Beta
×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

How Entrepreneurs Overturned California's Retroactive Tax On Startup Founders

samzenpus posted about a year ago | from the winning-one-for-the-big-guy dept.

The Almighty Buck 105

waderoush writes "Startup founders in California can breathe a little easier today — they won't be getting bills from the state for up to $120 million in back taxes. On Friday California Governor Jerry Brown signed a bill prohibiting the state from levying retroactive taxes on founders and other small-business investors who took advantage of a tax break invalidated last year by a state appeals court. California Business Defense, a coalition of entrepreneurs, spent most of 2013 trying to reverse the California Franchise Tax Board's interpretation of the court ruling, under which it planned to hit Californians with new tax bills on the sale of small-business stock going back to 2008 (a story that Slashdot picked up in January). Two bills on the matter reached Governor Brown's desk in September, one fully restoring the investment incentive through 2016, the other partially restoring it. Brown signed AB1412, the bill granting full relief. 'For a bunch of political greenhorns operating in an environment where political partisanship is at an all-time high, we did all right,' writes Brian Overstreet, one of the co-founders of California Business Defense. 'But it should never have been this hard.'"

cancel ×

105 comments

Sorry! There are no comments related to the filter you selected.

Don't Worry (1)

Austrian Anarchy (3010653) | about a year ago | (#45064161)

Sometime soon they will remember that they failed to tax your hindquarters ten years ago and make a tax bill for that, which will require a new round of lobbying for repeal.

Re:Don't Worry (1)

Impy the Impiuos Imp (442658) | about a year ago | (#45064269)

Alternatively, keep drilling into their testicles with your new power drill, and see if they keep staying.

People vote with their feet, too, and there are 49, well, about 42 other states and Puerto Rico to go to.

Re:Don't Worry (2)

Impy the Impiuos Imp (442658) | about a year ago | (#45064295)

BTW, Governor Brown knows this, and understands the difference between rhetoric fed to you for your vote, and the poitical calamity of losing billions in taxes as industries flee the state.

Heh heh heh I said brown knows.

Re:Don't Worry (1)

JustOK (667959) | about a year ago | (#45064329)

snot funny

Re:Don't Worry (1)

fiannaFailMan (702447) | about a year ago | (#45064699)

I'm impressed by Brown. He paddles a little on the left, then a little on the right, and he keeps a steady path.

Re:Don't Worry (1)

JDAustin (468180) | about a year ago | (#45065159)

Between allowing illegals to get both drivers licenses and practice law, banning lead ammo for hunting, reclassifying any semi-auto rifle with a clip as a assault rifle (including simple .22's) and therefore making it illegal to transfer ownership (even upon death); I would say that Brown paddled to the far left.

Re: Don't Worry (0)

Anonymous Coward | about a year ago | (#45066415)

It sounds like most everything is to the left of you.

Re:Don't Worry (1)

the_arrow (171557) | about a year ago | (#45067671)

In politics, left and right are very relative terms. What is left in the USA is right in Europe, for example.

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45065017)

That's right, better stay away from Vermont, Idaho, Nevada, Washington, Rhode Island, Maine, and Nebraska. .... WTF?

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45065115)

i thought we had 57 states????

Re:Don't Worry (1)

tnk1 (899206) | about a year ago | (#45065241)

That's the United States of Heinz. That's somewhere in Europe. Near Andorra.

Re:Don't Worry (1)

Anonymous Coward | about a year ago | (#45064375)

No, they didn't forget -- they still tax your ass off in CA. For instance, you'll still have to pay an $800/year fee to have an LLC, even if it grosses $0 that year. CA would be at or near the top of my list for places to move, despite it generally being overpriced, if not for those sorts of dickish taxes and fees. I'm trying to get my one-man business off the ground, and losing a month's rent each year to fees I don't have to pay in other states that are as nice or nicer than CA just doesn't appeal to me.

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45064553)

$800 == a months rent?!?!

You obviously don't live in CA...

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45064745)

I pay less than that for a 10-year mortgage on a 5-bedroom house.

Re:Don't Worry (1)

gmhowell (26755) | about a year ago | (#45066855)

I pay less than that for a 10-year mortgage on a 5-bedroom house.

The free banjo playing kid in town must really seal the deal for you.

Re:Don't Worry (1)

ganjadude (952775) | about a year ago | (#45065123)

and with the housing costs that you are leading to i dont want to

Re:Don't Worry (1)

khallow (566160) | about a year ago | (#45065145)

$800 == a months rent?!?!

In Sacramento it would.

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45065275)

Yes, I did and it was. I had a big bedroom in a flat kitty-corner from Dolores Park in San Francisco. I think that particular neighborhood's gone up since Zuckerberg bought his house a half dozen blocks away, but I still have friends posting sublets in that range.

