California increased its income and sales taxes recently, in the midst of a recession. That measure was intended to be a temporary increase. Coupled with an increase in the yearly car registration fee, it appeared that plenty of funds would be raised by the new levies. Well, the summer showed that California hadn’t yet left budget crisis mode. As part of a deal to close a $26 billion budget deficit, California is resorting to a dirty trick- taking a no interest loan from its constituents.
Death and Taxes
California, according to the Tax Foundation, has the 6th highest tax burden in the nation. With the highest rate of taxes at a whopping 10.55% (for earners over $1 million) and 9.55% (the bracket below) for all wages earned over $46,309. California doesn’t have an exemption for capital gains (long or short), and even taxes Health Savings Accounts. Not even the Feds are that brazen…
What’s got me writing today is this nugget: California is increasing its withholding rates as a condition of closing the budget gap. Yes, California is going to take out 10% more than they currently do from California worker paychecks. This tax adds up to a whopping $1.7 billion short term loan for the state. If you file your taxes at the end of the year, you’ll find that you paid at a rate 10% higher than even with the higher brackets. Of course, California is betting some people who pay their fair share of taxes either won’t file returns, or won’t increase their allowances.
I know, I know, it works out to a few dollars a paycheck… plus you’ll get it back at the end of the year. Still, why does this feel like boiling frogs? As a condition of the stimulus, we were told that a few extra bucks a month would make a difference. What about a few less?
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