Michael Schaus

California handed out over $120 million in tax credits and incentives for specific small business startups over the past five years. And now, like a child on a playground, the state’s Franchise Tax Board is asking for all that money back.

Over 2,000 small businesses are now being levied with hefty tax bills – some as high as $250,000 – for having taken advantage of a duly passed tax incentive program. State Senator Ted Lieu, D-Redondo Beach, said “[Businesses] relied on California law as it was written, that they would get a tax break if they invested in certain kinds of businesses.”

Silly Democrat. Doesn’t he know this is California?

At issue is a tax incentive program put in place by lawmakers that was recently declared unconstitutional by the courts. (See, Pelosi, this is why you read bills before passing them.)

After the court decided the incentive programs were unconstitutional by state standards, the Franchise Tax Board decided, “Hey. . . That means we should’ve been paid all those taxes!”

And thus the wheels of uncaring bureaucracy kicked into gear, by sending small businesses letters highlighting the massive amount of retroactive taxes due to state coffers. (Lucky for us this same kind of bureaucracy will soon be shelling out fines and penalties under the direction of the “Affordable Care Act.”)

Ken DeVore, with the National Federation of Independent Businesses, said “it sends a message that you can’t trust government.” . . . It’s a shame Ken never reads this website.

The most chilling (and unsurprising) portion of a Local CBS story was near the end of their piece of accidental journalism:

Investors who could be hit by the retroactive taxes did not want to go on camera, fearing they would become an easy target for the Franchise Tax Board.

Wasn’t it Thomas Jefferson who said government should fear the people, and not the other way around? The apparently unanimous fear of California’s taxing authority is merely the symptom of an over-reaching and intrusive authority. Investors hit by the taxes refused to speak out, in fear of actions taken by a government agency that has declared itself entitled to other people’s legally acquired wealth. (Heaven forbid any of these investors also declare they are members of the tea-party. . .)

Not being a California Constitutional expert (let alone an expert on the Socialist Republic of California) it is impossible for me to make a judgment on the legality of the tax incentives. It is, however, painfully clear that special treatment, retroactive taxation, and government intimidation are not traditional American values.


Michael Schaus

Michael Schaus is the Associate Editor for Townhall Finance, and the Executive Producer for Ransom Notes Radio. He is a former talk show host and political activist. Having worked in fields ranging from construction to financial investment, his perspectives and world views are forged with a deep understanding of what it means to be an American.
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