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 $1 billion short of assumptions. Outsize deficits are projected for years to come.
Posted by Cornsilk Blondie 2009-11-01 08:51||
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#1 Dang, Blondie - you posted this while I was writing my brilliant in-line snark to posting the same news story. And it was pretty good, too. Fred's filter caught it and dumped it.
#8 You'll be repaid any extra withholding in April.
While Barry prints USD, California prints IOU's. If one listens closely, you can almost hear the clatter of the printing presses.
Posted by Besoeker 2009-11-01 12:13||
2009-11-01 12:13||
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#9 Think of it as a forced, interest-free loan:
Wow this is new. When did the Fed's invent with-holding... hummm.... WW Decue? Hell, best to have dem soldaten (LOL semi-Afrikkaner alert) pay they taxes before hitting they beaches. amirite?
Posted by .5mt 2009-11-01 13:27||
2009-11-01 13:27||
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#10 These numbers don't seem to make sense.
Isn't the CA tax rate around 8%? At 90K$ per year, that would be roughly $7200 a year. All would be withheld. Ten percent more is $720, per month that would be $60, not $25. Surely the exemptions and standard deductions wouldn't reduce the taxes on 90K that much?
Posted by KBK 2009-11-01 15:11||
2009-11-01 15:11||
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#11 Uh oh. No popcorn for me for a while, right, Barbara? Sorry.
Posted by Cornsilk Blondie 2009-11-01 15:16||
2009-11-01 15:16||
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#12 "These numbers don't seem to make sense."
There's your problem, KBK - you expect anything the Cali politicians do to make any sense.
#14 KBK, the marginal CA income tax rate increases w/ income from 1 to 9.3%. the max 9.3% rate kicks in at $47K (single filer) so it just seems like a flat rate.
Posted by ed 2009-11-01 16:10||
2009-11-01 16:10||
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#15 Oh, forgot the 1% surcharge on millionare income earners. No wonder they are fleeing to zero state income tax Texas.
Posted by ed 2009-11-01 16:12||
2009-11-01 16:12||
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#16 We left California and came to Texas 40 years ago in June. I should probably tally up all the money we've saved by not paying state income tax all those years. Might improve my mood LOL.
Posted by Woozle Uneter9007 2009-11-01 19:17||
2009-11-01 19:17||
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#17 Let's see what increasing the punishment for wealth creators does to the economy.
Posted by Bright Pebbles 2009-11-01 20:00||
2009-11-01 20:00||
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#18 Let's see what increasing the punishment for wealth creators does has done to the economy.
Fixed it for you, BP
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