Video and transcript below of Governor Brown’s State of the State address for 2013, preceded by what in most cases will be a loud ad.
FULL TEXT:
The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget. And, by God, we will persevere and keep it that way for years to come.
Against those who take pleasure, singing of our demise, California did the impossible.
You, the California legislature, did it. You cast difficult votes to cut billions from the state budget. You curbed prison spending through an historic realignment and you reformed and reduced the state’s long term pension liabilities.
Then, the citizens of California, using their inherent political power under the Constitution, finished the task. They embraced the new taxes of Proposition 30 by a healthy margin of 55% to 44%.
Members of the legislature, I salute you for your courage, for wholeheartedly throwing yourself into the cause.
I salute the unions—their members and their leaders. You showed what ordinary people can do when they are united and organized.
I salute those leaders of California business and the individual citizens who proudly stood with us.
I salute the teachers and the students, the parents and the college presidents, the whole school community. As the great jurist, Oliver Wendell Holmes, once said when describing what stirs people to action: “Feeling begets feeling and great feeling begets great feeling.” You were alarmed, you stirred yourselves to action and victory was the outcome.
That was 2012 and what a year!
In fact, both 2011 and 2012 were remarkable.
You did great things: Your 1/3 renewable energy mandate; the reform of workers compensation; the reorganization of state government; protecting our forests and strengthening our timber industry; reforming our welfare system; and launching the nation’s first high speed rail system.
But, of course, governing never ends. We have promises to keep. And the most important is the one we made to the voters if Proposition 30 passed: that we would guard jealously the money temporarily made available.
This means living within our means and not spending what we don’t have. Fiscal discipline is not the enemy of our good intentions but the basis for realizing them. It is cruel to lead people on by expanding good programs, only to cut them back when the funding disappears. That is not progress; it is not even progressive. It is illusion. That stop and go, boom and bust, serves no one. We are not going back there.
The budget is balanced but great risks and uncertainties lie ahead. The federal government, the courts or changes in the economy all could cost us billions and drive a hole in the budget. The ultimate costs of expanding our health care system under the Affordable Care Act are unknown. Ignoring such known unknowns would be folly, just as it would be to not pay down our wall of debt. That is how we plunged into a decade of deficits.
Recall the story of Genesis and Pharaoh’s dream of seven cows, fatfleshed and well favored, which came out of the river, followed by seven other cows leanfleshed and ill favored. Then the lean cows ate up the fat cows. The Pharaoh could not interpret his dream until Joseph explained to him that the seven fat cows were seven years of great plenty and the seven lean cows were seven years of famine that would immediately follow. The Pharaoh took the advice of Joseph and stored up great quantities of grain during the years of plenty. When famine came, Egypt was ready.
The people have given us seven years of extra taxes. Let us follow the wisdom of Joseph, pay down our debts and store up reserves against the leaner times that will surely come.
In the midst of the Great Depression, Franklin Roosevelt said: “There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation has a rendezvous with destiny.”
We –right here in California– have such a rendezvous with destiny. All around us we see doubt and skepticism about our future and that of America’s. But what we have accomplished together these last two years, indeed, the whole history of California, belies such pessimism.
Remember how California began.
In 1769, under King Charles III, orders were issued to Jose de Galvez, the Visitor General of Baja California, to: “Occupy and fortify San Diego and Monterey for God and the King of Spain.´
Gaspar Portola and a small band of brave men made their way slowly north, along an uncharted path. Eventually, they reached Monterey but they could not recognize the Bay in the dense fog. With their supplies failing, they marched back to San Diego, forced to eat the flesh of emaciated pack mules just to stay alive. Undaunted, Portola sent for provisions from Baja California and promptly organized a second expedition. He retraced his steps northward, along what was to become El Camino Real, the Kings Highway. This time, Father Serra joined the expedition by sea. The rest is history, a spectacular history of bold pioneers meeting every failure with even greater success.
The founding of the Missions, secularized and sold off in little more than 50 years, the displacement and devastation of the native people, the discovery of Gold, the coming of the Forty-Niners and adventurers from every continent, first by the thousands and then by the hundreds of thousands. Then during the Civil War under President Lincoln came the Transcontinental Railroad and Land Grant Colleges, followed by the founding of the University of California. And oil production, movies, an aircraft industry, the longest suspension bridge in the world, aerospace, the first freeways, grand water projects, Jet Propulsion Laboratory, Venture Capital, Silicon Valley, Hewlett Packard, Apple, Qualcomm, Google and countless others, existing and still just imagined.
What is this but the most diverse, creative and longest standing mass migration in the history of the world. That is California. And we are her sons and daughters.
This special destiny never ends. It slows. It falters. It goes off track in ignorance and prejudice but soon resumes again—more vibrant and more stunning in its boldness.
