As media stories increase regarding the State of California potentially issuing IOUs in coming months, many astute reporters seem to have completely missed a significant point.
News references have consistently lumped possible IOUs for State employees, vendors, taxpayers, and social services such as student aid, mental health and other welfare programs into the same basket. An IOU is an IOU, apparently.
However, an important distinction exists that simply should not be ignored in this “horn of un-plenty” situation. An IOU for a State program is quite different than one for a tax refund.
Put aside for a moment the debate over whether many of the services being provided by the State should be provided by government at all, as well as the inefficiency with which California administers its programs. (Remember those “boxes,” Governor?) Just for now, place on the nearest shelf the question of whether our taxes are currently too high.
In the case of IOUs going out instead of checks, in nearly every instance it means a lack of payment for a service that has already been provided by the payee, or a lack of payment for an established entitlement program. A bad scenario, no doubt, not to be minimized. Yet, again, it is very clear in this case that the IOU is for a service that the State does in fact provide.
That part should be obvious.
However, in the case of an IOU being sent in place of a tax refund, that constitutes something completely different. It means a lack of refund for a service that hasn’t been provided at all, and won’t be provided. Quite simply, a breach of the payback of funds. Let’s see, monies paid to California over and above what government is due. Uhh, dollars overpaid to the State by the taxpayers.
Let’s count the ways to say it. Bottom line: Ours…not theirs in the first place.
Why is that part not obvious? Does Controller John Chaing not get the difference? Sadly at this point, it might come as no surprise if the Governor himself may not even get it.
In simple terms, gentlemen, it’s not your money to keep. No, not temporarily, and not even with a payment plan.
Perhaps the first tax refund IOU sent by the State will immediately be followed by a lawsuit, courtesy of the same folks that know the difference between a majority and two-thirds of the legislature when it comes to raising taxes.
No doubt someone will rebut this whining by pointing out that working people should be more analytical about the taxes coming out of their paychecks, and take some responsibility for ensuring they don’t make overpayments to the State.
You know what? I wholeheartedly agree. Faced with the government keeping money it doesn’t own – your money – may I suggest that you the taxpayer would be wise to have a lesser amount in State taxes taken out of your checks, with a goal of no refund at the end of the year (as if the tax codes are simple enough to estimate that magic number spot on).
Then, for those of you with additional tax liability as a result, if you need some more time to make payment, what’s fair is fair. The goose should be equal to the gander, or something like that. Go ahead and send the Franchise Tax Board an IOU.*
Lastly, let me know how that works out for you.
*This in no way should be considered a substitute for the advice provided by a qualified CPA, tax advisor and/or criminal attorney.
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