Re:Don't Worry (0)

Anonymous Coward | about a year ago | (#45067709)

Call it a tax to encourage personal responsibility. LLCs are largely abused by sole proprietors to shield themselves from personal accountability when their negligence or outright fraud harms others.

Re:Don't Worry (1)

Medievalist (16032) | about a year ago | (#45064771)

Sometime soon they will remember that they failed to tax your hindquarters ten years ago and make a tax bill for that, which will require a new round of lobbying for repeal.

Rich sociopaths don't have to worry about taxes. Only the 99% who can't afford to buy politicians will ever have to pay more than a token percentage of their assets.

uh, yeah... (0, Interesting)

Anonymous Coward | about a year ago | (#45064165)

Capital gains taxes need to be raised up to parity with income. And yes that means you guys making over $250K. 39%

Re:uh, yeah... (-1)

Anonymous Coward | about a year ago | (#45064187)

Do you even understand what capital gains is?

What a fucking moron. Just shut down the flow of capital into the markets. Shit, they don't need no stinkin capital.

Fuck those people who want to start a company and need investors to pay employees during the start up phase.

God Damned fucking OWS piece of shit, is what you are.

Fuck off and die.

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064253)

Just shut down the flow of capital into the markets. Shit, they don't need no stinkin capital.

They certainly don't, hundreds of billions, even trillions are just sitting there because the people with it can do so without paying taxes.

Fuck those people who want to start a company and need investors to pay employees during the start up phase.

God Damned fucking OWS piece of shit, is what you are.

Fuck off and die.

That's exactly what the Wall Street capitalists want to do to the rest of us. Which means what? We should accommodate them?

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064411)

Wall Street likes to think of itself as a pack of wolves.

Are they surprised when the sheep turn on them?

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064257)

Do you even understand what capital gains is?

Do you? Oh, I'm sure you can quote all sorts of textbook libertarian pap at me about capitalism, but what capital gains tax is, is what the fat investor cats want the government to call it.

Re:uh, yeah... (1)

ganjadude (952775) | about a year ago | (#45065153)

well lets put it out there since alot of you like to talk about how good or bad it is without talking about it.

I work, I save up a few hundred bucks. that money is taxed as income. I then decide I want to invest it, in say apple or MS or tesla or (insert whatever wont get your panties in a bunch since this is only for argument sake)

I then take that already taxed income and use it to prop up another business instead of spending it on xx or YY

why in the hell should my money thats already been taxed at income levels be taxed again???

Re:uh, yeah... (1)

spitzak (4019) | about a year ago | (#45065829)

That's just silly. The money is not "taxed again". What is taxed is the *gains* you make from the investment. Now there are good arguments for taxing these gains at a lower percentage than income produced by your own labor, but claiming the "money is taxed twice" is a stupid thing to say.

Re:uh, yeah... (1)

ganjadude (952775) | about a year ago | (#45083705)

ok i see how i may have misworded it a little bit however the point stands. I shouldnthave to pay taxes on something that I gain on money that has been taxed. In other words that money i have invested means i cant spend it anywhere else, its tied up and i should see the gains on that without the government getting involved. tax those gains i will find somewhere else to put my money. gold for example

Re:uh, yeah... (1)

spitzak (4019) | about a year ago | (#45084951)

I still don't get it. That's like claiming I should not be taxed on the profits of my business because I had to purchase a machine to run the business and the money spent on that machine is "tied up" therefore the money produced by using that machine should not be taxed. (and don't try to bring up depreciation, since that is equivalent to your stock *losing* value, not gaining. If your stock gains it's like you got some income and the machine is still worth it's entire initial price).

The few serious attempts to explain this actually amount to arguments that the capital gains calculation should take inflation into account, which I agree with. But the convoluted reasoning to twist this into the "taxed twice" so that the tax is reduced for even short-term investments that are a millisecond long (and the reduced tax is still applied to inflation on long-term investments) is pretty bad.

Re:uh, yeah... (1)

AK Marc (707885) | about a year ago | (#45064267)

Do you even understand what capital gains is?

Yes, it's a tax on inflation. Do *you* understand it?

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064415)

Clearly you don't.

Re:uh, yeah... (3, Informative)

AK Marc (707885) | about a year ago | (#45064571)

Sure. you buy a house for $50,000 in 1973, then 40 years later sell it for $250,000, an inflation calculator will indicate an almost imperceptible change in "value" (in 2013 dollars), but you'll be taxed on the inflation (on not, if you live there as a homestead, and meet other rules).

Capital gains is a tax on the inflation. They don't calculate the capital gains on the "real" gain, but the dollar gain.

You are obviously the person that doesn't understand it. If I don't understand it, explain how I'm wrong. Go ahead. I'll be waiting.

