Bill Leonard, Member - Board of Equalization

There has been extensive news coverage this week about the alternative budget plan put out by Assemblymembers Keith Richman (R-Simi Valley) and Joe Canciamilla (D-Antioch). The plan is the result of discussions of a bipartisan working group of legislators, but none of the 16 or so members who participated-- other than the two authors-- have endorsed the proposal because the spending controls are too severe for the Democrats and the tax increases too depressing for the Republicans. I understand that Assemblyman Richman presented the plan to the Republican Caucus but was not asked a single question about it. He received neither criticism nor compliment. Assemblyman Canciamilla has not been permitted to present the plan to the Democrat Caucus.

***Every Penny Counts***

A key component of any successful budget proposal this year must include reforms to prevent the state's structural deficit from growing. However, even such reforms will be meaningless if the state continues to waste our money in silly ways. Consider three examples we learned of last week: 1) Because Governor Davis failed to give adequate notice to the federal government, California will have to pay an extra $10 million to the Feds to send payments to the aged, blind and disabled. 2) Philip Shenton of Oakland received seven checks from the Franchise Tax Board, each in the amount of $438.69. The checks kept coming for six months because his Social Security Number had been erroneously linked to another taxpayer. The FTB did not detect the error. An FTB spokesman explained, "Our computers can only do so much." 3) Three years ago the state changed the way trucks are charged weight fees. The change was supposed to be revenue neutral, but, according to the Department of Finance, actually resulted in $160 million less being collected. So now the Governor wants to boost the fees 42%. California Trucking Association Vice President Stephanie Williams put it best, saying, "During a recession, it's not a good idea to tax people who can leave."

***Speaking of Leaving the State***

One of Forbes magazine's annual features is a ranking of the best U.S. cities for businesses. In 2002, two California cities topped the list: San Diego and Santa Rosa. Six of the top ten were in the Golden State. In 2003, Santa Rosa was the highest-ranking California city and it placed 23rd. One does not have to think too hard to figure out the cause of the plummet. California's job-climate has been strangled by a burdensome tax system, complex regulatory system, skyrocketing workers' comp costs and daily discussion of new, higher taxes. The Forbes survey is merely a reminder to us of what decisionmakers in business already know: the uncertainty and unfriendliness of California's job-climate gives them great incentive to locate and expand elsewhere.

*** Sovereignty and Citizens Rights***

Since I was a staff member to Congressman Jerry Pettis I have been working with California Indian Tribes regarding a number of issues, but the one that has always interested me the most is that of tribal sovereignty. After conquering the tribes, the United States government offered treaties that recognized sovereignty. Of course, until many tribes took advantage of Federal law by offering gambling, the idea of sovereignty did not bring a lot of bread to the dinner table. A recent U.S. Supreme Court case reflects the ongoing struggle to define this term.

The Paiute-Shoshone Indians in Bishop, California sued Inyo County over the propriety of a search warrant. The county was investigating suspected welfare fraud and asked the tribe to disclose its employee records. Now, you and I lost this sovereign right long ago. California government agents can come onto our property at any time and take our employee records. I do not like this law. I think it violates constitutional protections against search and seizure that are supposed to be available to all. The tribe reacted like most employers would. It said NO. Inyo County went to a county judge and got a search warrant. The tribe authorities resisted, claiming that their sovereignty precludes search warrants from applying to them.

The Supreme Court ruling on May 19th (caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&navby=case&vol=000&invol=02-281) was not exactly from King Solomon. They split the baby this time. They ruled that the county search warrant might be valid and that Inyo County was not liable for trying to get the information requested in the warrant. But the high court also said tribal sovereignty means something and that the trial court failed to explore this issue because the lawsuit was filed regarding the right of a citizen to object to a search warrant and clearly Indian sovereign nations were different than American citizens-- Indian or otherwise.

So the matter is still unsettled even after a 9-0 Supreme Court decision. I find it uplifting that tribal governments are fighting for sovereign rights as it may help the rest of America resist government's encroachment of their rights as citizens. I also find it interesting that sovereign nations-- whether they are tribal governments or Great Britain or France-- still need diplomats to represent their interests to other nations. Often diplomacy between nations has avoided wars or cemented friendships. This is something that California governments and tribes would do well to follow.

I note in this case that the Paiute-Shoshone Tribe offered to Inyo County to share the employee records if they would show the tribe the actual welfare application signed by the person suspected of fraud. I like this. I am disappointed that Inyo officials refused this reasonable diplomatic solution to the problem. And as an employer I would like to have the opportunity to see some evidence that the government has suspecting fraud by my employees before I am required to give up my company records.