The rest of the country looks to California. Not for what is conventional, but for what is necessary—necessary to keep faith with our courageous forebears.
What we have done together and what we must do in the coming years is big, but it pales in comparison to the indomitable courage of those who discovered and each decade thereafter built a more abundant California.
As Legislators, It is your duty and privilege to pass laws. But what we need to do for our future will require more than producing hundreds of new laws each year. Montaigne, the great French writer of the 16th Century, in his Essay on Experience, wisely wrote: “There is little relation between our actions, which are in perpetual mutation, and fixed and immutable laws. The most desirable laws are those that are the rarest, simplest, and most general; and I even think that it would be better to have none at all than to have them in such numbers as we have.”
Constantly expanding the coercive power of government by adding each year so many minute prescriptions to our already detailed and turgid legal system overshadows other aspects of public service. Individual creativity and direct leadership must also play a part. We do this, not by commanding thou shalt or thou shalt not through a new law but by tapping into the persuasive power that can inspire and organize people. Lay the Ten Commandments next to the California Education code and you will see how far we have diverged in approach and in content from that which forms the basis of our legal system.
Education
In the right order of things, education—the early fashioning of character and the formation of conscience—comes before legislation. Nothing is more determinative of our future than how we teach our children. If we fail at this, we will sow growing social chaos and inequality that no law can rectify.
In California’s public schools, there are six million students, 300,000 teachers—all subject to tens of thousands of laws and regulations. In addition to the teacher in the classroom, we have a principal in every school, a superintendent and governing board for each school district. Then we have the State Superintendent and the State Board of Education, which makes rules and approves endless waivers—often of laws which you just passed. Then there is the Congress which passes laws like “No Child Left Behind,” and finally the Federal Department of Education, whose rules, audits and fines reach into every classroom in America, where sixty million children study, not six million.
Add to this the fact that three million California school age children speak a language at home other than English and more than two million children live in poverty. And we have a funding system that is overly complex, bureaucratically driven and deeply inequitable. That is the state of affairs today.
The laws that are in fashion demand tightly constrained curricula and reams of accountability data. All the better if it requires quiz-bits of information, regurgitated at regular intervals and stored in vast computers. Performance metrics, of course, are invoked like talismans. Distant authorities crack the whip, demanding quantitative measures and a stark, single number to encapsulate the precise achievement level of every child.
We seem to think that education is a thing—like a vaccine—that can be designed from afar and simply injected into our children. But as the Irish poet, William Butler Yeats said, “Education is not the filling of a pail but the lighting of a fire.”
This year, as you consider new education laws, I ask you to consider the principle of Subsidiarity. Subsidiarity is the idea that a central authority should only perform those tasks which cannot be performed at a more immediate or local level. In other words, higher or more remote levels of government, like the state, should render assistance to local school districts, but always respect their primary jurisdiction and the dignity and freedom of teachers and students.
Subsidiarity is offended when distant authorities prescribe in minute detail what is taught, how it is taught and how it is to be measured. I would prefer to trust our teachers who are in the classroom each day, doing the real work – lighting fires in young minds.
My 2013 Budget Summary lays out the case for cutting categorical programs and putting maximum authority and discretion back at the local level—with school boards. I am asking you to approve a brand new Local Control Funding Formula which would distribute supplemental funds — over an extended period of time — to school districts based on the real world problems they face. This formula recognizes the fact that a child in a family making $20,000 a year or speaking a language different from English or living in a foster home requires more help. Equal treatment for children in unequal situations is not justice.
With respect to higher education, cost pressures are relentless and many students cannot get the classes they need. A half million fewer students this year enrolled in the community colleges than in 2008. Graduation in four years is the exception and transition from one segment to the other is difficult. The University of California, the Cal State system and the community colleges are all working on this. The key here is thoughtful change, working with the faculty and the college presidents. But tuition increases are not the answer. I will not let the students become the default financiers of our colleges and universities.
Health Care
California was the first in the nation to pass laws to implement President Obama’s historic Affordable Care Act. Our health benefit exchange, called Covered California, will begin next year providing insurance to nearly one million Californians. Over the rest of this decade, California will steadily reduce the number of the uninsured.
Today I am calling for a special session to deal with those issues that must be decided quickly if California is to get the Affordable Care Act started by next January. The broader expansion of Medi-Cal that the Act calls for is incredibly complex and will take more time. Working out the right relationship with the counties will test our ingenuity and will not be achieved overnight. Given the costs involved, great prudence should guide every step of the way.
Jobs
California lost 1.3 million jobs in the great Recession but we are coming back at a faster pace than the national average. The new Office of Business and Economic Development — GoBiz —directly assisted more than 5,000 companies this past year.