Re:uh, yeah... (1)

PPH (736903) | about a year ago | (#45064829)

The idea behind cap gains taxes is to capture the gains above inflation that people make in buying and selling assets. But that's not the way they work when applied to dollar values. Inflation over 40 years may indeed raise the price of everything (including that house) by a factor of 5. But that isn't an increase in value. Long term dollar gains need to be discounted by an inflation factor to capture actual value gains above the rise due to inflation. Since Congress and the Administration are in control of inflation (in theory), cap gains taxes are a way of taking wealth which in reality was never created.

Re:uh, yeah... (1)

AK Marc (707885) | about a year ago | (#45065959)

They also need to calculate capital gains on capital gains. I know more than one day-trader, and they spend all day long researching, trading, treating it like a salaried job, and if they make cash from a 2-hour holding of MSFT, it's a capital gain. Capital gains are discounted because the capital helps the economy grow. How does day-trading make a long-term investment in the economy?

It doesn't. Capital gains taxes do not tax what they are aiming for. Setting them as they are (lower than earned income) only helps the rich. What's needed is to abolish the difference between earned and unearned income. Perhaps a distinction between pre-tax and post-tax income (for some types of benefits or retirement accounts), but there's no need to tax capital gains lower, except for the campaign donations being from rich people who want no tax on their billions of dollars of income.

Treating capital gains under one month as earned income, setting the rate to the earned income rate, and "discounting" the gain against inflation to tax value, not numerical, and otherwise simplifying the tax would be a great improvement. The issue is that taxing as it is done now was well tweaked to leave in breaks and loopholes for those who helped write the rules, and they have more money and incentive to keep it going than we do.

Re:uh, yeah... (1)

CyprusBlue113 (1294000) | about a year ago | (#45065013)

Sure. you buy a house for $50,000 in 1973, then 40 years later sell it for $250,000, an inflation calculator will indicate an almost imperceptible change in "value" (in 2013 dollars), but you'll be taxed on the inflation (on not, if you live there as a homestead, and meet other rules).

Capital gains is a tax on the inflation. They don't calculate the capital gains on the "real" gain, but the dollar gain.

You are obviously the person that doesn't understand it. If I don't understand it, explain how I'm wrong. Go ahead. I'll be waiting.

That is actually a really good point.

Is indexing the cost basis against something like CPI something that has been proposed as law before?

I know I personally would absolutely support that change, although I would like to see CG rates be more in line with income rates as a compromise, as the goal was never meant to tax base value of long term assets, but specifically to tax value gained over the time.

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45065109)

Sure. you buy a house for $50,000 in 1973, then 40 years later sell it for $250,000, an inflation calculator will indicate an almost imperceptible change in "value" (in 2013 dollars), but you'll be taxed on the inflation (on not, if you live there as a homestead, and meet other rules).

Capital gains is a tax on the inflation. They don't calculate the capital gains on the "real" gain, but the dollar gain.

You are obviously the person that doesn't understand it. If I don't understand it, explain how I'm wrong. Go ahead. I'll be waiting.

That is actually a really good point.

Is indexing the cost basis against something like CPI something that has been proposed as law before?

I know I personally would absolutely support that change, although I would like to see CG rates be more in line with income rates as a compromise, as the goal was never meant to tax base value of long term assets, but specifically to tax value gained over the time.

Bullshit. The goal was to recoup the taxes they didn't get to collect while you had those funds locked up in an investment.

Re:uh, yeah... (1)

david_thornley (598059) | about a year ago | (#45076081)

FWIW, the one time I filed capital gains was from some stock that I had bought a few years ago, watched it keep almost all of its value while inflation went on, and then sold it. I lost a bit on the sale (inflation-adjusted) and significantly more on the taxes for illusory profit.

Re:uh, yeah... (1)

AK Marc (707885) | about a year ago | (#45076575)

Yup. Inflation is the pink elephant. Everyone knows it's there, but nobody wants to talk about it. That's the reason why your taxes are "due" December 31, but you pre-pay them all year. So the government has a stable income to balance expenses on, and because $1 in January is worth more than $1 in December. If everyone paid their taxes in full the last day possible, the government would lose billions in inflation (usually called "interest" to hide the elephant).

Re:uh, yeah... (0)

Nadaka (224565) | about a year ago | (#45064289)

Capital gains tax in the US is functionally the same as income tax, at a lower rate.

And no, increases in the tax rate of capital gains does NOT at all hinder the economy.

In fact the only tax cut PROVEN to stimulate economy is the corporate tax rate.

All other data points to most other tax cuts having no effect or a negative effect on the economy with the exception of taxes near or below the poverty level.

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064559)

Liar liar

JFK and Regan both lowered income taxes and got huge increases in GDP because of it.

Re:uh, yeah... (2)

Tailhook (98486) | about a year ago | (#45064785)

capital gains does NOT at all hinder the economy

Good to know. Perhaps we should eliminate the capital gains exemption [bankrate.com] for real estate sales of primary residences. I wonder if a $10,000 tax liability on $50k of profit would "hinder" John Q. Low Information voter when he sells his house.

