Free Markets, Free People

California Chutzpa

The disaster that is California government has now turned into the theater of the absurd:

Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes.

The vendors have filed a federal class-action lawsuit. But the depth that government will stoop too to collect revenue never surprises me. With housing prices crashing everywhere, local governments continued to try to collect at the same value rates as before or, in some places, actually raise the taxes.

And here we have California issuing, what to this point are absolutely valueless promises to pay – maybe – and then expecting those in receipt of those worthless bits of script to treat them as real money and to pay taxes on the amount in real money.

The onions it takes to make that sort of demand is just breathtaking. Or perhaps arrogance is a better word. But regardless it is just a stunning thing to behold.

And, as an aside, you can’t help but wonder what California will pay the lawyers it hire to defend its indefensible demand. As a further aside, it wouldn’t surprise me at all to see the court find in the state’s favor.


29 Responses to California Chutzpa

  • “And, as an aside, you can’t help but wonder what California will pay the lawyers it hire to defend its indefensible demand. As a further aside, it wouldn’t surprise me at all to see the court find in the state’s favor.”

    Yes, I can hear the demand for more “laws and regulations” to protect the state from the evil “small businesses already. Incredible story, just incredible.


  • This is even worse than Kansas withholding tax overpayments. Of course, this begs the question: Who is more culpable, the government or the people who continue to re-elect the same morons to run it? This is a democracy, after all.

  • What strikes me about the last few months is that the large government crowd has become almost completely tone deaf in their obsession with growing government. They no longer seem to grasp the power of symbols, or even of sound-bites.

    This particular case is stupid from several points of view, and the symbolism is just horrible. Forcing taxes on Monopoly money is the sort of outrage that doesn’t require a lot of explanation, and can’t really be justified in any coherent way.

    It illustrates vividly and unambiguously that the government is completely unconcerned about the effects of its policies, or the fairness of them. It just wants to get its hands on more money and is quite prepared to abuse its power to do that.

    Now, even though this is just the California state government (which I mentioned has world class idiocy in its legislators), there are implications for federal issues. Many citizens tend to lump all levels of government into one bucket. Having California demonstrate unequivocally that it doesn’t care what effects are promulgated by its policies will mentally carry over for many people, who will conclude that the federal government won’t care about the effects of, say, it’s healthcare policies either.

    Once a person concludes that, no amount of hand-waving assurances by Obama, Pelosi, or any of the other smarmy Democrats will matter. It translates to them as “Who are going to believe, me or your lying eyes?” And the more the smarm-meisters bleat about how they really mean it in the face of convincing evidence that they don’t, the more opposition will solidify.

    At times in the period from 1998 to 2008, I got the impression the Republicans wanted to fail. Some of their decisions were so obviously stupid and contraproductive to staying in office that they seemed to like the role of shrill minority that can’t really do anything.

    I’m starting to get the same feeling about some Democrats., because some of their shenanigans are so obviously bad for their re-election prospects.

  • Will the attorneys arguing California’s case accedt IOUs in payment of their fees?

  • Congratulations, California. You have now gotten a full dose of hysterical Orwellianism, brought to you by the same numbnuts thinking that is in charge of this country.

    Sacramento today, DC tomorrow! Who’d a thunk it?

  • Picking between 2 options rendered by a small group of somewhat obscure individuals is not Democracy. 

    • It’s only a two party system because the numb-nut electorate makes it that way. There’s nothing impeding a third party but the population’s own stupidity.

  • “How dare you ask us to accept our own worthless promises as payment!  What do you take us for?  Suckers like you?”

  • What I’m willing to bet happens is this:
    A politically connected firm will begin to buy up these IOU’s from desperate small businesses for 30% of their face value, hold onto the IOU’s and then redeem them for full face value once the Assembly, Senate and Governor finally reach a budget agreement.  I will be further cynical and say that this politically connected firm will seek to delay any budget deal to further distress holders and reduce the amount of hard currency necessary for their purchase.  The only question will be whether or no the Speaker, the President and Ah-nuld PERSONALLY profit or if only their political backers profit?

  • Well, of course Cali wants them to pay taxes on the IOUs in cash…  How else is it supposed to pay back the IOUs?

  • Actally, the IOUs are future tax money. If you don’t give us tax money (in real dollars)how can we pay you?

    Notice that even as they figuratively fall into the ocean, the citizens of California are still trying to have their cake and eat it too.  They still won’t fund drilling (eco freaks), or put the stop to starving the water needs of their farmers (federal mandates on guppies), or let animals go on their own for a few years (sea lion funding), or tell the illegals to simply “go home” and stop paying their free ride, (welfare, schools, medical, etc.).  If you don’t have the money, you can’t spend it, this economic contraction has exposed all the governments, local-state-federal, and the Ponzi scheme they were operating.  Still people want all the goodies, but don’t want to pay the price.  Like the other commentators have said, we did it to ourselves.

  • That is beyond fiction.
    If you had put that in a book, any competent editor would have cut it out and/or made you rewrite it into something plausible.
    Someone should get this to the fine folks at Mirriam-Webster’s, they could put it in the definition of “adding insult to injury”.

  • Better question: will the California Supreme Court justices who end up hearing the case accept IOUs to pay their salaries?

  • This situation is our whole country’s future.
    Why else the need for speeding all the gigantic bills out the door?
    Accelerating what was going on in last administration?
    I’m afraid they know what they’re doing.

  • Seems to me business owners who got IOUs have a good case that there is no “taxable consequence” arising from the issuance of those pieces of paper.  After all, they’re hardly negotiable instruments.  Seems totally logical that recipients only owe income tax on those amounts if (and only at such time as) the state actually redeems its IOUs for cash.
    The state will claim that the IOUs are like a *check*– both are a promise to pay.  A check is considered income, so…   But a check is a promise to pay on the demand of the bearer (recipient), without further conditions.  Hell of a difference.
    PLEASE, Lord, let this case be heard before August, 2010.  It would be a fine weapon against any party that sought to expand government power.  Which is why it won’t happen:  Look for the Cal courts to try to dismiss this either on a summary judgment, or by ruling that the plaintiffs don’t have “standing” to sue!  (Exactly the ruling when citizens sought to challenge Obama’s qualification to be president.)
    After all, the small-businessmen are just powerless, peon-taxpayers.
    Who dares to confront the power of the king?

  • The people get the government they deserve. Enjoy.

  • Isn’t it illegal for a state to issue money?  If a slip of paper says it is a note of payment and the state wants to tax it as if it was a note of payment isn’t that the same as the state printing it’s own money?

  • Jct: There’s nothing wrong with small denomination municipal or California State IOUs if anyone can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes by everyone.
    When the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
    U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
    See on growth of the international time-trading network.
    Too bad California IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.
    If they make IOUs legal tender, I’ll take back every joke I ever made about Girlieman Governor Musclehead if he engineers the California state currency lifeboat.