Tuesday, July 26, 2011

California Supreme Court Makes it Easier to Seek Refunds of Illegal Taxes

Some good news: according to the San Francisco Chronicle, California's Supreme Court ruled that taxpayers in the state may file class action suits against cities and counties to seek refunds, if a local tax is found to be illegal. The ruling reduces a substantial barrier to seeking compensation, and overturns lower-court rulings requiring taxpayers to file requests for redress individually. The ruling pertains to a 2006 case, in which the city of Los Angeles was sued for a telephone tax that was linked to an invalid federal excise tax. On the down size, the ruling does come with limitations: cities like San Francisco, which has laws prohibiting class actions for tax refunds, would likely be exempt from the ruling, and class actions still can't be filed in areas where the law spells out procedures for seeking individual refunds. But it's a good thing.

While we're on the subject of illegal taxes, KQED raises an interesting point about the coming referendum on the Amazon tax: assuming the company is successful in getting its measure on the ballot, would the tax have to be put on hold until the vote? According to an opinion from the Legislative Counsel's office in Sacramento, yes. The ironies here are manifold. The Amazon tax has already cost California jobs, and there was never reason to believe it would actually realize the $200 million in revenues that Sacramento expected, but Governor Brown and leaders in the Legislature just had to have the symbolic victory of higher taxes. Now, by pushing the tax over the objections of firms like Amazon and Overstock, the backlash might ultimately end up blowing a bigger hole in the budget. What's more, Brown is now poised to sign a bill cancelling next February's presidential primary, a move which proponents claim will save money. Yet it would carry the consequence of pushing the referendum off until June, potentially costing the government more in Amazon tax revenue than it would save. Oh, what a tangled web we weave.

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