It's an absurd article, capitalizing on predominant anti-California sentiment that has become popular to talk about in the last ~5 years or so.

It’s not that absurd. CA regulatory infrastructure is setup for established, large firms. It’s obvious that small businesses don’t have the overhead to deal with EDD and FTB. As an example, I spent 10x more time dealing with the state for my nanny than I did having to manage her.

The state needs small business rules with simple forms, push button compliance and exemptions for interstate commerce.

The alternative is that most small firms live in the informal sector or do things wrong, not b/c they are bad actors but b/c compliance is hard.

There are companies that businesses can hire such as Gusto, JustWorks, etc. that handle all this red tape for you. Most well-advised startups do just that.

I wasn't aware that JustWorks can also handle state income taxes and franchise fees. Is this true?

I'm sure if California had to pay the costs of hiring them, they'd magically find ways to simplify the code.

Respectfully, I think that's the point. Why should a single-employee company have to outsource to deal with all the red tape?

For the same reasons they don't generate their own electricity or grow their own food: Because dealing with red tape isn't core to most businesses' missions.

His point is there shouldn't be red tape at all.

there's an argument for having better laws with exemptions, there's not much for a "magically just have no administration at all" one.

Why should tax regulations be so complicated in the first place? This is the same mentality that let the IRS grow into the beast that it is today. Most of this stuff should be 100% automated unless you have some edge test case.

The IRS doesn’t write the tax (revenue) code; Congress does. And the tax code is the result of countless lobbyists peddling influence on behalf of their constituents, all of whom are looking for a carve-out of some sort.

People like to use the IRS as a political punching bag and it makes zero sense to me. Their job is to explain the code Congress wrote in terms laypeople can understand, design the forms, collect and process the returns, send notices, and take enforcement actions when cheaters try to flout the law. People who don’t like getting taxed or are frustrated at the complexity of the revenue code should take it up with Congress, not the IRS.

As a side note, it’s also incredibly weird that some very vocal people have a problem with the IRS, yet are staunch defenders of police, even though the IRS has never beaten up or killed a single person for breaking the law.

Anti-California sentiment in the context of small businesses generally, the FTB generally, and particularly in the intersection of these two, is eminently reasonable. The system is garbage, it’s designed to extract as much revenue as possible from large orgs and it absolutely fucks independents.

My reality is that nobody smart and wealthy that bothers to read or hire a CPA and lawyer actually is encumbered by California's "high taxes and onerous compliance".

So yeah, sure an obvious counter example is of W-2 employees at a FAANG are smart and wealthy, but many of them don't bother to look and have few ways of lowering their taxes, but people playing around with capital have plenty of ways.

This leaves a poorer class of people (in California and all across the country) that make too little to actually be encumbered by California taxes and also are not doing anything to trigger compliance measures on themselves while merely imagining its high taxes, and a richer class of people that can route around it like always and enjoy everything attractive about California.

? I agree that the second point you made refutes the first point you made.

I make a lot of money, pay a lot in taxes, and do not have "obvious ways of routing around it" outside of a mega-backdoor roth.

they have to be smart && wealthy && bother to do things to nullify taxes, my second point made an example of smart && wealthy && !bothering to do thing to nullify taxes

There are no ez ways for W2 FAANG employees to "route around taxes."

yeah thats what I said. glad we agree.

CA FTB is hard to dodge even for capital gains. Basically, if you have ever lived in California for anything other than a "temporary or transitory purpose", you are at least a part-time resident, likely a resident. Ergo, you owe CA's silly taxes, including on Capital Gains, and CA's own version of AMT (and no, CA does not recognize many taxation agreements that are federally recognized!).

Basically, if the FTB decides to throw the book at you, you are toast.

https://www.ftb.ca.gov/forms/2020/2020-1031-publication.pdf

Right. Anything that gets your AGI (adjusted gross income) low that year nullifies whatever California is looking for too.

So expense everything because you're building something revenue producing and spending towards that, trade 1256 contracts more often instead of just random stocks/ETFs willynilly (ie. $SPX options instead of $SPY options, because you actually know what you're trading), tax loss harvest aggressively, borrow against assets to begin with, spend the borrowed or outside capital on the expensable things (you owe whoever you borrowed from - eventually - but not the government, and in some cases can deduct the interest as well). Spend more than you earned that year and you have no tax to pay, achievable via having savings or outside capital to spend. Boost up assets in tax deferred and tax exempt accounts, the usual. Its easy to stagger the tax events across years, such that there is always a counteracting force mitigating taxes during that current year.

The government makes an incentive to transact in certain ways, the velocity of transactions is more important for the economy than taxes, when you fail to do that the government takes a cut of the remainder. (This is true of income and some other taxes, while other forms of taxes support very specific programs directly, and are much smaller)

I'm from the mountain west, and I'd say anti-California sentiment has been around my whole life (born right after the Wall fell). Even from my Appalachian migrant parents.

In the national media, it has clearly accelerated in the last few years.

For most East Coast rural areas, NY & DC have been the traditional bogeymen, not california. The mountain west is much more within Cali's sphere of influence so-to-speak.

I find this map surprisingly accurate.

https://www.fitsnews.com/wp-content/uploads/2020/01/map11.jp...

Not really, many of these are more "joking" dislikes than actual strong disdain/dislike that California, New York, etc. engender.

someone tell North Dakota that we in SD don't actually hate them, it's just jokes, we hate California just as much as everyone else

The main issue with California is that they try to collect on everyone, and they require a ton of paperwork even if you did make an honest mistake. People who move out of California are often hounded by the tax board. Even something as innocuous as having a storage unit in the state can cause the FTB to still consider you a resident.

I haven’t lived in California for two years, yet I still have to pay them taxes on RSUs that are vesting this month. It’s insane.

He’s fortunate he didn’t hire a second employee in NY.

I think better would be to have an exception for very small companies. Ie. If your revenue, assets, profits and expenses are all under $100k in the year, then you're allowed to just pay nothing and submit a 1 page form attesting to that fact.

Unfortunately, this will never happen because they love going after the small businesses! Their total liability typically is less than the cost of a tax attorney so they get paid at way higher rates than normal.

Many states are not advanced enough to "detect" these issues, even if you W2 someone in their state from out-of-state.

California has a pretty advanced FTB and catches and alerts on these.