So CA Legislators Won't Have Their Pay Cut--Prop 25 Rendered Toothless

Anytime a ballot initiative is written and supported by the legislature and proposes to "cut" legislature pay if no balanced budget is reached, be skeptical.

Many of you may remember and likely voted for Proposition 25 back in 2010, which stated that if a balanced budget was not delivered on time, the legislature would not be paid.  Alas, this was the hook to convince the general public to vote for it.  The real meat of the proposition had to do with lowering the requirement to pass a budget from 2/3rds to a simple majority--in essence cutting out the already marginalized republicans.

In a classic case of bait-and-switch, a Superior Court Judge has ruled that it is up to the legislators themselves to determine whether the budget they passed was "balanced" or not.  When the legislature passed a phony budget last year just in time to get paid, state controller John Chiang stepped in and determined that the budget was not balanced and therefore, legislators would not get paid.  Chiang's actions were short-lived and now it appears the legislature can continue to pass unworkable budgets year after year.  Proposition 25 sounded nice, but again, voters were sold a bill of goods.

Family Limited Partnerships Video Presentation

So I've toyed with the idea of creating short videos discussing various estate and tax planning techniques for quite some time.  I'm more of a visual learner myself and so I tried to figure out if I could create a video that would visually convey some key aspects of the various planning opportunities that are available.  My first video discusses how family limited partnerships can be used to transfer value in a business to your children while still retaining control and how to reap some pretty generous gift and estate tax benefits along the way.  The video is below.  I realize the production quality is a little low-grade but considering it's my first in a series, I think it's not too bad.

California's Tax Takers Await Day-by-Day Updates of Tax Proceeds

There's an interesting article in the L.A. Times about the hundreds of workers in Sacramento who are busy during tax season opening and sorting taxpayer checks.  The article had this gem of a paragraph:

Every afternoon for a few weeks in April, as Californians pay their state taxes, a courier ferries them [taxpayer checks] to eight banks to nourish the money-hungry government.  Meanwhile, lobbyists, lawmakers and activists — people whose jobs hinge on this seemingly mundane process — huddle by their computers and wait for the daily tally, which they'll tweet and email like the play-by-play of a championship game. By the end of the month, state accountants will add up the money and hope there's enough to cover expenses.

So far, the legislative analyst's office predicts the state will be about $2 billion short of projected revenues.

The Great California Exodus

Another great article in the weekend edition of the WSJ interviewing Joel Kotkin, who is an acclaimed demographer and self-professed "Truman Democrat".  Mr. Kotkin runs through a litany of California's ills that are driving away its middle class.

Here are just a few snippets:

[The] Golden State's fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn't Hollywood or tanned girls on a beach, but Greece....

And things will only get worse in the coming years as Democratic Gov. Jerry Brown and his green cadre implement their "smart growth" plans to cram the proletariat into high-density housing. "What I find reprehensible beyond belief is that the people pushing [high-density housing] themselves live in single-family homes and often drive very fancy cars, but want everyone else to live like my grandmother did in Brownsville in Brooklyn in the 1920s," Mr. Kotkin declares....

Another is the cap-and-trade law AB32, which will raise the cost of energy and drive out manufacturing jobs without making even a dent in global carbon emissions. Then there are the renewable portfolio standards, which mandate that a third of the state's energy come from renewable sources like wind and the sun by 2020. California's electricity prices are already 50% higher than the national average.

Meanwhile, taxes are harming the private economy. According to the Tax Foundation, California has the 48th-worst business tax climate. Its income tax is steeply progressive. Millionaires pay a top rate of 10.3%, the third-highest in the country. But middle-class workers—those who earn more than $48,000—pay a top rate of 9.3%, which is higher than what millionaires pay in 47 states.

So what would an artist's depiction of a tax cut look like?

Artist Chad Person has put together a series of collages made from U.S. currency he has entitled "TaxCut".   Of course he deducts as a business expense all the currency he destroys as part of his art.

Interview with John Malos of MeTV Fresno: Tax Day

This morning I was a guest on the show "Connect With Me", which is a new show hosted by John Malos.  He invited me on on tax day, April 17th,  to discuss a whole host of tax related topics.  We even discussed Ron Paul's position to throw out the entire tax code!  John's a great host and is surrounded by a great crew.

So how much did President Obama donate to charity before running for office?

The big news today is that the Whitehouse released Pres. Obama's tax returns for 2011.  Notably, he donated 21.8% of his income to charity last year.

But what did President Obama's charitable contributions look like in prior years?  Below is a chart showing his income and chartable donations since 2000 (courtesy of TaxProf Blog). 



I won't attach Joe Biden's chart as its hard to deviate from a high of 1.45%.

So does an employer have to make sure its employees actually take breaks during break period?

Although not directly related to tax issues, Doug Larsen, my colleague has an excellent post discussing the landmark Brinker case which just came out today and which will affect nearly every California employer.  The case deals with, in part, whether or not an employer is required to provide and ensure compliance with meal and rest periods, or whether the employer is required only to make them available to employees.

How will the "Buffet rule" reduce the deficit?

The "Buffett rule" (a minimum 30% tax on people making over $1 million per year) has been suggested and raised these past few months as a possible cure to national deficits.

The projected revenue increases range from between $30 billion and $40 billion over 10 years.

Below is a chart (courtesy of political math) which demonstrates the impact the "Buffet rule" will have on government finances, in particular, the deficit. Make sure to scroll all the way down to the bottom of the chart to see the impact.

Yes, executors can be personally liable for a decedent's unpaid taxes

The recent case of U.S. v. Tyler is a stark reminder that executors of an estate need to ensure the proper payment of creditors, in particular if that creditor is the IRS.

In this case, the decedent died with hundreds of thousands of accrued federal tax liabilities.  Instead of liquidating the estate to pay back-taxes, the executors tried to apparently "sell-off" assets to family members at highly discounted prices in an effort to render the estate insolvent. 

Not suprisingly, the court find that the executors of the estate should be personally liable for the decedent's unpaid tax liability because they had known about the liabilities and had intentionally distributed estate assets to insiders (the court essentially ignored the "sales" to family members and treated them as distributions).