He might be a little less willing to indulge "progressive" hate mongering about the "rich," at least. Anyhow, you let me know when we elect someone ready to repeal that little tax break because it doesn't "hinder" the economy.

I'll be right here, not holding my breath.

Re:uh, yeah... (2)

PPH (736903) | about a year ago | (#45064939)

Good point. What people don't realize is that capital gains taxes hit the individual harder than the corporation.

Individuals can't shuffle their asset ownership around like corporations can. Either by moving ownership structures offshore (most progressive countries have little or no cap gains taxes) or by resetting their tax basis by mergers and acquisitions.

The primary residence tax break was instated to keep the John Q Public voters largely unaffected and therefor unaware of the true impact of capital gains taxation. And since most voters' only other major wealth holding is a pension (managed by others), it remains largely hidden from them. If they ever sat down and figured out how much money the government has robbed from their retirement, there would be blood on the streets of Washington DC.

Re:uh, yeah... (1)

_merlin (160982) | about a year ago | (#45066271)

It wouldn't hold back the economy to eliminate that exemption. In fact it would probably help housing affordability. CGT exemption on residence leads to people treating housing as a tax-free investment rather than a place to live. So they "improve" their house to the point where it's not even the kind of thing they'd want to live in any more with the sole intention of selling it without paying tax on the profit and moving on to the next one. Of course no politician will talk about eliminating the CGT exemption because their opposition would immediately use it to stir up negative feeling, because people only want others taxed, not themselves.

Re:uh, yeah... (1)

PPH (736903) | about a year ago | (#45064845)

In fact the only tax cut PROVEN to stimulate economy is the corporate tax rate.

[citation needed]

Re:uh, yeah... (1, Interesting)

AlphaWolf_HK (692722) | about a year ago | (#45064209)

Yes, because taxing an income that has already been taxed is such a wonderful idea.

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064283)

Now you're thinking like a Liberal!

Re:uh, yeah... (0)

Anonymous Coward | about a year ago | (#45064423)

I agree with your sarcastic comment, but it's off-topic considering it has nothing to do with a capital gains tax.

Re:uh, yeah... (1)

suutar (1860506) | about a year ago | (#45064451)

I've heard this before, but I don't think I'm understanding it. Capital gains is on the profit from selling stock, right? How does that profit get taxed before you sell it?

Re:uh, yeah... (0)

mirix (1649853) | about a year ago | (#45064857)

It's a bullshit line to make the feeble minded weep for the rich, and take pity on them. There's nothing else to understand about it.

Re:uh, yeah... (1)

Charliemopps (1157495) | about a year ago | (#45065035)

I pay capital gains and I sure as fuck am not rich.

Re:uh, yeah... (1)

sjames (1099) | about a year ago | (#45066941)

I'll bet you wouldn't prefer to pay income tax instead.

The problem is that the rich don't pay income tax at all. All of their money coming in is somehow not income and so is taxed at a lower rate.

Re:uh, yeah... (1)

Charliemopps (1157495) | about a year ago | (#45065231)

It can be, but that's over simplified. A capital gain is when a capital asset (stocks, bonds, property) is sold or traded for more value than it was initially purchased for.

As far as the "already taxed" thing goes, there are 2 primary arguments that support this.

The first is the easiest to understand. There is a "Corporate tax" on corporations. If you own stock in that corporation you are part owner, and, in effect, paying that corporate tax. The value of your stock is lower because of that tax. Then, when you pay capital gains, you're getting taxed again. You are quite literally paying taxes twice in this case.

The second is a little bit harder to grasp. Basically it goes like this: You earn money in some way, and you are taxed on it. Then you take that money and decide to save it. You start an investment account and invest in stocks. Then you have to pay capital gains tax on what to you is a retirement account. You were taxed when you earned the money and then you were taxed again when you try to withdraw it from your investment account simply because the stock increased in value.

Lastly there is an argument that's not really about "Double taxes" but is a good argument against our 'current' capital gains system. It's that much of capital gains is not, in fact, profit. If your capital assets are your retirement fund for example, and you hold an index for 30 years or more, when you sell that in retirement the increase in value is treated like profit, when in fact a lot of the increase in value is due to inflation. There are ways to tax that would take inflation into account but the United States has never taken action to change it.

If anything I think the most credible argument against capital gains is that it discourages investment. For example, I have an index fund that pays dividends. In most cases people choose to re-invest those dividends into the same stock. So the index pays out $20 a month in dividends and my account just uses that to buy more shares. But I have to pay capital gains on those dividends... the result? I invest less back into the index.

Re:uh, yeah... (1)

spitzak (4019) | about a year ago | (#45065897)

I really do not buy the second version at all:

You earn money in some way, and you are taxed on it. Then you take that money and decide to save it. You start an investment account and invest in stocks. Then you have to pay capital gains tax on what to you is a retirement account. You were taxed when you earned the money and then you were taxed again when you try to withdraw it from your investment account simply because the stock increased in value.