One of those companies was Samsung Semiconductor Inc. headquartered in Korea. Working with the City of San Jose and Santa Clara County, GoBiz persuaded Samsung to locate their only research and development facility in the world here in California. The new facility in San Jose will place at least 2,500 people in high skill, high wage jobs. We also leveled the field on internet sales taxes, paving the way for over 1,000 new jobs at new Amazon distribution centers in Patterson and San Bernardino and now Tracy.
This year, we should change both the Enterprise Zone Program and the Jobs Hiring Credit. They aren’t working. We also need to rethink and streamline our regulatory procedures, particularly the California Environmental Quality Act. Our approach needs to be based more on consistent standards that provide greater certainty and cut needless delays.
California’s exports are booming and our place in the world economy has never been stronger. Our ties with The People’s Republic of China in particular are deep—from the Chinese immigrants crossing the Pacific in 1848 to hosting China’s next President in Los Angeles last February. This year we will take another step to strengthen the ties between the world’s second and ninth largest economies. In April, I will lead a trade and investment mission to China with help from the Bay Area Council and officially open California’s new trade and investment office in Shanghai.
Water
Central to the life of our state is water and one sixth of that water flows through the San Joaquin Delta.
Silicon Valley, the Livermore Valley, farmers on the East side of the San Joaquin Valley between Fresno and Kern County and farmers on the West side between Tracy and Los Banos, urban Southern California and Northern Contra Costa, all are critically dependent on the Delta for Water.
If because of an earthquake, a hundred year storm or sea level rise, the Delta fails, the disaster would be comparable to Hurricane Katrina or Superstorm Sandy: losses of at least $100 billion and 40,000 jobs. I am going to do whatever I can to make sure that does not happen. My proposed plan is two tunnels 30 miles long and 40 feet wide, designed to improve the ecology of the Delta, with almost 100 square miles of habitat restoration. Yes, that is big but so is the problem.
The London Olympics lasted a short while and cost $14 billion, about the same cost as this project. But this project will serve California for hundreds of years.
Climate Change
When we think about California’s future, no long term liability presents as great a danger to our wellbeing as the buildup of carbon dioxide and other greenhouse gases in the atmosphere.
According to the latest report from the World Bank, carbon dioxide emissions are the highest in 15 million years. At today’s emissions rate, the planet could warm by more than 7 degrees Fahrenheit by the end of the century, an event unknown in human experience. California is extremely vulnerable because of our Mediterranean climate, long coastline and reliance on snowpack for so much of our water supply.
Tipping points can be reached before we even know we have passed them. This is a different kind of challenge than we ever faced. It requires acting now even though the worst consequences are perhaps decades in the future.
Again California is leading the way. We are reducing emissions as required by AB 32 and we will meet our goal of getting carbon emissions to 1990 levels by 2020.
Key to our efforts is reducing electricity consumption through efficiency standards for buildings and appliances. Over the last three decades, these pioneering efforts have saved Californians $65 billion dollars. And we are not through yet.
We are also meeting our renewable energy goals: more than 20% renewable energy this year. By 2020, we will get at least a third of our electricity from the sun and the wind and other renewable sources—and probably more.
Transportation and High Speed Rail
In the years following World War II, California embarked on a vast program to build highway, bridges and roads.
Today, California’s highways are asked to accommodate more vehicle traffic than any other state in the nation. Most were constructed before we knew about climate change and the lethal effects of dirty air. We now expect more.
I have directed our Transportation Agency to review thoroughly our current priorities and explore long-term funding options.
Last year, you authorized another big project: High Speed Rail. Yes, it is bold but so is everything else about California.
Electrified trains are part of the future. China already has 5000 miles of high speed rail and intends to double that. Spain has 1600 miles and is building more. More than a dozen other countries have their own successful high speed rail systems. Even Morocco is building one.
The first phase will get us from Madera to Bakersfield. Then we will take it through the Tehachapi Mountains to Palmdale, constructing 30 miles of tunnels and bridges. The first rail line through those mountains was built in 1874 and its top speed over the crest is still 24 miles an hour. Then we will build another 33 miles of tunnels and bridges before we get the train to its destination at Union Station in the heart of Los Angeles.
It has taken great perseverance to get us this far. I signed the original high speed rail Authority in 1982—over 30 years ago. In 2013, we will finally break ground and start construction.
Conclusion
This is my 11th year in the job and I have never been more excited. Two years ago, they were writing our obituary. Well it didn’t happen. California is back, its budget is balanced, and we are on the move. Let’s go out and get it done.
Discuss!
It’s always at least a slightly mixed bag with our Governor, but there are lots of good bits in this one. And that introduction, at least until he gets to Montaigne, is breathtaking. I really enjoy having a Governor who can talk and think like this.
I think that this also answers the question of whether he’s running for re-election. Yep.
“We also leveled the field on internet sales taxes, paving the way for over 1,000 new jobs at new Amazon distribution centers in Patterson and San Bernardino and now Tracy.” What did leveling the field on internet sales taxes entail? Anyone know?
