If I were you, I’d stop doing business with the state of California

It’s bad enough the situation in California requires the state to dish out IOUs to residents and small business owner who are owed refunds or contract payments, but now the state will not allow IOUs to be used as payment for amounts owed to the state itself.

If I had a contract with the state of California, I’d want to get paid or they can forget the goods or services owed to them. Some businesses are finding out the hard way that dealing with the state of California is bad business.

Here’s a report from Courthouse News Service last week (Aug. 4), with my emphasis added.

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’ federal class action claims the state is trying to balance its budget on their backs.

Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California “paid” her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called “sale” of the uniforms.

No friggin way would I be paying the state of California taxes that I never collected from my customer – the state of California.

Hat tip to Ed at Hot Air who notes

When governments start issuing IOUs instead of actual US currency, they are legitimizing that kind of transaction for themselves.  To give Baird a pile of literally worthless paper and then object to Baird responding in kind is the worst kind of hypocrisy.  Either California’s government deals in scrip, or it doesn’t, but the rules should be the same in either direction.

It’s difficult to think of a more breathtakingly stupid series of actions in government than what we’ve seen in California over the last few months.  This one is practically pathological.

1 reply
  1. donh
    donh says:

    The IOU promises to pay real cash in the future. No income is received until redeemed. No tax is due until the promise is met and IOU's exchanged for real cash. There is such a thing as a promisary note tax, but promisary notes differ from IOU's by providing a date for redemption. The government always makes excuses why it cannot cut personnel and benefits to its union workers and stiff those contracts, but they have no problem shafting private vendors and bond holders.. those evil collectors of profit. Anyone providing goods and services to a government should demand cash only in advance or no work.

Comments are closed.