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Is Tim Draper's 'Six Californias' Plan a Cash Grab for Silicon Valley and the Rest of the State's Wealthy? [VIDEO]

First Posted: Feb 24, 2014 01:00 PM EST
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There is a plan to divide California into six states, but is it just a huge scheme to enable the wealthiest residents of California to horde their tax dollars? That is the main question on everyone's minds after a wealthy Silicon Investor by the name of Tim Draper has lobbied the Secretary of State for permission to pursue the some 800,000 signatures to get it onto a ballot measure to be voted on by the Californian people. People who have lived a long time in California will tell you there is always a scheme brewing somewhere or talk of spilling up the biggest state in the country. This one makes us all think because, as we well know, tax avoidance is what separates the rich from the poor. So what is the motivation behind the plan to divide California this time?

The plan is being proposed byIS Draper, who has made millions of dollars by investing in internet startups like Skype and Hotmail. He proposes to divide California, adding the following six states to the United States: Silicon Valley (San Francisco and San Jose), South California (San Diego and Orange County), West California (LA and Santa Barbara), Central California (Bakersfield, Fresno, and Stockton), North California (Sacramento), and Jefferson (Redding and Eureka). So far, critics have said that the plan to divide California is intended to ensure that the taxes of wealthy individuals such as Draper and others in Silicon Valley will stay in their own neighborhood, that is, their taxes will not have to be used to support the rest of the state.

This comes at a time when a large number of corporations Silicon Valley corporations already hide their tax dollars overseas, thereby avoiding paying into the government at all. According to Bloomberg, the top ten corporate tax avoiders are tech companies: 1. Microsoft, $76.4 billion; 2. IBM, $44.4 billion; 3. Cisco Systems, $41.3 billion; 4. Apple, $40.4 billion; 5. Hewlett-Packard, $33.4 billion; 6. Google, $33.3 billion; 7. Oracle, $26.2 billion; 8. Dell, $19.0 billion; 9. Intel, $17.5 billion; 10. Qualcomm, $16.4 billion. This is consistent with the idea that people behind such an industry are not interested in paying taxes which the government could use to improve the lives of people in the poorer parts of California, which is one of the reasons given for dividing the state.

Rather than for the richest companies to put their minds and wallets together in a collective effort to bolster conditions in the whole state, the simplest solution would be to divide the state up, Tim Draper told TIME in a recent interview: "The issue is very interesting. For one thing, I've noticed that the people most adamant about creating their own state or being a part of their own state are the poorest regions, and in the current system, they are not happy, because it is not working for them. So if they had their own state, I believe all of those states would become wealthier. And I believe by managing their own state, they will become much more successful. A lot of those regions are rural, and they feel they're being unduly influenced by the urban population."

Silicon Valley and the region containing Hollywood would become the two most powerful states if the state was divided, with the northernmost, central and southern regions having the least amount of resources at their disposal, although in theory they would have more political autonomy. "The strongest argument for Six Californias is that we are not well-represented. The people down south are very concerned with things like immigration law and the people way up north are frustrated by taxation without representation. And the people in coastal California are frustrated because of water rights. And the people in Silicon Valley are frustrated because the government doesn't keep up with technology. And in Los Angeles, their issues revolve around copyright law. Each region has its own interest, and I think California is ungovernable because they can't balance all those interests. I'm looking at Six Californias as a way of giving California a refresh and allowing those states to both cooperate and compete with each other," Draper suggested.

It is not clear whether the proponents of the plan have considered the political and economic ramifications of such a plan, which Draper did not elaborate on in detail. A writer for The Huffington Post pointed out the logistical problems: "Think of the thousands of business transactions that take place between Southern and Northern California each day. Many of those would now be between states, triggering federal regulation of interstate commerce. How many Californians would need to file two, three, or more state income tax returns every year? ... Draper's initiative is vulnerable to hundreds of political hits."

The Californian state legislature found in a nonpartisan analysis that splitting California would create an enormous economic disparity amongst the proposed new states. One main issue reinforcing the rich-poor gap is that Silicon Valley would have the highest per-capita income in the U.S., while the newly created "Central California" would become the poorest state in the country.

Those old enough to remember Santa Monica's failed move to succeed from the state over tax disputes are reminding people that the proposal backed by a few wealthy individuals did not garner the necessary public support: "I'm laughing because California is in to deep of Obligations to state Unions for this to ever gain any real support outside of Silicon Valley. If you remember Santa Monica wanted to succeed from Ca. once and never gained any serious backing outside a few wealthy folks opposed to the way their taxes were being delegated. Same story here only crazier," one person wrote.

Some online commenters have accused Silicon Valley motives of not being in the best interest of the state by trying to break away so the wealthiest do not have to deal with the problems of the state at large, where most inhabitants are poorer, and instead being able to live in their own tax haven-like utopia. One person wrote: "Draper has huge money invested in silicon valley and that means draper wants more profit for 'his' companies. As it stands, the tax money that comes from silicon valley helps support the whole state. The bigger the state, the more tax money needed. More taxes = less profit. Are you starting to understand why draper wants to shrink the size of his silicon valley state? Hint: smaller state = less taxes = more profit. I admire the way he 'plays the profit game'. [sic]"

At least 807,615 voters will need to sign the petition by July 18 to make it onto the ballot. The idea would then go before voters although Draper has not decided if he will do that in 2014 or 2016. If the ballot vote passed with a majority support by Californian voters it would then be sent to Congress. It will require an enormous amount of money spent on political lobbying to make the initiative final succeed. "I can't imagine this would ever go anywhere," says a government expert at Dartmouth. Historically, there have been about 220 efforts to divide California but all have failed. One Californian resident argued that the idea was impractical because every state would have to create its own logistical system from scratch, a move that would be a burden on each state, especially so on poorer ones: "You'd need a whole new highway patrol, a whole new capital, all these other expenses," he told FOX.

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