While preparing my income taxes I discovered that the depreciation schedules for real estate investments are different for federal and state tax returns. Why is this? I also looked at five past tax returns and discovered that my California income tax was around 30% of my federal obligation.
We could greatly simplify the California tax code by having individuals (and maybe even corporations?) file out a one page California tax form that calculates our California income tax as a fixed percentage of our federal tax obligation. A copy of federal form 1040 (2 pages) must be included with the California tax return for proof of the federal obligation.
So how does this save $500M? The Franchise Tax Board has over 6,000 employees. It costs California well over $600M per year (salaries, benefits, office expense, overhead, etc. ~ $100K per employee) to employ these folks. California might be able to save over a HALF BILLION DOLLARS in direct and indirect costs just by simplifying our income tax system. I estimate 5,000 of these jobs could be cut resulting in the $500M savings.
Let the IRS perform their federal audits and report any problems back to California. 1,000 employees should be able to handle any reporting issues.
So what do you do with the employees that were cut? Remember, these are highly trained accountants, attorneys, and analysts. Some will leave by attrition. Some will retire. Those remaining will help with the transition and can be assigned to other state agencies to begin to streamline California government. I have been involved with California government for many years. It is a mess.