HI Susan…what Gov Brown is referring to in leveling the field is requiring companies like Amazon to collect sales tax from its customers who have product shipped to CA. If Amazon has to collect sales tax on its sales just like a brick and mortar shop here in town (or any other internet retailer who has a location in CA), the field is leveling itself. I believe it was a negotiated resolution to whether Amazon was required to collect or not…by Amazon being required to collect sales tax, that opened up the opportunity for Amazon to establish distribution centers in CA (which would have required them to collect tax if they did it earlier). Still not sure it is a level playing field, but I believe that is the theory…I don’t understand how Amazon can make money on a lot of the stuff people order- seems like UPS get a boat load of business though along with cardboard manufacturers and recyclers.
For some reason most of CA taxpayers were not remitting their use tax on their Amazon purchases when Amazon was not collecting sales tax (not picking on Amazon, but that is the easiest example)….I know, strange!
Susan, I think that it meant imposing sales taxes on out-of-state vendors so that they no longer have an advantage over in-state vendors — hence “leveling the field.”
“California is back, its budget is balanced, and we are on the move”……… Hmmmmmm
To Texas?
TORREY PINES, CA – Phil Mickelson is torn; the professional golfer said in recent days he may move out of California because voters approved a higher income tax on the wealthy.
FYI, Golf champion claims higher California tax, end of tax cuts takes 60% of income.
That is just beginning!
Many are giving up USA citizenship.
Yep, I have definitely seen the number of high earners, who have somewhat portable careers/businesses, ask me to perform analysis on moving to a more favorable state. Not so much giving up citizenship, but definitely on state of residency. I can see it being more and more of a growing trend…at least people considering it. Now, will they actually go through with the actual steps needed to save the state tax- we will see.
Will the state FTB step up enforcement? I have to imagine that they will, budgets permitting of course.
Remember, higher state taxes for the super higher earners (generally not in AMT) also cost the IRS money since state taxes generally result in a reduction of federal taxes, so every time that a state raises taxes, it costs the federal gov’t.
“Not so much giving up citizenship”……… Hmmmm
Right now usually the EXPATS who are sick and tired to file USA income taxes are giving up the citizenship in about 2K per year.
Many countries, including the EU are recovering from the socialism while USA is starting.
That is just my experience…many clients are asking for analysis about moving to less taxing states but not too many about giving up citizenship. However, I believe your 2K figure is low by the way, not that it matters.
Yeah, people are moving to other countries because no other country has taxes.
It’s morons like Fiala that keep our taxes high, if we could actually elect some progressives we could cut our bloated defense budget and actually get some services for our tax dollars.
After what Brown has done to our court system (what will be happening) and I imagine other govt. entities for the sake of balancing the budget, I feel like moving too.
This state and really the entire country has sacrificed our future to worship on the alter of the super wealthy.
Oh poor Phil Mickelson, he’ll have to pay some taxes on that 50 million a year he makes playing golf and making commercials, how will he ever make it?
Quick, let’s end school lunch subsidies so poor old Phil doesn’t go hungry.
People make business decisions everyday and choosing how to manage taxes is a business decision. When your career of choice is portable, then state of residency, can make a very big difference in net after tax cash flow. This is especially true when you weigh the barriers to moving to another state which for a lot of individuals and some businesses are not all that high.
The US is one of the very few countries in the world that taxes its citizens on all world wide income regardless of where you live or earn that income (there are some credits and exemptions, but often will not wipe it all out). I have seen kids born in other countries who were technically a US citizen yet never even stepped foot in the country and then down the road realize that they are “tax cheats” because they have never filed a US tax return and paid US taxes, yet alone filed foreign bank account reports…messy.
Anonster, do you believe that progressives would cut taxes in CA as opposed to folks like Fiala, presumably the opposite of a progressive, who you assert keep taxes high? Maybe my presumption is not really correct, but my sentiment is that CA is more run by progressives than those who have beliefs like Fiala, yet it does not seem like our taxes are decreasing in the state…
Additionally, what has this state done to worship at the alter of a Phil Mickelson in order to sacrifice the future? I know plenty of individuals who like watching him and presumably add to his yearly income, but not sure how the state is sacrificing its future for him…especially when presumably most of his income is earned outside of the state yet will still be taxed at our almost highest of anywhere rates (he would receive a credit for taxes paid to other states, but effectively all income would still be taxed at our highest rate- part being paid to the other state and the remainder paid to CA).
hey stupid anoster who are going to collect from when all the high earners leave the state . CALIF IS IN THE TOILET DUE TO PROGRESSIVES AKA LIBS .. i cant wait till this state goes bk AND THEN WHO ARE YOU GOING TO BLAME .. they control everything .. oh yeah youll blaim the republicans ..