ISSUE FOCUS: TECHNOLOGY

***The Case for Spam***

One of the greatest characteristics of the Internet is freedom. The web has truly opened the world-whether for a shut-in in rural America or a student on China. With that freedom come challenges. One that has been discussed here in great detail is sales tax on Internet purchases. My point has always been that taxing the Internet will not work because of the freedom people have to locate their e-businesses off-shore and avoid U.S. regulation. The same thinking applies to the many attempts to regulation unsolicited e-mail (aka "spam"). Assembly Bill 567 (Simitian) would authorize the recipient of spam to sue for up to $1,000. Not only will this do nothing to stop spam, it also has the potential to clog the courts with frivolous lawsuits from people trying to prove they were damaged by spam. A similar measure is moving through Congress right now as well. Reason magazine editor Nick Gillespie recently explored (http://www.techcentralstation.com/1051/techwrapper.jsp?PID=1051-250&CID=1051-061603A) not only the unforceability of such laws, but also the undesirability of them. He writes, "[S]pam, like the pornography it so often advertises, is in the eye of the beholder. Or, more precisely, the nuisance level of spam is highly subjective and can only be properly sorted out at the individual level. As The New York Times has detailed, the vastly popular 'Iraqi Most Wanted' card decks were almost completely a function of spam-based marketing; clearly, the folks who bought over 1 million decks in a matter of days didn't necessarily find that particular piece of spam insulting." And that is what makes the freedom of the Internet so appealing, despite its inconveniences.

TAX CORNER

***Do Not Neglect to File Your Returns***

In a case that came before me recently at the Board hearing in Culver City, an individual who found himself cross-wise with FTB was unable to prevail even though it appears that one of his employers had submitted an erroneous W-2 form. The form said that he had made around $170,000 when the employee claims he only made $69,000. When he realized the error, the man did call FTB and tell them the W-2 submitted for him was false --- but he made one critical mistake that resulted in FTB garnishing $40,000 from his wages. The mistake he made was that he never actually filed an income tax return for the disputed year in question. He could have done so and filed a federal form 4852 that would have corrected the false W-2 submitted by the company. I still voted in favor of the taxpayer because he did make an effort to resolve the matter and had some personal issues that exacerbated the problem -- but his failure to file a return of any kind led the majority to reject his story. I will repeat this lesson again and again: Do not neglect to file a tax return, even an incomplete one.

***Over-the-Counter Tax***

You have read here before about some of the oddities of sales tax law. For example, if you buy carrots for yourself to eat, they are not taxable, but if you are purchasing the carrots to feed to your pet rabbit, they are taxable. That may be an absurd example, but recently I dealt with a person having a more realistic situation. This person as diabetic and had purchased glucose test strips at a local drug store. The person was charged sales tax and thought that was odd since glucose test strips are medical devices. According to BOE Regulation 1591.1, those test strips would have been not subject to sales tax if they had been dispensed by a pharmacist. The regulation covers a variety of medical devices that are exempt from tax, but only when given by a pharmacist with a valid prescription.

MISCELLANY

***Three More Words to Know***

Each week, the Leonard Letter features a few of the words from a list of 100 words that every high school student should know. The full list may be viewed at

http://www.houghtonmifflinbooks.com/booksellers/press_release/100words/.

7. Belie—to misrepresent; to contradict: Previous experience belies the Governor’s belief that tax increase will generate as much new revenue as he predicts.

8. Bellicose—warlike in manner; having or showing a disposition to fight: Senator Republican Leader Jim Brulte is bellicose in his opposition to tax increases.

9. Bowdlerize—to modify or omit parts considered offensive: Republicans would like to bowdlerize tax increases from the Governor’s budget to make it more acceptable to taxpayers.

BOE AND LEGISLATIVE DATES

June 25 --- BOE meets in Sacramento.

July 1 --- Start of California’s fiscal year. The extent of interruption in government services if a budget is not passed by this date is unknown.

July 4 --- Independence Day.

July 9 --- BOE meets in Sacramento.

July 11 --- Last day for policy committees to meet and report bills from opposite house.

July 18 --- Legislature’s summer recess begins upon adjournment only if Budget Bill is passed.

NOTABLE DATES/ HISTORY

June 23, 1860 --- U.S. Secret Service created.

June 24, 1908 --- Grover Cleveland, 22nd and 24th President of the U.S., dies in Princeton at the age of 71.

June 24, 1884 --- John Lynch is the first black elected as chairman of Republican convention.

June 25, 1788 --- Virginia becomes 10th state to ratify the U.S. Constitution

June 25, 1951 --- first color television broadcast: CBS’s “Arthur Godfrey Show.”

June 25, 1991 --- Slovenia and Croatia declare independence from Yugoslavia.

June 26,1934 --- FDR signs Federal Credit Union Act to establish credit unions

June 27, 1867 --- Bank of California opens.

June 28, 1914 --- Assassination of the heir to the Austrian throne, Archduke Franz Ferdinand and his wife, Sophia, in Sarajevo by a Serbian Nationalist. This precipitated the war with Serbia that began World War I.

June 29, 1854 --- The Gadsden Purchase occurs: U.S. buys parts of Arizona and New Mexico from Mexico for $10 million.

GENERAL TAX INFORMATION

For answers to your general tax questions, call the Board of Equalization information center. Customer service representatives are available to help you from 8:00 a.m. to 5:00 p.m. Pacific time, Monday through Friday (except state holidays).

Toll-free number: 800-400-7115

TDD service for the hearing impaired
TDD phones: 800-735-2929
Voice phones: 800-735-2922

HOW TO CONTACT ME

Bill Leonard
Board of Equalization
450 N Street, MIC: 78
Suite 2337
Sacramento, CA 95814
Telephone: (916) 445-2181
Fax: (916) 327-4003

Email to: Bill.Leonard@boe.ca.gov


	Featured Links

	District 2 Offices BOE Meetings Taxpayer Services California Taxes Free Seminars CalGold Business Permits

| | |