Sorry, I only see the increase in value being taxed. That is NOT the same money being taxed twice, it is NEW money.

I fully agree with your later statement that inflation should be taken into account (except no refunds if the resulting calculated tax is less than zero). But 99% of the complaints are about short-term investments which inflation does not effect. I do not think trading some money with somebody in one day should somehow make your income taxed less depending on whether it is classified as a "capital gain" or not. And inflation does not change prices in that short period of time as it is not a continuous slope.

It should all be taxed the same. Anything you sell you are allowed to subtract the inflated value of the original purchase price (except clamped so you cannot claim you lost money). This is part of your income. Taxing different forms of income differently is government market manipulation just like taxing larger sodas differently and should be hated by libertarians.

Re:uh, yeah... (1)

nedwidek (98930) | about a year ago | (#45065857)

It gets taxed via AMT (alternative minimum tax) in special cases. If your company gives you ISO stock options (as my wife's company did), you have a strike price and a vesting period. Once your stock option vests and you exercise it, you realize an on paper gain in wealth of current value of the stock less the strike price. You owe the AMT on this paper gain, which is treated as a pre-payment of any cap gains you'll owe when you sell it. So you hold it a year and then sell for cap gains long. If cap gains taxes are more than what you paid in AMT, you pay the difference. If it's less, you don't get a refund for a year. Since we're not rich, we did a straight sale when the option vested and paid income tax. :P

It would have been more money in the long run if we'd had the money to do it the right way. We could have swung the strike price, but the AMT would have killed us. Plus we just decided to go with easy as the headache for the difference was just not something we'd want to deal with anyways.

Re:uh, yeah... (1)

sjames (1099) | about a year ago | (#45066935)

Excellent! Since the money a corporation pays to employees was already taxed, we can eliminate the income tax and sales taxes entirely. Also, when you pay it to a business, they get to exempt that portion because it was already taxed once.

Somehow, that doesn't seem quite workable, I guess we have to let money be taxed more then once sometimes.

Re:uh, yeah... (1)

anyGould (1295481) | about a year ago | (#45074475)

Heck, since every dollar (excepting whatever the Mint generates each year) has already been taxed, we shouldn't have to pay taxes on *anything* anymore, right?

Rich People Find Loophole.... (1, Insightful)

MatthiasF (1853064) | about a year ago | (#45064169)

Courts close loophole...... paid off politician gives amnesty to everyone who used loophole..... and rich people always win.

Government fails the 99% yet again.

Re:Rich People Find Loophole.... (1, Interesting)

interval1066 (668936) | about a year ago | (#45064227)

I agree with you, to a certain extent. But in an ostensibly capitalist country it neesd to be ok to be a capitalist, otherwise the people with the capital flee the country. I think if taxes were simplfied rather than remain the incredibly complex morass of laws and regulations we have now, we might have a better chance at collecting them.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064293)

How are state subsidies to people who don't need them 'capitalist'?

Re:Rich People Find Loophole.... (1)

interval1066 (668936) | about a year ago | (#45064337)

How are state subsidies to people who don't need them 'capitalist'?

Don't need them? You ever start a company, with the potential to employ people? I thought not. Protip: It takes a lot of money.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064425)

So what? Yeah, it takes money, so it means I have to pay for your employees through taxes?

Protip: if you can't pay your employees, then you are failing.

not retroactively taking away a paycheck is subsid (1, Insightful)

raymorris (2726007) | about a year ago | (#45064799)

What?!?! The tax RETROACTIVELY took money that people had earned years ago. You work 80 hours a week for several years, then sell the business, finally reaping the rewards of your hard work. With the money, you pay off the credit cards or other debts you incurred while getting the business going. Two years later, the state comes along and says they want that money.

How is ceasing that nastiness a "state subsidy to people who don't need it"? Are you high?

Re:not retroactively taking away a paycheck is sub (0)

Anonymous Coward | about a year ago | (#45066195)

Um, because you're completely wrong? It was a retroactive tax CREDIT, not a retroactive tax.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064311)

You mean like the multinational corporations?

Re:Rich People Find Loophole.... (2)

MonkeyDancer (797523) | about a year ago | (#45064313)

But in an ostensibly capitalist country it needs to be ok to be a capitalist, otherwise the people with the capital flee the country.

Don't forget to pay the exit tax [wikipedia.org] on the way out!

Re:Rich People Find Loophole.... (1)

khallow (566160) | about a year ago | (#45065171)

But if you do "forget", there's not much they can do about it.

Re:Rich People Find Loophole.... (1)

Shadow of Eternity (795165) | about a year ago | (#45065657)

Funny I didn't notice germany, which has more new millionaires than any other country, hemorrhaging population recently. Or the scandinavias. Or pretty much anywhere that isn't a blatant kleptocracy.

