Some Call it California’s Cash Advance

Gird your wallets friends.  The desperate politicians are at it again, this time with more “creative financing” for the state of California.  And once again this “creative financing” is a direct hit at your take home pay.

Spotlight California;

Effective today, the amount of state income taxes withheld from California workers’ paychecks will increase 10 percent.

That might sound like a tax increase, but state officials insist that’s not the case.

The lawmakers say this isn’t a tax increase?  Really?  OK, how about calling it a compulsory interest-free loan from taxpayers to the state?

The idea is to withhold more from your paycheck now, so that come tax time next year, the refund the state owes you will be less.  Uh-huh. The extra withholding tax will reduce Californians’ take-home pay by about $1.7 billion for the year.  Now California is already struggling.  Every sector is down, housing, retail, manufacturing.  Income tax rates went up last year by 0.25%, bringing the top rate to 10.55%, but receipts are already coming in $1 billion below projections, according to the state controller.  So someone please explain to me how this is going to help the people of California and at the same time shore up its growing hole of debt.

The spin continues;

Brenda Voet, spokeswoman for the state Franchise Tax Board. “We’re trying to warn people to go to their personnel and human resources departments for 2010 to make sure they have the proper amount of tax withheld and make any adjustments they need to make. We don’t want people to be surprised by anything.”

This is the same state that has been issuing IOU’s to pay their state contractors, so trust me Brenda,  we are no longer surprised by anything that happens in the “Golden State”. To the rest of the you, pay attention.  If you don’t, your own state officials might get “creative” with your paycheck too.


Comments

  1. nightcrawler says

    The cash flow shortage is real and that is a truly desperate move of the part of California, frightening actually.

    This brings us back to the flat tax argument. Make it simple, make it predictable, pay as you go. No year end reconciliation or postponements. No games. It would take a while to implement, but once in place this type of system would prevent such folly.

  2. PapaTodd you’re a bit late. This was done in Arizona 6 months ago. My withholding went up 15%

  3. Dave Hurley says

    I do enjoy this blog but want to point out that your line “But the lawmakers say this isn’t a tax increase. OK, how about calling it a compulsory interest-free loan from taxpayers to the state?” is a direct lift from the Wall Street Journal article (which was not your linked item). This should have been attributed.

    http://online.wsj.com/article/SB10001424052748703932904574511923279377100.html

  4. You da man! And that was indeed a particularly pithy turn of phrase.

    Just for the record, I moved my family back to AZ after a run in CA precisely because the state is falling apart. The climate there for a middle-class, home-owning small businessman with family is absurdly hostile. I have taken my business (and CA client base) out of the state and am now bringing CA dollars into AZ. Many more people with a similar opportunity will be taking it. Earthquakes are the least of California’s worries.

    Love the blog–it’s good to be able to get back up to speed on AZ politics.

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