Boutwell,
Your reading comprehension sucks.
I never said that progressives would lower taxes, I said we’d get something for our tax dollars, like healthcare, infrastructure and free higher education.
And FYI, out of the last 30 years California has spent 24 of them with Republican Governors and legislature held hostage to the intransigence of the minority (R) due to the 2/3’s rule, hardly a progressive’s paradise.
I also never said that we worship at the alter of Phil Mickelson but of the wealthy in general. Since Reagan we have been rolling back our progressive tax codes in favor of the rich and it’s eliminating the middle class. Instead of profits being rolled back into businesses (due to high taxes) our business leaders are just padding their bank accounts and enough is NEVER enough.
Remember Reagan’s “greed is good”. Our business leaders have no loyalty to their country or countrymen, but what is even worse they’ll run their business into the ground if they personally can make a buck off it (think Mitt Romney).
We are rapidly becoming a two-tiered society, the haves and the have nots. Phil Mickelson is just another greedy douche bag who typifies the mindset.
Thanks for the well wishes Anonster…yes, I often mis-read people so thankfully there are others who can set me straight.
I do not think that it is a lack of reading comprehension that would surmise that when you say that “it’s morons like Fiala that keep our taxes high” that it is not too much of a stretch to surmise that the opposite would be true, assuming that Fiala is pretty much the opposite of a progressive. I also read the part about cutting defense and getting services for tax dollars to mean that the progressives would take the savings and reduce taxes instead of simply reallocating it to additional services for tax dollars. I now see that I misunderstood you and I should have read that to mean that the progressives would take the savings from defense and allocate to healthcare, infrastructure and free higher education (not sure anything is ever free, but that is a separate issue). Those are all noble goals.
You seemed to have used Phil as an example of the super wealthy, so I was simply asking how the benefits that he has received are sacrificing the future of CA…you can feel free to substitute the super wealthy for his name and the same question evolves.
I am sorry, but I do not remember much about Reagan’s tenure- I was not too concerned about POTUS or politics while playing Tee Ball. That may be good or bad, depending on the situation I guess. I probably should know more about him and other past leaders. To a limited extent, I do agree that “greed is good”. I am unsure as to Reagan’s context, but greed has a lot of use- it can also destroy when it becomes the only thing that is important. Is it destructively greedy to want to keep some more cash in your pocket by living in another state? I personally don’t feel that it is…especially, since there are others in the “target” state that presumably would benefit from that decision- it is a shift.
In our ever expanding globalized economy, there are plenty of business leaders and companies that want to help the world out and don’t have the loyalty just their countrymen or country that the US likely had a generation or two ago. For a lot of people, it is hard to even define who their countrymen are….is it only those in their resident state, in their resident country, the country where their sister lives, the country where they were born, the country where they sponsor kids who don’t have it as well as we do.
In the context of the CA tax situation, I guess that business leaders need to have loyalty to their own states and statesmen first. I for one am fine in helping my neighbors up in OR, WA, ID (yes, grew up in the PNW and still have plenty of roots there), or FL, TX, etc…
I do agree with you that we are becoming a 2 tiered society, albeit with many steps in between- I just am not sure how to “fix” it. I would rather see the floor rise for everyone and not the ceiling pulled down. I personally feel that one should benefit from their own hard work and when someone starts adding expenses on top of them, they should have the freedom to make decisions to rectify the situation. That person also has a responsibility to help others, which I also am very highly in favor of.
I also likely lean towards someone who has obviously been quite successful not being called a hygiene product or having their picture pissed on by responsible citizens because they want to reign in an ever expanding expense.
Boutwell,
“I also likely lean towards someone who has obviously been quite successful not being called a hygiene product or having their picture pissed on by responsible citizens because they want to reign in an ever expanding expense.”
IT’S THE WHINING!
The man is one of the most financially fortunate people on the planet!
Yes, he “worked” hard to get where he is, but a lot of people work long and hard and they make a fraction of what he makes.
Who among us wouldn’t trade for his income and tax “problem”. Most of us could survive on 26 million a year and we would feel FORTUNATE, hell, most of us make far, far, far, far, far (add about 995 fars) less and we still feel fortunate.
Phil Mickelson isn’t just a GREEDY DOUCHE BAG he’s a WHINY GREEDY DOUCHE BAG!
As I tell my kids…name calling does not solve any problems- it may make you feel better I guess, so go for it (no, I don’t tell them that- they will figure it out for themselves I am sure).
Amazing how one person’s strategic thinking is interpreted as another person’s whining…anyways, yes, we would all be so lucky. Most of us will never be so lucky to be like Phil or Buffet.
It is not just working long and hard…it is choosing what to work long and hard at if you want to get to that position…choosing a career that society rewards and that one is superior to the competition at. If financial riches is a goal, think long and hard about the choices. Let’s face it…the best kindergarten teacher in the world, who works even harder than Phil at his profession, will not earn in a lifetime what Phil may earn in one week.