Re:Rich People Find Loophole.... (1)

the eric conspiracy (20178) | about a year ago | (#45065833)

That seems unlikely.

According to this [msn.com] the US created more new millionaires last year than Germany has TOTAL.

Nonsense... (1)

bayankaran (446245) | about a year ago | (#45066795)

But in an ostensibly capitalist country it neesd to be ok to be a capitalist, otherwise the people with the capital flee the country. I think if taxes were simplfied rather than remain the incredibly complex morass of laws and regulations we have now, we might have a better chance at collecting them.

The rich will flee to where? To Somalia - the land with no taxes!

The whole argument 'if you tax the rich, they will flee' is nonsense perpetrated by the rich. They are in California, New York or Paris for a reason - these are good environments to be with your wealth.

Why do the rich Russian oligarchs buy property in London and other Western cities...its not because of their new found love for British monarchy, kidney pie or Shakespeare, its because of the quality of living and the 'rule of law' which may not be usurped by the Politicians in power if you fall out of favor. Only democracies can guarantee that to some extent - at least until you turn against the state in a serious way.

Re:Rich People Find Loophole.... (5, Insightful)

Anonymous Coward | about a year ago | (#45064239)

The concept of "Ex Post Facto" is not a loophole, it's a foundational principle of justice. This same "loophole" prevents the government from declaring whatever you did yesterday a crime and throwing you in the slammer for it.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064265)

Pray tell: what, in your opinion, is the crossover point between being an entrepreneur who has worked long hours to build your business from your garage up into a stable entity that someone else wants to invest in and you finally some reward for your time and hard graft, and being a rich prick?

Soft pitch again (0)

Anonymous Coward | about a year ago | (#45065157)

Pray tell: what, in your opinion, is the crossover point between being an entrepreneur who has worked long hours to build your business from your garage up into a stable entity that someone else wants to invest in and you finally some reward for your time and hard graft, and being a rich prick?

Mark Zuckerberg.

Re:Rich People Find Loophole.... (3, Insightful)

tdelaney (458893) | about a year ago | (#45064385)

No - courts close loophole, loophole can't be used anymore.

Laws that take away freedoms (e.g. making something a crime) or property (e.g. taxes) must not be retroactive. This includes loopholes - if use of the loophole was determined to be legal under the law as it was at the time anything gained from it cannot be taken away.

I dislike people using loopholes to advance themselves as much as anyone, but not setting precedents of making retroactive legislation is more important.

Re:Rich People Find Loophole.... (4, Insightful)

yurtinus (1590157) | about a year ago | (#45064501)

Exactly - you wouldn't want something like the earned income tax credit or mortgage interest deduction to be invalidated and suddenly make you liable for thousands in back taxes.

As we always clamor: streamline the tax code and get rid of this myriad of deductions and loopholes

Re:Rich People Find Loophole.... (0)

GauteL (29207) | about a year ago | (#45067653)

I've used two legal forms of tax "management" in the UK; child care vouchers (vouchers taken before tax to pay for child care costs) and the "salary sacrifice scheme" (where your employer pays your national insurance for you, causing your taxable income to become lower).

The difference is that these were both understood (and in the case of child care vouchers an actively encouraged benefit) to be legal by all parties; employers, employees and the government.

If you actively seek out loop holes for yourself in a clever attempt to be "smarter" than the government in order to pay less tax and it later turns out that you weren't (and your loop hole was in fact illegal tax evasion), then you should not be able to get away with it. Ignorance is not a defence, and you took a calculated risk.

Re:Rich People Find Loophole.... (1)

GauteL (29207) | about a year ago | (#45067767)

Please mod down my post above; I had misunderstood the situation. The "loop hole" in question seems to have been a government encouraged benefit, more or less the same as the child care vouchers. If child care vouchers later turned out to be illegal under some EU regulation which the UK government had misinterpreted, then going after all the users for tax evasion would have been terrible.

Re:Rich People Find Loophole.... (1)

Just Some Guy (3352) | about a year ago | (#45064891)

A synonym for "loophole" is "legal". The law said "if this, then that", and someone decided to meet the predicate so that they could use the result. Blame the politicians for not clearly specifying their intent, not the people who obeyed the law as it was written.

Re:Rich People Find Loophole.... (1)

tompaulco (629533) | about a year ago | (#45065813)

By the way, this "loophole" that the businesses exploited is the same sort of loophole as your mortgage interest deduction, or your automatic deductions for dependents.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45065901)

By the way, this "loophole" that the businesses exploited is the same sort of loophole as your mortgage interest deduction, or your automatic deductions for dependents.

No, look at why the courts tossed it out. It was a perk given out to local business owners.

Re:Rich People Find Loophole.... (1)

tompaulco (629533) | about a year ago | (#45066005)

Oh, then I am correct. It is not a loophole. It was put there on purpose, like mortgage deductions or deductions for dependents.

