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California Government Helps the Rich

April 17, 2012

Just in time for tax season, here’s a fine example of the California government helping those mean rich people with a last-minute tax savings that will cost the government money to process.  It’s yet another example of the state that’s a run-away petri dish for America’s government-first culture going so far that it backfires and benefits only the people they targeted in the first place… while many less-well-to-do people suffer.  (You’ll note that I had a lot of fun writing that paragraph.) 

Detials here.  You have to read the whole thing to really get the story, but here are a couple snips that help.

Historically, almost all property owners who itemize deductions write off 100 percent of their real estate taxes, even though some might not be deductible. Property tax bills do not spell out which ones are and are not deductible and there is no easy way to figure it out.

The state last year attempted to “clarify” rules by essentially saying that people had to dig into complicated formulas and look at actual tax items on their property tax to determine the right deduction.  They attempted to get more data from the IRS, who essentially told them that their tax ideas were nuts.

Although the letter was dated Feb. 6 and posted on the IRS website in March, the tax board says it never received it.

“We saw it on April 5,” when a legislative analyst ran across it on Taxanalysts.com, a news service for tax professionals, says Denise Azimi, a spokeswoman for the tax board. Azimi confirms the letter was a response to the tax board, even though its name has been redacted.

And then they waited another week or so to publish becuase they kept trying to get more data from the feds.

So now it’s the last minute of tax day, and most of the people in California have filed already.  Some of them potentially missed five (and maybe six) figures of potential tax deduction, and even low-level property owners have likely shifted down a tax table if they did what California suggested.

For some people, likely on the lower-end of the scale, the difference might not be enough for them to go back and re-file a return.  For the higher-end payers, though, this is a necessity to redo given potential for a big change to taxes.  So the middle class end up having to decide if the cost of recovering their own money is worth it, while the high end of the spectrum will reclaim by necessity and cost the state the extra processing dollars.

Really, I find this amusing.  California attempted to find any type of loophole to get more money, and it got whacked.  Now it’s on the hook to give that money back.  But the bad part is that it’s the middle class that pays the biggest burden, and that goes completely unnoticed in view of the larger scale of silliness.

 

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