August 27, 2011 - Phil Hodgen

The shipment of California jobs to Texas – what can be done?

This is just too good–for its commentary on the quality of the brains in California politics, and for the meta-message about the quality of brains in Congress and the White House (hint hint: FATCA. hint hint: the ongoing FBAR jihad). From 40 Tax Management International Journal 244, April 8, 2011.

The Shipment of California Jobs to Texas — What Can Be Done?!

by Herman B. Bouma, Esq.
Buchanan Ingersoll & Rooney PC
Washington, D.C.

May 2, 2011. This just in: Concerned about the shipment of California jobs to Texas, the California State Legislature today passed legislation imposing current, worldwide income taxation on every corporate group headed by a California corporation, thus subjecting such a group to current taxation on its income earned worldwide, including in Texas. The Governor indicated he will sign the legislation, stating, “It is high time we repeal the tax breaks and loopholes for shipping California jobs to Texas.”

May 2, 2016. This just in: Recently released statistics indicate that the number of corporate groups headed by California corporations has dropped precipitously over the last five years. The statistics also indicate that those California-headed corporate groups still remaining are having a difficult time competing with other corporate groups. Members of the California State Legislature expressed surprise at the findings.

May 2, 2017. This just in: Dazed but undaunted, the California State Legislature today passed legislation imposing current, worldwide taxation on every corporation in the world and instructing the Governor to take over the world in order to ensure compliance. The Governor indicated he will sign the legislation and expressed every confidence in the ability of the California Highway Patrol to carry out its new mission.

I would only note that this is in fact already true in California. Let’s say there exists a trust. The assets are outside of California. All of the beneficiaries live outside of California and have never traveled to California in their lives. The only connection with California is that the trustee is based here.

  • Result 1: California says the trust must pay California income tax on its income. (Consequently, the beneficiaries end up paying the California income tax even though they don’t live here). This is seen as completely logical in Sacramento–as immutable as the Law of Gravity.
  • Result 2: California banks and trust companies cannot compete for this business. Instead they open trust companies in Nevada and Delaware. (Consequently, banking and trust company jobs are created in Nevada and Delaware). This produces utter bewilderment in Sacramento.

A hearty tip of the hat to Herman Bouma for his humorous article.