Re:Rich People Find Loophole.... (1)

GauteL (29207) | about a year ago | (#45067623)

Hang on. Courts don't have law making ability (*). That is up to the elected government. If a court closed a loop hole, it just means it was already illegal and the court has simply decided how the law should be interpreted. When assholes use shady loopholes to benefit themselves, they may have believed it to legal, but they run the risk of that loophole turning out to be illegal after all (and ignorance is not a defence). If a court later concludes that the practise was indeed illegal, going after them is not "Ex Post Facto" or retroactive legislation.

(*) Granted they do have the ability to create presedence, and may change commonly understood interpretations of the law. This, may in practise, appear pretty close to defining new law.

Re:Rich People Find Loophole.... (2)

GauteL (29207) | about a year ago | (#45067737)

To clarify. My post is about the principle of retroactive legislation and tax loop holes; not about this current case, which seems rather special in that the businesses followed state accepted (and encouraged rules) for tax management created to stimulate startups. That these rules later turned out to be unconstitutional is not the fault of the businesses, but the fault of the state government creating a poor state law.

The businesses have thus broken the law, but in this specific case the right thing to do is to give them amnesty because it was done unwittingly, they had no criminal intent and acted in good faith, based on a law which could not be legally upheld.

It is imporant not to treat this as a general rule though. The case was very specific. If you search for unintended loop holes and exploit these for your own benefit, you must take the risk that you are wrong about the legality of the loop hole.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064467)

Courts close loophole...... paid off politician gives amnesty to everyone who used loophole..... and rich people always win.

You forgot the final step. Bragging on the internet how great an entrepreneur you are because you got your tax loophole back.

In short, we succeeded by doing what we do best: being entrepreneurial.

He's not an entrepreneur, he's a special interest lobbyist.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064499)

Yeah, we see a whole lot of innovation out of socialist countries with leeches sucking the system and the "rich" dry every chance they get.

Re:Rich People Find Loophole.... (0)

Anonymous Coward | about a year ago | (#45064677)

"Yeah, we see a whole lot of innovation out of socialist countries"

You mean, like Israel, Finland or Norway? Yes, a lot of innovation is coming from them.

And I certainly would live in any of them before thinking about USA.

Re:Rich People Find Loophole.... (2)

PPH (736903) | about a year ago | (#45064705)

Almost correct.

Rich people lobby for loophole and get legislation creating it. After some time, court invalidates it. Rich people ask for and get amnesty for period between creation of loophole and its final invalidation.

In theory, they could play this game forever. Simply pass the 'same' legislation again with some minor differences making previous court decision not applicable. Case goes back to court, invalidating new loophole. But amnesty is granted for the period between law enactment and court finding. Again. For all intents and purposes, business would get its loophole. And if they are smart, they can time the events to which these transient loopholes apply, avoiding tax altogether.

Re:Rich People Find Loophole.... (1)

MatthiasF (1853064) | about a year ago | (#45064791)

I stand corrected.

Re:Rich People Find Loophole.... (1)

PPH (736903) | about a year ago | (#45065271)

What's going to be even funnier: The court overruled the original tax loophole. The legislature passes and Gov Brown signs a bill prohibiting levying of retroactive taxes. But the court has not yet spoken on this second piece of legislation. What if the court overturns it as well?

Two things come to mind. IANAL, so bear (bare?) with me. The Constitutional prohibition against ex post facto laws is a restriction on the powers of Congress. Its not certain that the courts can't say that the law was one way, you tried (and failed) to change it. So we (the court) are merely putting things back the way they were, as though no faulty legislation had ever existed. And this includes tax liabilities. The second thing is: If your tax attorney/accountant suggests some strategy, it would behoove you to ask if said strategy or its underlying legislation has withstood a test in court. If not, you could be fsck'd.

Re:Rich People Find Loophole.... (1)

atgaaa (1869296) | about a year ago | (#45069661)

Can you please define "rich people"?

Sounds like the Massachusetts software tax (1)

Anonymous Coward | about a year ago | (#45064177)

What probably happened in both places is that businessfolks in IT, particularly entrepreneurs, don't have a lobbying presence in the state capitols like the old-line manufacturing and service business do. So when state government is hurting for cash, and they often are, they know they can't disappoint their friends who just wined and dined them in a skybox at the big game. By contrast, software and IT looks like a big cash cow, ripe for the plucking.

Re:Sounds like the Massachusetts software tax (0)

Anonymous Coward | about a year ago | (#45064683)

What probably happened in both places is that businessfolks in IT, particularly entrepreneurs, don't have a lobbying presence in the state capitols like the old-line manufacturing and service business do. So when state government is hurting for cash, and they often are, they know they can't disappoint their friends who just wined and dined them in a skybox at the big game. By contrast, software and IT looks like a big cash cow, ripe for the plucking.

