JOHN BATCHELOR SHOW
Friday 22 February 2013 / Hour 1, Block A: Jim McTague, Barron’s, in re: Sequester White House Open to Two-Month Sequester Deal President Barack Obama supports $2 in spending cuts for every $1 in revenue for a sequester replacement bill, White House Press Secretary Jay Carney said Friday.
Friday 22 February 2013 / Hour 1, Block B: Kim Barker, ProPublica, in re: American Action Network and 13 Illinois Mad Scientist. "The statute governing social welfare nonprofits says they should be operated 'exclusively' for promoting social welfare," Barker writes. "But the IRS paved the way for political spending by these groups by interpreting 'exclusively' as meaning the groups had to only be 'primarily' engaged in promoting the public good. Some groups have taken this to mean they can spend up to 49 percent of their money on election ads."
Friday 22 February 2013 / Hour 1, Block C: . Steve Malanga, Manhattan Institute, in re: CALPERS and Risk: The Pension Fund that Ate California CalPERS’s corruption, insider dealing, and politicized investments have overwhelmed taxpayers with debt
Friday 22 February 2013 / Hour 1, Block D: Jeff Bliss, Bliss Index , in re: The California tax that terrifies tech - Retroactive tax bills and the elimination of a state tax-break for California's entrepreneurs and early-stage investors could force them to move to ... Texas. Entrepreneurs and investors in California can expect to receive a rude shock in the mail if they sold their company in the last four years. Not only did the state's Franchise Tax Board (FTB) eliminate a tax break on capital gains for small business owners and investors, it announced the tax would be reinstated retroactively. This means those who benefitted from the break can expect a bill for unpaid taxes, plus interest, stretching all the way back to 2008.
Since 1993, California entrepreneurs and early-stage investors have enjoyed a partial state income tax exclusion on sales of stock of a "qualified" small business. This was an incentive for people to start and keep businesses in California. If they sold their company, they would only have to pay half of the regular state tax rate on what they gained -- about 4.5% instead of 9%. That could include founders of companies such as Instagram and Yelp (YELP). The FTB announced its decision last December, and the ruling went into effect earlier this year. Now, not only will stockholders have to pay the full tax rate on capital gains, which has risen to about 13%, but they'll also be billed retroactively for 50% of the taxes they excluded. The FTB says this will affect over 2,500 people and bring in about $120 million in revenue.
Not surprisingly, the changes have led to concern among entrepreneurs. "A lot of people who are going to be very affected don't even know about it," says Brian Overstreet, entrepreneur and co-founder of AdverseEvents, a pharmaceutical data firm. "This is going to affect our decision to keep jobs and businesses in California." Overstreet had previously co-founded Sagient Research Systems, a company he sold last year. As a result of the transaction he says he will personally have to pay an additional six-figure amount in taxes and interest.
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When the time came for him to set up his third company, Xeris Pharmaceuticals, in 2010, the serial entrepreneur John Kinzell decided he had had enough of California, despite having lived there for almost 25 years. He launched the company in Austin instead and says a lot of people followed him. "It's hard to swing a cat around without hitting someone from California who's moved here or is at least looking," says Kinzell. "We have more companies here than talent, so they're having to pull a lot from California." He says it's unlikely he or fellow entrepreneurs will ever move back. "It's just become a very unfriendly state to run a company," says Kinzell. "Once that sort of bleed starts, it gets hard to reverse it."