Prop 24: The Poor Rich!
(Prop 24 changes HERE.
Yes on Prop 24 HERE
. No on Prop 24 is HERE
Proposition 24 would prevent several tax breaks for wealthy corporations and people, and so tests voters’ belief in the idea that rich people can handle money better than poor people, and rich people can invest us out of recession, if we just give them enough money.
Even before an analysis of the measure, we might wonder if there’s any substance to the idea that the wealthy can invest us out of depression. If the wealthy are so good with money, why do they need tax breaks, can’t they make money now? Most of us are busted flat, we don’t get tax breaks, in fact the cost of every government service is going up for us. In addition, WHO HAD THE MONEY BEFORE THE DEPRESSION, THE POOR? The greed of the wealthy got us here, and the pretense of property owners to be wealthy. So, no, the theory, at first glance, doesn’t seem to be verifiable. Indeed, one might propose a contrary theory, that if we stop taxing anyone making less than $100,000 a year, people might stimulate the economy by paying bills, sending kids to school, buying groceries, and eventually, buying houses again. Perhaps giving money to the masses doesn’t work, but let’s try it once and see.
The two sides call the Proposition two different things, of course. Pro Prop 24 calls it a tax fairness act; anti Prop 24 calls it the job tax act.
But, what if we look more closely at Prop 24?
The Proposition is an opportunity for the people of California to turn back tax relief given on certain kinds of income by the governor and legislature during 2008-2009. They, too, believe somehow, that giving money to the wealthy will stimulate something (it does, the wealthy).
However, the tax benefits also help California’s small businesses, many of whom are not wealthy, but who do employ folks in the communities where they work. That really might make a difference at the kitchen table.
The clearest analysis of Prop 24 comes from the Secretary of State
A NO vote on this measure means: Three business tax provisions that were recently changed will not be affected. As a result of maintaining current law: (1) a business will be able to deduct losses in one year against income in more situations, (2) most multistate businesses could choose to have their California income determined based only on a single sales factor, and (3) a business will be able to share its tax credits with related businesses.
A YES vote on this measure means: Three business tax provisions will return to what they were before 2008 and 2009 law changes. As a result: (1) a business will be less able to deduct losses in one year against income in other years, (2) a multistate business will have its California income determined by a calculation using three factors, and (3) a business will not be able to share tax credits with related businesses.
From the Legislative Analyst’s Office
Restricts Ability of a Business to Use Operating Losses to Lower Taxes. This proposition prevents a business from using an NOL carryback to reduce its taxes for previous years. Businesses could still use NOLs to reduce their taxes in future years—though they would have 10 years to use each NOL, rather than 20 years.
Ends Ability of a Multistate Business to Choose How Its California Income Is Determined. This proposition eliminates the option that multistate businesses will have to choose between two formulas to determine the portion of their income subject to California state taxes. Instead, businesses’ taxable income in California would continue to be determined based on the formula currently in use which considers businesses’ sales, property, and payroll. (The tax law used for businesses that only do business in California would be unchanged by this part of the proposition.)
Ends Ability of a Business to Share Tax Credits Within a Unitary Group. This proposition prevents business entities within a unitary group from sharing tax credits in the future. (While it is not certain, it appears that businesses would be able to use tax credits that already have been transferred to them.)
When a family makes less money, they automatically pay less taxes, and businesses do too. However, the no-on-24 website gives this information:
Prop. 24 would literally tax new job creation, hit California employers and small businesses with $1.3 billion in higher taxes each year, and stifle job growth in our most promising industries. The State Franchise Tax Board estimates 120,000 businesses could be impacted.
Impacted, but how much? That isn’t clear. “Yes on” says multi-state corporations would benefit, but local small businesses wouldn’t. The truth appears to fall somewhere in the middle.
The no-on site doesn’t mention large businesses, but they are the most skilled and most able to do that, since they can shift assets around in a way that isn’t always easy for real small businesses. Likely, the reason “stopprop24.com” focuses on “small businesses” and “jobs” is that’s what voters most care about, but perhaps not what the corporations who are paying for the fight most care about.
Increased State Revenues. This proposition would increase state General Fund revenues by increasing the taxes paid by businesses. When fully implemented by 2012–13, revenues would increase by an estimated $1.3 billion each year. There would be smaller increases in 2010–11 and 2011–12. More than one-half of these estimated increased taxes would be paid by multistate businesses as a result of the elimination of the single sales factor option.
Effects on Education Funding and the State’s General Fund. Proposition 98 (passed by the voters in 1988) determines the minimum amount of state and local funding for K–12 schools and community colleges each year. Under the formulas of Proposition 98, a significant part of Proposition 24’s revenue increases would be allocated to schools and community colleges. The remaining revenues would be available to the Legislature and the Governor for any purpose.
From the Legislative Analyst’s Office, HERE
The total tax benefit would be between $1 billion and $1.3 billion, but there might be complimentary losses in jobs. Maybe.
And, “maybe” is the key here. Both sides make claims which are only partially true, or may or may not become true.
Yes on says: 98% of California businesses would not be effected, but evidence doesn’t seem to bear that out. Certainly a much larger percentage of businesses would benefit, but perhaps not very much.
No on says: they have a study that shows a loss of 322,000 jobs and $1.8 billion dollar tax loss. Problem is, those losses might happen anyway, no one knows. Some sources say the recession is over, and has been over for months now, but foreclosures continue and the jobless rate shows no real change.
Both sides have tons of superfluous junk on their sites, like how much corporations pay their CEOs, or how many jobs were lost when. Those are “objective facts” which are intended to have an emotional impact, but don’t really add much to the discussion of how the measure will impact our communities.
Final analysis: California Teachers Association likes Prop 24 and have contributed eight and a half million to it’s passage, even though there is no guarantee the measure would bring more money into the state coffers, and what it does bring in might not go to schools. Large corporations like Fox, Viacom, Disney, GE, Genentech and Time Warner are against it and have provided over a million each to fight it.
Prospect recommendation: None.
Who do you believe? If you think we’d be better off to take the tax money now, and that California is just too rich a market for corporations to ignore, vote Yes. It might help schools, or at least teacher’s unions.
If you think the rich need your help, or that decreasing taxes will result in greater tax revenues down the road, vote No. It might help small businesses, or at least big ones.