These people got their own tax loophole by lobbying in the first place. Then when the courts ruled giving just them a tax loophole and not everyone, the loophole was closed. So these guys whine up a storm and get an even bigger loophole. I'm not sure what story you're talking about.

Looked At Another Way... (1, Insightful)

hondo77 (324058) | about a year ago | (#45064567)

A few rich guys who don't want to pay their taxes get together to do something about them. They have the resources to lobby a bill almost full time for nine months. In the end, they get their bill passed but whine that democracy is broken because they had to work really, really hard at it.

Must be nice. Some of us have day jobs.

Re:Looked At Another Way... (1, Insightful)

Gavagai80 (1275204) | about a year ago | (#45065641)

This is all true -- but in this one case I'm okay with the rich people having their way because retroactive taxes create too much uncertainty, potentially preventing businesses from reinvesting their profits into new projects for fear of needing that money for unexpected retroactive tax.

Re:Looked At Another Way... (1)

TheSpoom (715771) | about a year ago | (#45069729)

I don't think that's fair. If the federal government retroactively increased your taxes, I'm pretty sure you'd be pissed too, and probably join / start a class action lawsuit to reverse it.

retroactive laws (1)

Anonymous Coward | about a year ago | (#45064953)

are bullshit

Re:retroactive laws (0)

Anonymous Coward | about a year ago | (#45069037)

are bullshit

Retroactive laws are specifically forbidden by the US Constitution, how did this get passed in the first place?

I doubt this is over (1)

spitzak (4019) | about a year ago | (#45065965)

Anybody who reads the actual story will realize that this is a fight with out-of-state companies, not with the state. They want to extract a bunch of money from California and will probably take this to the courts to try to get it.

Basically California offered a tax break to in-state entrepreneurs that it did not offer to people who lived out-of-state. For some reason this was declared unconstitutional. The outside groups are now claiming that unless California charges the in-state people retroactively then they must get refunded the same amount.
I assume the bill is some sort of legal thing to undermine this claim. Note that everybody is paying the same tax now.

Rich People Taking More Again (0)

Anonymous Coward | about a year ago | (#45066469)

Just another example of the rich raping are this once great country. We need that money to close the hole in the budget for the schools and social services. Also to bring back redevelopment districts to prevent urban sprawl and the blight it brings. The people running start-ups don't need it. They are started by wealthy people from top tier schools. The janitor struggling on the minimum wage isn't going to start anything. He needs the services that government provides through adult education and unemployment.

Nai Modnar

Two important things. (0)

Anonymous Coward | about a year ago | (#45067475)

Even poor people can find loopholes, in fact poor people tend to take advantage of the system a lot more than rich people, why? Because they are the ones leaching off of tax dollars. The second thing is that there are tax breaks for everyone in any industry even without an industry. It's nobody's fault but yours if you don't know how to invest your money or find these loopholes, hell... Just hire an accountant and they will do just that for you. Anyhow, people tend to be outraged at these mega corporations that provide jobs and stability for millions but they forget about the lazy that do nothing but suck up the economy dry.

The second thing is that California is nuts with taxes. Startups can't startup in California anymore, their taxes are too high and you have to renew every year and not just a few dollars either. There's a good reason why corporations and startups are all moving out of state, it's because it's easier to just go to silicon valley if need be for investors and keep your HQ out of state. The price of an airline ticket or two is pretty cheap compared to the annual taxes that they charge LCC's and S-Corps. California is edging itself closer to complete bankruptcy and they only have themselves to blame. Over taxing and over regulating kills business and when businesses are hurt; jobs are lost and big corporations get even bigger because they can survive through it (or move overseas if need be). Startups barely have enough capital to pay for a pizza usually when no investors are helping.

Not retroactive, but it was the state's mistake (1)

DutchUncle (826473) | about a year ago | (#45069659)

I compare this to the cable company: "You ordered basic cable and have been paying for it; we mistakenly enabled the super-deluxe package, so you owe us back charges." No. If the service was set up wrong, that's the service's error, not the customer's fault. If the state had a tax rule, and taxpayers were complying with the rules as specified, and then the rules turned out to be invalid, that is not the taxpayers' fault.

My bigger problem with this kind of thing is that when government makes an error, they present it as if the people were cheating. Also when people set up legitimate plans based on the current rules, and the rules change, should the plans be grandfathered or not? Card or board games where the rules change in the middle can be amusing, but changing rules would be annoying in sports, and ruinous where money and law are concerned.
Load More Comments
Slashdot Login

Need an Account?

Forgot your password?

Submission Text Formatting Tips

We support a small subset of HTML, namely these tags:

  • b
  • i
  • p
  • br
  • a
  • ol
  • ul
  • li
  • dl
  • dt
  • dd
  • em
  • strong
  • tt
  • blockquote
  • div
  • quote
  • ecode

"ecode" can be used for code snippets, for example:

<ecode>    while(1) { do_something(); } </ecode>