Closing tax loopholes is hard to do. Powerful interests throw up a smokescreen, however spurious, to protect their particular loophole. Add in the 2/3 vote requirement in the California legislature, or the obscurity of these tax issues if taken to the ballot, and loophole protection is often a successful venture.
The most egregious of California tax loopholes, of course, is the one that gives out-of-state companies the ability to choose, every year, how much income to report to California. In recent weeks, there has been exposure of the hypocrisy of several of those companies who defend this $1 billion loophole. In one report, the same 4 companies who have lobbied against this loophole -- Chrysler, General Motors, Kimberly-Clark and International Paper -- were shown to have received $42 million in state contracts while saving millions in taxes. In another report, some of these companies were demonstrated to have fought aggressively in their own states for the same tax policy they are fighting against in California.
So the California Tax Reform Association decided to take a look at how California taxpayers fare with these companies, particularly the auto companies which have received bailouts with federal tax dollars. And here's the result, using simple math: California taxpayers pay about 11.6 percent of all federal taxes, including income, corporate, and excise taxes. And there's general agreement that the combined bailout of Chrysler and GM cost taxpayers about $25 billion.
The result: about $2.2 billion in bailout help from California taxpayers. Now, we have been pleasantly surprised by the results from the auto companies: GM has become far more successful than expected, and Chrysler's new combination with Fiat looks like a winner. So we don't necessarily begrudge the bailout.
What is unconscionable, of course, is now these companies who received our help are turning around and trying to block a loophole that greatly lowers their taxes paid to California. Having turned profitable with our $2.2 billion contribution, it is a slap in the face to our state that they persist in their efforts to maintain their special tax deal. So here's a simple solution: GM and Chrysler, call off your special interest loophole protection money, we'll happily cheer for your success, and hopefully your cars will be competitive in the California marketplace.