought their financials would be in ruin, what with giving out all of that free healthcare?

Don't get me wrong, we will eventually get to the spot Europe is in if we don't make changes to our health care services of one type or another.

We have however shown a remarkable ability to vote for people that tell us we can't afford things we can't afford. We took drastic austerity measures in the 90's and we actually voted for it - twice.

I'm not too worried about our finances, once people get the numbers in front of them, they tend to be convinced.

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

#63

Post by 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.

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

#65

Post by almost_usual »

king_magic wrote: post #41
whalesalad wrote: post #37

Earlier quoted context omitted.

NYC has the most outrageous taxes in the country. You might as well be in France giving up 75%.

Yeah, it's rough. After federal, SS/payroll, NY state and NYC residential taxes, I take home 57.95% of my salary. I don't have the energy to find which state would give me the best deal, but I seriously doubt it's NY. :-)

Probably Texas, or some Midwestern state

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

#66

Post by lisper »

basseq wrote: post #34

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... 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.

> 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.

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

#67

Post by dragonwriter »

rplacd wrote: post #6
forgingahead wrote: post #4

Houston, we have a spending problem.

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 re…

Its true that its not about increasing tax revenues, but it doesn't seem to be a "petty overreaction" either, its the FTB applying the Court of Appeals determination that California's QSB benefit statute violated the Constitution (the exact words from the holding regarding the statue are that "The statute is discriminatory on its face and cannot stand under the commerce clause.")

The FTB doesn't have the power to arbitrarily rewrite unconstitutional laws to remove the parts that have been found to make them unconsitutional -- either the court (by explicitly severing the unconstitutional provision) or the legislature would have to do that.

The court of appeals case is at http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%202012... and the FTB's description of its application of the decision is at https://www.ftb.ca.gov/law/notices/2012/2012_03.pdf and the FTB's FAQ on its action is at https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_an...

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

#69

Post by sliverstorm »

rayiner wrote: post #38
preinheimer wrote: post #22

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.

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...

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