SACRAMENTO, CA – Christmas is a time when people are thinking about giving. Last Christmas Eve, a story re-emerged about taking — the kind indulged by the state of California, and centered on the duties of one state employee.

Duane Hoffman is a tax auditor who tracks professional athletes, and specifically their "duty days" in California.  The state then shakes them down for state taxes at the same high rates as residents. According to a report in the Sacramento Bee, this brings in some $100 million annually, including $163,000 from a three-day trip by the New York Knicks and $106,000 from the 2006 California sojourn of Yankee infielder Alex Rodriguez. As we noted when we first covered this story ("State Greed Has Consequences," August 4, 2004) this confiscatory activity is not limited to athletes.

The tax also applies to a blues singer from Chicago, a home-care nurse from Nevada, and a novelist from Montana. According to Kathy Kristoff of the Los Angeles Times, an out-of-state salesman earning $50,000 a year, about $200 a day, would owe 9.3 percent of that, $18.60 a day, to California. Such people are not as easy to track as Shaquille O'Neal and other athletes, whose stellar salaries, usually public knowledge, make them an easy target for the "jock tax" that actually applies to everyone. Like all taxes, it has consequences.

Because other states retaliate, California's money grab is really a kind of zero-sum game. The Bee's report also notes that high taxes make contracts with California teams worth less money, and that state tax laws are now a factor in contract negotiations. It may not come out in the sports pages, but athletes have solid fiscal grounds for wanting to work elsewhere. So does everybody else, and many are doing so.

Last year the number of California residents moving out exceeded those moving in. As PRI's Anthony Archie notes, this should come as no surprise in a state unfriendly to entrepreneurship, and which deploys a punitive tax structure. Single individuals hit the 9.3-percent bracket at just under $42,000, hardly rock-star wages. That rate is only a point below the 10.3-percent peak, the highest marginal rate of all 50 states. As PRI showed in Taxing Times: How California's Steep Income Tax Stifles Economic Growth, the tax needs to be flattened and compressed. Whether we should have a state income tax at all needs to be debated. In California, everyone spends far too many "duty days" working for the government.

That's why people vote with their feet and leave California, a state that once attempted to tax editorial cartoons as works of art purchased in a gallery — a scheme known as the "laugh tax." That, like the "jock tax," is what passes for ingenuity in Sacramento.  Any way to wring more money out of the people is fair game. That dynamic needs to change if California's economic fortunes are to be restored. This should not be a difficult matter. Ingenuity and zeal should be transferred to finding ways to lower taxes, and toward exposure of the state's prodigious waste and corruption.

California employs people to expose waste and fraud but, unfortunately, agencies such as the California Department of Education (CDE) sometimes prefer to fire and demote these workers rather than heed their warnings. (See "The Corruption Inherent in the System," December 11, 2002.)  State funds are now flowing to attorneys defending the CDE against its own employees. PRI will address this disturbing case again during 2007.

Meanwhile, PRI's forthcoming California Education Report Card quotes Paul Meyers, a CDE official, who says of one categorical program: "We don't know how the money is being used. We wish we did." 

So do the California taxpayers who provided the money. Consider also Carolyn Macchiavellie, a CDE official who oversees English Language Acquisition in California. Asked by a reporter where the money goes for that program, Macchiavellie said: "I have no idea. There's no audit. There's nothing."

That kind of glib agnosticism with public funds probably merits a visit from law enforcement. But maybe the newly minted Schwarzenegger administration could relieve Duane Hoffman from tracking Shaquille O'Neal and assign the intrepid sleuth to these cases.

K. Lloyd Billingsley is Editorial Director at the Pacific Research Institute. He can be reached via email at lbillingsley@pacificresearch.org.