| ► 07/22/09 Letter to Gov. Schwarzenegger re: Legislative Tax Avoidance/Fraud |
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07/22/09 Letter to Gov. Schwarzenegger re: Legislative Tax Avoidance/Fraud
Following is the Watchdawg's letter to Gov. Schwarzenneger providing him with facts that state senators are involved in tax avoidance and/or outright fraud that has likely led to the loss of millions of dollars that should have been paid to the IRS and more importantly to the State of California.
July 22, 2009
Hon. Arnold Schwarzenegger
California Governor
Re: Legilsative Tax Avoidance/Fraud
Dear Governor:
Find attached a copy of a July 21 letter to AG Jerry Brown regarding evidence of tax avoidance and/or outright fraud involving state senators. I thought this might be of some help in your ongoing struggle to deal with the massive budget deficits facing California.
I was pleased to discover in a July 18, 2009 story by Patrick McGreevy of the LA Times that you ordered the sale of 15% of all state cars. The Times also reported that you ordered a 20% reduction of the 8,662 state workers who are provided with cars for commuting purposes.
As you’ll see from the attached letter, IRS Publication 15-B considers commuting in an employer provided car to be treated as “personal income.” Of course the same is true of any personal use with the exception of de minimis (minimal/inconsequential) use.
The IRS also requires that any income derived from personal use of an employer vehicle be declared on an employees annual W-2. In order to determine whether W-2s issued to state legislators were in compliance, I requested copies of their W-2s from Controller John Chiang. Unbelievably, Mr. Chiang’s denial came after I provided him with copies of W-2s I obtained in Ohio for the State Attorney General, State Auditor, Secretary of State, justices of the Ohio Supreme Court, and several hundred sitting and retired judges. As a result of Mr. Chiang’s unwarranted denial, I was forced to file a public records lawsuit against him in Sacramento Superior Court.
I would suspect that the 8,862 state workers granted commuting privileges may not have maintained detailed logs differentiating personal v. official use of state cars. More importantly, the income they derived may not appear on their annual W-2s. If in fact, this is the case, then the amount of federal and state taxes owing, along with penalties and interest would likely be in the millions, and I mean millions of dollars.
As California’s Chief Executive Officer you are empowered with the authority to issue a directive to Mr. Chiang that he immediately provide me with the W-2s of state legislators as I previously requested and that he also make available to me for inspection annual W-2s for the 8,862 state employees provided with take-home privileges.
When the state continues to confront massive budget deficits, it is frivolous to the nth degree for Mr. Chiang to deny me the opportunity to discover whether or not state employees and/or legislators are complying with IRS rules and reporting/paying applicable federal/state taxes on income earned over the years. How does Mr. Chiang justify the costs of defending a public records lawsuit when it is plainly clear he has no sound legal basis for so acting. Obviously, I have no interest in invading the privacy of state employees/legislators, meaning social security numbers, home addresses and the like should in fact be redacted; however, the disclosure of income declared in box 12 or 14 of an employee’s W-2 is not under any circumstance an invasion of privacy.
In my personal opinion and prior investigation of this issue in Ohio, there is absolutely no justification for thousands of state employees to be provided with take home privileges. I can assure you that a forensic audit would likely prove that some employees are pumping gas into personal vehicles and/or allowing family members to use them. Obviously there are justifiable exceptions; however, I would suggest that at a minimum 85% of state employees have no need for take home privileges, and the state should consider selling at least 75% of its fleet and reimburse employees for provable miles driven on official state business, which is the case with most private employers.
Lastly, the Sacramento Business Journal quoted you on July 17, 2009 as saying, “Any waste, fraud and abuse of taxpayer dollars is absolutely unacceptable. If we find it happening, we will take immediate action to correct it.” I could not agree more and as always I stand at the ready to assist you in this laudatory endeavor.
Thanks for your time and attention to this serious matter and I look forward to your prompt response.
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Dave Palmer
The Watchdawg
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