Boutwell, did you ever read Catch-22? Because characterizing betrayal of one’s collective group in pursuit of profit as “strategic thinking” reminds me very much of Milo Minderbinder.
Greg, I am not familiar with that book. As such, I am not 100% sure of Milo Minderbinder’s actions, but I presume that you view them negatively.
“…characterizing betrayal of one’s collective group in pursuit of profit as “strategic thinking” reminds me very much of Milo Minderbinder.” I presume that you feel that Phil and anyone else who moves out of state (income/sales/ppty tax), spends money out of their own city (sales tax), works in another state (income), moves out of their community/city/county (sales/ppty), invests in any foreign company (foreign tax), etc…is betraying the collective group even though it may be the best decision for themselves and their family. I guess I don’t hold the same feeling. I have no problem on moving to a community that does not have Mello Roos or lower ppty taxes. I have no problem in spending money in a community outside of my own because of convenience and pricing. I have no problem having some mutual funds that have foreign investments in order to achieve a more balanced and diversified portfolio.
I also have no problem in SAVING. Saving inherently can be a detriment to the community yet good for my family. The money that I am saving would be much better for our Orange County community, or my local city, if I were to SPEND SPEND SPEND. However, I have strategically decided not to spend every dollar that I make or even worse, spend more than I take home. I strategically have decided to save $X amount and spend the leftover (hence, this is why a tax increase for someone with my same thinking actually cuts what gets spent not what gets saved)…that is all bad for the collective group right now.
Remember, the Federal government will take home MORE REVENUE if Phil were to live in a different state. Actually, the federal government would actually get more revenue if a large portion of us were to move to a different state. It is all a matter of perspective…one group wins (the IRS) while one group loses (the FTB).
Stop what you’re doing right now and read Catch-22.
2000 per year, you say? How will we ever do without them? I look forward to their being denied visas.
Goodbye to Phil Mickelson then. Seriously, we’re not going to let assholes hold us hostage. He’d better be very sure about not having CA residency, though.
Not sure he (Phil) is holding anyone hostage, but he certainly is considering making a business decision- just as you likely do with your business. Other high income taxpayers are considering the same decisions- especially on the state residency side.
Is the state really better off with someone who makes that type of money leaving? The type of money that buys “stuff” in the community as well as contributing directly to state income tax revenue. If enough of them leave the state, it makes a big difference. I presume that Mickelson probably pays about $2M to $3M (could be higher or lower depending on where his earnings are made) in CA tax if he makes $50M in earnings. Individually, that is not too terribly high of an impact, but multiply that by 10 people each paying $2M or 100 people, etc… and it starts to add up.
Here is an interesting article from the OC Register on the same out of tax state issues…I personally feel it is wrought with some over-exagerations, but still some truth in it although not in the same income park as Phil: http://www.ocregister.com/articles/california-383369-tax-business.html
He’s not holding any individuals hostage, he’s holding a policy hostage by saying that if he doesn’t get his way he’s leaving. (His preferred policy would hurt individuals in need, but I’ll presume that that’s not his goal.) So fine, what he’s threatening to do is legal — at least he’d better hope so. We don’t respond to him with violence or fines, we respond to him with contempt. If he dodges taxes like this, I will hope for the presence of mind to insult him as loudly as possible if I ever see him in California — and I hope that other Californians will do the same. It’s a milder equivalent of being a traitor.
Two other points on its being “a business decision”: (1) I doubt that it is. He probably has little idea of how much he’d actually lose — and what idea he has is likely based on the common confusion about marginal tax rates. He probably underestimates the cost of travel and multiple households. Furthermore, the bad press alone will hurt his endorsements.
Second, calling something a “business decision” doesn’t justify it. Tony Soprano made lots of “business decisions.”
Would it add up if the rich all moved out? Undoubtedly. Does that mean that we must give in to them? No — because it is at essence hostage-taking. If they leave, we’ll have to do with less — but we’ll make pissing on photos of them a popular state pastime, so our quality of life may not go down too badly.
Yeah, I sure would hate to live in your town and shop in another…taking all that sales tax revenue to another locality- hope you don’t have any pictures of me, oh heck, go ahead and piss away. He is choosing to take his business somewhere else, or at least contemplating it. I would venture to guess that in his line of business, he may have a lot of supporters if he were to make a tax motivated decision.
Tax motivated decisions are made every day…doubt you would hold such contempt for someone who say gets married in January instead of December or who chooses to participate in a 401K plan. He would not dodging taxes if he is paying what he should. You should want him to come to CA…he then pays CA tax and contributes to the local economy!!!! Sometimes, I just don’t “get it”- which I know you probably think too, but from a different perspective.
