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California Helps Itself to a Bigger Chunk of Everyone's Paychecks
Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.Technically, it's not a tax increase, oh, no, no, heavens, no! even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change. Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less. "Hoo boy, Mabel, we're gonna git a bigger IOU next April from Ah-nuld!" From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay. The provision is one of numerous maneuvers state lawmakers and Gov. Arnold Schwarzenegger approved in the summer to paper over the state's deficit. Many of the changes, including the extra withholding, were little noticed outside of Sacramento. Savvy taxpayers can get around the state's maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state's Franchise Tax Board. "People can get out of this," she said, noting that most people would have to change their allowances through their employers. California's budget leaders are banking on the hope that most won't. But Stephen Levy, director of the Center for Continuing Study of the California Economy, wasn't so sure. "It's having a relatively small impact on people's income," Levy said, pointing out that many families will receive only $12 to $40 less each month. Ok, Stevie, why dontcha just give me $12 to $40 a month, then? I'm sure you'll hardly notice...especially if I take it out of your check before you get a chance to spend it. The extra withholding comes in addition to tax hikes the state enacted this year. In February, state income tax rates were bumped up 0.25 of a percentage point for every tax bracket. The dependent credit was slashed by two-thirds. The state sales tax rate rose 1 percentage point. The vehicle license fee nearly doubled to 1.15% of a car's value. Lawmakers and the governor also approved deep cuts to schools, social services and prisons to fend off one of the steepest revenue losses in California history. Temporary budget bandages, such as the increase in withholding, were included at several points this year to avoid higher taxes and deeper cuts, said H.D. Palmer, a spokesman for the state Department of Finance. So...California's finances are just peachy now, right? Everything's fixed, I'm sure. Sacramento, meanwhile, is awash in red ink again. The state controller recently said revenue in the budget year already had fallen more than $1 billion short of assumptions. Outsize deficits are projected for years to come. Posted by: Cornsilk Blondie 2009-11-01 |
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