Proposition 13 Unraveling

Limits on taxes don’t last forever and can’t survive without constant supervision over the tax and spend fans of big government.  It’s been 25 years since the voters in the PRC set limits on property taxes that had become so bad that people were forced to sell their homes.  Those limits, and their imagined effects on tax revenues, are now right smack in the bull’s eye of PRC rulers desperate for money.  As I mentioned earlier, the power of resentment between neighbors is reaching a breaking point, where new property owners are upset about having to pay current market value property taxes, while their neighbors may be still benefiting from Prop 13 limited taxes.   Some proposals currently being discussed include:

Removing the limits just for commercial property.  While this may seem like a good idea at first, to stick it to the evil businesses, that is very short-sighted, and will just make things much worse for the economy out there on the Left Coast. As anyone who truly understands how businesses works should know, companies don’t ultimately pay taxes. They are nothing more than conduits which will either pass on their increased taxes to their customers or cut costs elsewhere to even things out.  The most likely effect will be for more businesses to relocate out of the control of the evil rulers of the PRC and relocate elsewhere.  Abandonments and sales of commercial properties will have the effect of lowering property values (based on basic supply & demand forces), pushing property tax revenues down again.  Of course, avoiding these consequences requires considering the long-term effects, which is beyond the capability of most elected officials, whose long-term horizon is the next election.          

Tax-cut punch

Naysaying Times.  The paper of record will never throw props to a tax cut. – Of course, given the NY Times’ reputation for fabricating news and printing lies as truth, what good would their endorsing a tax cut do?

Six Important Rules for Real Social Security Reform 

A company that loses money is socially irresponsible – A Peter Drucker classic

Economic Profit Vs. Accounting Profit

Why Smart Managers Do Dumb Things – Motivations for creative accounting tricks.

Give Us Disclosure, Not Audits – There have long been serious problems with the practicality of GAAP (generally accepted accounting principles) in audited financial statements as investors try to make reasonable decisions.  This isn’t a new problem by any stretch of the imagination.  I can still recall this as a topic in my early college accounting classes, almost 30 years ago.  One of the biggest surprises when I started learning about accounting is there is no such thing as one way to do things.  GAAP includes a wide range of optional methods that can be used, making a truly useful side by side comparison of different companies’ published financial statements impossible.  I’m sure most people, including many financial planning advisors, are completely unaware of that fact.