Good Reason To Vote For The Recall

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Governor Newsom is maneuvering in every way he can to make sure he wins the recall vote. Don’t doubt the state reopening on June 15th was a political decision. There are many reasons to consider voting to replace the Governor. Let me convey a tale of incompetence that is symptomatic of why this state is a disaster for its residents and we need someone in charge who has a clue.

You may be familiar with PPP loans. Billions of dollars were provided by the federal government to small business employers in 2020 with the idea that the businesses use the monies to keep their employees on staff. At the time the program was established the idea was that the employers would keep their staff together for a quick bounce back after a couple of months of the pandemic. Of course, that plan failed because the pandemic ended up stretching out months longer than initially anticipated. But millions of Americans received salaries as opposed to unemployment benefits.

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The federal government determined last December that the proceeds of the loans were not taxable, and the related expenses would still be deductible. Immediately after that, the state government of California decided that was too favorable to employers and out of sync with their normal habit of punishing businesses and determined the proceeds of the loan were taxable. It was annoying, but at least we knew the rules we were operating under and so did the people writing tax software so we could prepare tax returns.

We come to the end of February. California passed a law providing benefits to residents for their COVID disruption.  We were told another bill was being passed that week to aid the employers who had PPP loans. It was good news for business owners even though some tax returns that were already filed would have to be amended. It is nuts to start changing tax law two months into tax season, but the benefit was so big for hurting employers we could adjust.

Then at the end of the week, no bill was passed. Then another week goes by and another and another.  There was no news about AB80, the bill to provide the state PPP loan relief. The March 15th deadline for filing of entity returns came and went. Tens of thousands of tax returns had to go on extension because the state had left tax preparers and thus residents in limbo. 

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We get to the end of March and Congress is working on passing the Biden COVID bill. Senate Majority Leader Chuck Schumer decides to slip a clause in the bill at the end that says that any state receiving money from the federal government from the bill cannot cut their taxes until after 2024. This is blatantly unconstitutional, but the clause had to be taken to court and a lawsuit was filed by Ohio the day after the bill was signed and later joined by 20 other states.

Governor Newsom realizes that AB80 which should have been passed weeks ago was now potentially illegal as it might be considered a tax cut. He asks for a ruling by the Treasury Dept. By now April 15th was upon us and we were extending hundreds of thousands of tax returns. Tax returns that people needed for loans and school scholarships and other reasons.  Newsom does not ask for a quick answer, so the feds blow another two weeks. The feds finally say that AB80 was not a tax cut and would be legal. 

The legislature and our Governor rewrite AB80 totally. When the bill passes there was a bundle of questions that needed to be clarified by the state. That takes another nine days. Finally, on May 7th tax preparers were provided clarity on how the state of California was taxing PPP loans.  Hundreds of thousands of businesses and individuals now had rules allowing them to file their tax returns in California. Rules that should have been in place on January 1st

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Tens of thousands of individuals were delayed in getting their federal or state refunds.  Many businesses overpaid taxes because they had to pay their taxes as if they would not have any state PPP tax benefit. God only knows when people will get their money back. Then there are the people who filed their returns before the unthinkable happened – the state discussing changing tax law in the middle of the filing season. It will take them months to get their overpaid taxes back.

This is an incompetent government on steroids. But then again this is the same state that gave out unemployment benefits to criminals to the tune of billions of dollars. The irony here is that is easier for criminals to get money out of the state than it will be for taxpayers to get their state-caused tax overpayments returned to them. 

To my knowledge, not one person has been fired for any of these messes. Maybe the guy at the top needs to be.

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This article was published on June 6, 2021 in FlashReport and is reproduced with the permission of the author.

 

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