download - Contra Costa County Bar Association

More documents

Recommendations

Info

Budget Gridlock, cont. from page 9 that growing government will lead to more division, not less. Each time we add to the size of government, we add to this unprecedented partisanship and potential for gridlock. We simply must stop looking to government for every happenstance or to resolve every inequity on the globe. Second, we need leaders that have the ability to focus voters on a common goal more than to divide their constituents. Reagan and Kennedy focused Americans on grand goals like restoring the economy and strengthening of our foreign policy goals. In both cases, Reagan and Kennedy relied as much on the private sector as on public sector activity. Both used tax cuts for all Americans, which bound people to their common presidential goal of reviving the economy. Kennedy challenged us to go to the moon and to join the Peace Corps. Reagan set a national goal for transcending communism. Those goals did not exclude any American from participating in their achievement. By creating goals for all Americans, goals that relied on private initiative, it made it easier for them to bring people together. Finally, as long as we have a tax system that pits one class of Americans against another, like our federal system, we can expect growing division. Taxing half of Americans and not the other half is the very nature of division. If we moved to a consumption-based tax system like many thriving states, we could minimize our divisions and grow the economy and revenues – all of IS PLEASED TO ANNOUNCE THAT IS PLEASED ARMAND TO ANNOUNCE M. ESTRADA THAT HAS RYAN JOINED W. LOCKHART THE FIRM AS OF COUNSEL HAS JOINED THE FIRM Mr. Estrada’s practice will continue to focus on business transactions, Mr. Lockhart intellectual focuses property his practice consulting in estate and licensing, construction, real property matters and related litigation. planning, wealth transfer planning, estate and gift Mr. Estrada provides arbitration and mediation services. tax planning, trust administration and probate. ___________________ The Firm continues to concentrate on business, employment, estate and tax planning, The Firm continues to concentrate on real estate and related litigation matters. business, employment, estate and tax planning, real estate and related litigation matters. 1333 N. California Boulevard, Suite 350 Walnut Creek, California 94596 Telephone: 925.944.9700 Facsimile: 925.944.9701 www.bpbsllp.com 1333 N. California Boulevard, Suite 350 Walnut Creek, California 94596 Telephone: 925.944.9700 Facsimile: 925.944.9701 www.bpbsllp.com that would lead to less gridlock. Those are long-term changes we need to make as a society. In the short term, it will take an extraordinary president or Speaker of the House to forge a consensus around a new national goal to break the current deadlock. The number of divisions present today in The Divided Era, however unfortunately, are not likely to simply go away. s 10 MARCH 2013
The California Cliff by Mark Ericsson California, the state that takes a backseat to no one, has certainly taken a backseat in the fiscal cliff debate. While all eyes were glued to the TV to watch the fight over how much the federal tax would bite the rich, California passed Proposition 30 which raised California’s top tax rates nearly one and a half times as great as our federal counterpart, and we did it retroactively to the start of 2012. Let’s look first at the rates we voted in by way of the proposition. The increases in California rates start at lower levels than the federal increases. For a single person, the top rate for those with incomes under one million dollars, formerly 9.3 percent, increases to 10.3 percent at a taxable income of $250,000, 11.3 percent at $300,000 and 12.3 percent at $500,000. The existing 1 percent surcharge kicks in at $1,000,000 taxing income in excess of $1,000,000 at 13.3 percent. For married couples, the increases come at twice the income levels as for the single taxpayer. While the increase in the top rate nationally was an increase of 13 percent over the 2012 rate, the increase in California was 32 percent over 2011, remembering the state increase was retroactive. For Californians with taxable incomes over $250,000, the news in California is not good. When you add in the effects of the alternative minimum tax, the ObamaCare investment tax and California capital gains policy, you can get some scary results. The alternative minimum tax was passed some 30 years ago to prevent high-income taxpayers from sheltering their incomes from tax. To calculate the tax, you first calculate your normal tax. You then calculate the tax without the shelter items to create a broader base and apply a lower rate. You pay the higher of the tax calculated by the two methods. One of the shelter items is state income tax. You do not get to deduct state income tax when calculating your alternative minimum tax. Taxpayers in states with high income tax rates like New York and California often get no tax benefit federally from paying state tax. Therefore, the two taxes are often additive. The combined tax rate for a single person with taxable income above $250,000 is 45.2 percent; above $300,000 it is 46.2 percent; above $400,000, it is 50.8 percent, above $500,000, it is 51.8 percent; and above $1,000,000, it is 52.8 percent. We then have the ObamaCare investment tax of 3.8 percent on investment income. All investment income over $200,000 for individuals and $250,000 for families is taxed at 3.8 percent. If you sell your house for a profit, you will certainly be subject to this tax. A lot of income is going to be taxed at 56.6 percent. Most disruptive is that in California, we don’t give any break for capital gains. The theory is that the California rates aren’t high enough to drive taxpayers out of the state. Thus someone with a capital gain from the sale of property or a business can incur a 12.3 percent rate on gains above $500,000 in addition to the 23.8 percent federal rate. I have a client who is going to sell his company for $150,000,000. He has asked me for instruction on how to cut his ties to this state. With 13 percent of his capital gain being taken by California, he sees no advantage in living in this state in a time where mobility is the big new thing. He will pay no tax if he moves to Nevada or Texas. The governor’s balanced budget assumes that no one is going to leave the state. Multiply the $18,500,000 in taxes the state is going to lose from this one taxpayer by the hundreds of others leaving and the budget loses its glamour. It is often noted that tax rates were much higher during the prosperous years of the Eisenhower administration. However, society is much more mobile now and work forces are much more competitive. Relocation is no longer a burden. Not only does California have America’s highest income tax rates, California has the nation’s highest sales tax rate, with counties that are looking to the more profitable real estate sectors to extract property tax and cities that are increasingly enforcing once lax gross receipts tax ordinances. One has to wonder why California needs the most pervasive tax regime by far of any state in the nation. s Mark Ericsson is a partner in the tax and business firm of Youngman & Ericsson, has served as the 2006 president of the <strong>Bar</strong> <strong>Association</strong> and is currently the chair of the Taxation Section. He has written over 30 articles on tax and business issues. CONTRA COSTA COUNTY BAR ASSOCIATION CONTRA COSTA LAWYER 11
Page 1 and 2: Contra Costa LAWYER Volume 26, Numb
Page 3 and 4: TED AND HIS CALIFORNIA FORMS WERE I
Page 5 and 6: 2013 BOARD OF DIRECTORS Jay Chafetz
Page 7 and 8: CCCBA - It’s Your Organization pr
Page 9: erations and those concerned with g
Page 13 and 14: ATRA also retained the 25 percent r
Page 15 and 16: Business Tax Provisions of ATRA 201
Page 17 and 18: IRS Return Preparer Regs Derailed b
Page 19 and 20: Annual Officer Installation January
Page 21 and 22: Meet Your New Commissioner: ANITA S
Page 23 and 24: Meet Your Local Judges, Family and
Page 25 and 26: RES IPSA JOKUITOR XVIII THE JOKE SP
Page 27 and 28: Elder Abuse Litigation Will & Trust
Page 29 and 30: Unfortunately, the rate reduction e
Page 31 and 32: Win A $100 GIFT CARD! We will be se
Page 33 and 34: that can be expensive for the clien
Page 35 and 36: CALENDAR UPCOMING EVENTS | OVERVIEW
Page 37 and 38: April 25 | Employment Section The E
Page 39 and 40: Why YOU should make referrals to CC

download - Contra Costa County Bar Association

Create successful ePaper yourself

Delete template?

Save as template?