I would venture to guess that he is not a tax rookie…he has very competent advisers who are telling him about all of the money he is earning out of state and that he can save $XXMM by making a residency move. It is not a marginal tax rate confusion issue…even if it were, if he is making north of $10MM, the lower tax brackets really mean nothing at that point…dollars and cents. Marginal brackets don’t mean much at that income level as so much of it is taxed at the highest brackets that the lower brackets are highly diminished.
Do you really think that someone who likely already has multiple houses and travels from tourney to tourney making a living does not understand the cost? How many of his tournaments are in So Cal versus Florida for example? I highly highly doubt that he has not considered it…it could even be a money saver for him if he plays it right.
You seem to be downplaying the residency planning that happens in advisory firms all the time…this is not just a misunderstanding. It is happening and happening more and more often. As rates go up, the tax planning opportunities also go up- people weigh the great weather and other good things about CA against the not so good items such as high income tax rtes (for some, yes, I know you think it is good and would weigh as a factor for you to come to CA).
Now, in the guys case who is in the OC Register article, yes, I do think he has some confusion on the marginal tax rate issues as well as understanding Texas’ tax system…but likely not Phil and his financial team. However, the end result of the taxes his advisers have told him he would save, is likely “on” just not his understanding of it.
A business decision is not the justification, but we all make these decisions to a lesser extent everyday. Tony Soprano’s business decisions, that you are implying are likely illegal,- that makes them highly wrong. Planning to reduce an expense in most instances is often viewed as a smart choice. Taxes are an expense…a big one at that.
I presume that you can see the difference between a “tax motivated decision” such as marrying on New Year’s Eve vs. New Year’s Day — that’s fine — and saying “yeah, I know that I’ve been a taxpaying citizen of your state but now I’m going to give up that citizenship while trying to continue to reap the benefits of being a homeowner and sometimes resident of your state. That’s rude. It’s rude when corporations reconstitute themselves as being in the Cayman Islands rather then the U.S. and yet still want people to think of them as “American” concerns.
You wrote as if calling something a “business decision” implicitly justifies it; my Tony Soprano counterexample was to point out that it’s not that simple. Mission accomplished. In Mickelson’s case, we’re not talking about illegality (so far as I know…) so much as the state (as opposed to national) equivalent of lacking patriotism. Society doesn’t deal with that as a matter of law, but as a matter of dishonor. If you think that it’s a “smart choice” no matter how people may react to his screwing us over by using our taxpayer-funded resources without paying for them, I suggest that you have omitted important variables from your calculus. People don’t like being ripped off; that’s what this feels like and if he does it a good adviser would let him know that he may pay the price for it. (If he banished himself from California, I’d feel differently about it.)
Residency for those with portable careers often is a tax motivated decision, counselor, just as marrying in one year versus the next.
How is he continuing to reap the benefits of this state if he is no longer a resident any more than someone else who may visit this state or own a 2nd home in this state? If he earns income through endorsements or winnings he will continue to pay the CA state tax. The rude thing is to think that just because someone has been a resident and takes the steps to now become a resident of another state, that you presume that he is reaping benefits and implying that he is skirting the laws (i.e. sometimes resident). IF HE EARNS INCOME IN CA, HE WILL PAY TAX HERE.
I don’t think I wrote that a business decision justifies it…you may have read it that way. Business decisions have to be weighed against the ethics, laws, and such. You comparing Phil to Soprano shows that you don’t really understand the situation of those who have the ability to make decisions like these IMO, which is fine.
” If you think that it’s a “smart choice” no matter how people may react to his screwing us over by using our taxpayer-funded resources without paying for them, I suggest that you have omitted important variables from your calculus. “…are you speaking of someone who pays a lot of taxes or someone who pays none…I am confused (not really), but hopefully you know that he likely has paid far more than he will ever use. There are others people in the state who that likely is not the case for, but I will let you decide which group that is.
“People don’t like being ripped off; that’s what this feels like and if he does it a good adviser would let him know that he may pay the price for it.”…a good adviser, I can pretty much assure you, will help him go through the steps so that he will succeed if there was a question of residency.
One does not have to banish themselves from the state when they move away. I believe that you once lived out of state and I am sure that you may occassionally go back there- if you earn income in that other state, say from a case you are helping with, you would pay income tax in that state. Phil would be the same way…if he earns income in the state and is a non-resident he would pay the income tax. If he owns property in the state, he will pay property tax. If he buys something in the state, he will pay sales tax. If he has rental property in the state he will pay income tax on it. What will he not be doing? I would not be paying income tax on his earnings from OUTSIDE of the state and on his investment income (investment income is taxed to residency).
