by Ethan Anderson, Founder, Redbeacon
Nothing terrifies investors or entrepreneurs as much as the concept of expropriation. When governments decide to expropriate legally obtained assets, entrepreneurs who worked tirelessly to build businesses and investors who risked scarce capital end up with little to nothing for their troubles. In fact, developing countries often get saddled withcountry risk premiums, making it harder for them to attract capital because the mere threat their governments will someday seize profitable companies or industries keeps investors away.
So it’s all the more puzzling that California, home of Silicon Valley and the densest concentration of entrepreneurs in the nation (possibly the world) would pass Proposition 30 in last month’s election. Regardless of your personal views on the issues of taxing and spending, there is one thing that cannot be overlooked. Prop 30 includes a gigantic retroactive tax increase on legitimate capital gains and ordinary income that dates back to Jan. 1, 2012.
The top marginal rate jumps by 29.13 percent to a staggering 13.3 percent of income. Oddly, California doesn’t distinguish between ordinary income and capital gains in the way the federal government does. The result is that we have nearly doubled the 15 percent federal capital gains tax rate, and this applies to income earned in the past, for which taxes have already been paid.
How This Happened
As is the case with many propositions, the voters may have been fooled by the governor and his allies who aggressively pitched it as a way to “save education in our state.” In fact, the money from Prop 30 simply replaces money the governor redirected from education to other priorities in his 2013 budget. So a more honest and fair characterization of Proposition 30 is a general purpose tax hike in the state which already has the highest income tax rates in the nation…..
Continue Reading at the following link:
http://allthingsd.com/20121204/what-proposition-30-means-for-californias-entrepreneurs/