Lessons from Pillage People Smackdown

Wednesday August 30th, 2017   •   Posted by K. Lloyd Billingsley at 3:23pm PDT   •  

As we noted, in 1990, Gilbert Hyatt was awarded the patent for the first single-chip microprocessor. This invention earned Hyatt a lot of money and he soon moved to Nevada, which has no state income tax. California’s Franchise Tax Board (FTB) claimed Hyatt lied about his residency, and that he owed millions in state income taxes. Despite a 2008 ruling in his favor by a Nevada court, FTB snoops kept after the inventor. By the time his case arrived at California’s Board of Equalization this week, the FTB was claiming that interest had run up Hyatt’s tab to $55 million. Turns out, they were wrong.

On Wednesday, a 3-2 vote by California’s Board of Equalization determined that Gilbert Hyatt was indeed a Nevada resident when state tax collectors said he lied about his residency. So the BOE waived $5.7 million in fraud penalties and $5.7 million in taxes from 1992. That left Gilbert Hyatt with a 1991 tax bill of $1.9 million, including interest, not a slam dunk but a far cry from $55 million.

Taxpayers might note that the Franchise Tax Board has spent more than $25 million on the case, so the quest to grab Gilbert Hyatt’s money wasted more than $20 million. Somebody should get fired, but massive waste seldom if ever prompts California to hold anybody accountable. On the other hand, the lessons still hold.

Government greed remains truly fathomless, and inventors of useful products such as the single-chip microprocessor will find better conditions in other states. Meanwhile, BOE members Fiona Ma and Betty Yee sided with the FTB pillage people against Gilbert Hyatt. Inventors, taxpayers and voters alike might take note of that.

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August 2017
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