The FEDERAL government is the one who wins. Phil must be trying to put more revenue into the US gov’t system. I find it appalling that someone would want to humiliate someone for moving because of financial reasons. There is a reason I don’t own a house in Irvine or at the Beach…does that mean that I should be hated by those who live in those areas? I presume that there are many others who also cannot afford to live in those areas…or even worse, they once did and then they take their money and run. Oh the injustice…
Phil Mickelson makes over a thousand times what the average Californian makes and I bet the GDB’s* accountants make sure he pays more in line with what the average millionaire’s tax rate is; 26%.
The idiots defending and empathizing with poor,poor Phil are just enabling the blatant greed and SHAMELESS behavior of the rich in this country.
Funny how those same folks always think the poor need to suck it up and just work harder and learn to budget, but when a GDB* starts to piss and moan about having to make it on 3 million a month instead of four, they fall all over themselves defending his right to be outraged. Oh, the inhumanity of taxes!
Lightening can’t strike Phil fast enough for my tastes.
*Greedy Douche Bag
The reason that the average millionaire’s taxes are that low (i.e. mid-20%’s, which I believe is for federal taxes only) is due to tax favored investment income. Most of Phil’s income would be earned income from both tour winnings and endorsement deals…subject to ordinary income tax rates, medicare tax, and the healthcare medicare surcharge (starting in 2013). CA also does not have a lower tax rate for investment income. Sure, he would have much higher investment income that the average person, but in comparison to the amount he earns, it likely is not very large, so most of his income is taxed at the high rates.
I don’t think that any reasonable person is feeling sorry for someone who makes that much money in relation to if they can “make it”. Instead, it is the pure magnitude of the percentage that someone who earns their income is taxed at such a high percentage. I sure don’t feel sorry for how he can live on what he makes…he earns a living doing something that most people have to pay to play and end up getting mad in the process. Do I feel that he has a right to move his household to a more tax friendly state? Yep…sure do.
Additionally, it is the increase that is being seen. The top federal income tax bracket is increased by 13% in 2013 (35% to 39.6%) and effectively even higher due to deduction limitations. The medicare surcharge is increasing medicare tax on earned income by 31% (2.9% to 3.8%). Our top CA tax bracket has increased by 29% (10.3% to 13.3%) retroactive to 2012, although the increase in CA tax lowers federal tax. Overall, someone of Phil’s income (and CA resident) is seeing income taxes on earned income increase by about 15%…in real terms as a % of income, their rate will go from about 44% to 51% (a 15% increase)- these are net of the federal deduction for state taxes since someone of that income level likely is not in AMT.
Ironically, him moving to another state will increase the tax revenue for the good old USA- maybe he is a national loyalist after all!
Although you may want someone to get struck down, I personally would never wish that upon anyone…regardless of their beliefs.
Boutwell,
A few colorful words and fun imagery can make comments a bit more readable, after all most of us are here for fun … so lighten up Mother Theresa.
I am certainly no Mother Theresa, but if you feel you need to use that type of language to make your comments more readable, I guess go for it. I think your comments are understandable and quite readable without the name calling and “fun imagery” of lighting striking someone, especially when that is a concern in their profession. I am not sure that I can say that about every person who posts, but you make your points very well IMO.
Yes, we are all here for fun but I for one have learned quite a bit reading the stories and the posts.
Re the “Jobs Hiring Credit”…love this credit for small companies, assuming he is referring to the New Jobs Credit. $400MM was allocated to this credit and is available until it is gone. Less than 35% of it has been used by the end of 2012 although it started in 2009. The reason is it not successful is that so many people just don’t know about it and it is only available to companies with few than 20 relatively full-time employees. Business owners just don’t know about it…too many tax advisers unbelievably don’t think about it. It is $3K per new hire full time employee…this is real money. It is worth $60K to a start up business (20 employees x $3K). I hope that the changes he is referring to are about a marketing campaign and possibly an expansion so it helps businesses with say up to 50 employees instead of 20 or maybe even a larger company but only eligible to apply to 20 employees. This is money that was already allocated to bring jobs here…use it to help hire employees the first year.
Did not the state save itself by dipping into the county and cities bank accounts?
Love this: “The people have given us seven years of extra taxes. Let us follow the wisdom of Joseph, pay down our debts and store up reserves against the leaner times that will surely come.”
I hope that the state can follow through with this. Very sage advice for gov’t, businesses, and family. I wish I had said it.
Kabuki!
*You guys are all great. Insight is fantastic. Yet, what we think is much more astounding is that Downtown Jerry Brown crushed Meg Whiteman…..not just beat her handlely…..but crushed her. It gives us great optimism that the days of the “fruitless entrepruners” is over. Huffinton…dust. Gray Davis…..dust. Heck, Unless our main man Mel Gibson ran for Governor…….the rest would never have a chance. Afraid, we would still vote for Downtown Brown…..he is a total classic and we love him. Thank you Jesus…….we got Downtown Jerry Brown….just in the nick of time.