http://www.latimes.com/business/la-fi-stat...0,2028140.story

California to withhold a bigger chunk of paychecks
The amount goes up 10% on Sunday as Sacramento borrows from taxpayers. Technically, it's not an income tax increase: You'll get the money back eventually.

Reporting from Los Angeles and Sacramento - 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, 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.

But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.

"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."

Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.

"Coming into the holidays, we're getting squeezed anyway," she said. "We're not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift."

The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California's deficit-riddled books.

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.

California will probably continue to collect the tax at a higher rate for many years -- or find an additional $1.7 billion to slice from a future budget, an unlikely occurrence. All workers who have state taxes withheld will see their paychecks shrink.

"Many families are sitting at their kitchen table wondering how they're going to make ends meet," said state Sen. Tony Strickland (R-Thousand Oaks). "At the same time, the state of California is taking a no-interest loan."

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.

The increase is coming at a bad time for store owners, many of whom depend on the holiday shopping season to keep their businesses alive.

"I don't think there's any question it's going to impact consumers' spending," said Bill Dombrowski, president of the California Retailers Assn. "Any time you reduce people's disposable income, there's going to be a negative effect on the retail sector."

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.

Yet Erika Wendt, 28, of San Diego said she already lived on a tight budget: She rides her bike to work, for instance, to save on gasoline and parking costs.

"I am frustrated as this directly impacts my weekly budget -- what groceries I buy, how much I drive and can spend on gas," she said. "Now money will just be tighter, and I'm not sure where else I can cut back."

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.

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.

Such temporary measures as the withholding tax increase don't really fix the budget gap, "they just more or less hid it," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. "I call it a fraud."

shane.goldmacher@ latimes.com

william.hennigan@ latimes.com

wow some conservative schwarzenegger is.

California is like a family where the children make up the rules.

for the record, Cons weren't what got Arnie there. He avoided the primary system the first time around to avoid losing to Bill Simon and lost a chunk to McClintock in the special.

This really isn't about the Gov's office or either party as much as the giant Pig-porking resultant from the idiocy of term limits and a Prop system which has about 30 years worth of guaranteed projects (bonds) without funds.

We're right behind you in New York.

10 percent on top of your normal federal taxes? Explain this.

That seems severe.

I live in california. The weather is nice.

California's revenue stream is crippled by a bunch of idiotic, self-serving ballot initiatives that make the state basically ungovernable. As long as shit is booming, they can pretend things "work" by borrowing shitloads and using growth to make the payments. When things screech to a stop, it's like a game of financial Musical Chairs, except being politicians they just cheat and end up sitting on each other's laps when the music stops.

Nothing will ever improve here until they junk the existing proposition system & re-do the constitution.
Until then, as someone more eloquent than me once said, we're doomed to lurch from crisis to crisis with no end in sight.

My question is what happens in April when the state is still too broke to pay back the 10% it is borrowing from us now? I assume it'll just never be repaid while the higher tax rate sticks around for the foreseeable future.

We bend over and take this, so obviously nothing. Someone might say oh it's only 20 dollars a month, but so what? It isn't their money to take. This state is a disaster.

Let's be real... not that you have anything to do with my post but you're response makes me respond

1) 10% is not off the fed part of the check but off the state tax. It's 10% more off of the percentage you gave. Not off the gross or net.

2) Arnie quietly allowed this and for anyone to say it had nothing to do with his conservative ass is right. He's a guy who wanted the presidency without being born here. He likes his own rules and like that other clown in Minnesota, Jesse, people from the movie predator shouldn't be governor. EVER!!!

It is only delaying the inevitable downfall of California. Soon there will be a mass exodus.

Already is. I thought after all the forclosures we would get rental prices going up becuase people need a place to live.

WRONG!

Rent have gone down and renters are desperate. IMO that means mofo's who thought they could make it in LA/SF are going back to Iowa or whatever because those places will recover sooner and with cost to earning being better everywhere else, who'd blame them.

still irks me how easy it is for the government to reach into my shorts and take my money and how hard it is to get what's due to me. and if they're gonna "borrow" money from citizens, the least they can do is treat it as a loan and pay us back interest in the form of tax breaks in the end or something.

The weather's way too nice for a mass exodus.

I never understood why so many people wanted to live here....until I went on a cross country trip.

Government spending is whack, here's another example of why we should work harder at our jobs so lazy people without jobs can have a cellphone too.

"I had a former employee call me earlier today inquiring about a job, and at the end of the conversation he gave me his phone number. I asked the former employee if this was a new cell phone number and he told me yes this was his “0bama phone.” I asked him what an “0bama phone” was and he went on to say that welfare recipients are now eligible to receive (1) a FREE new phone and (2) approx 70 minutes of FREE minutes every month. I was a little skeptical so I Googled it and low and behold he was telling the truth. TAX PAYER MONEY IS BEING REDISTRIBUTED TO WELFARE RECIPIENTS FOR FREE CELL PHONES. This program was started earlier this year. "

https://www.safelinkwireless.com/EnrollmentPublic/home.aspx

five seconds with Google.

I guess my "source" is slipping a little, I stand corrected.

On the internet, as on a forum, anything posted in ALL CAPS is guilty until proven innocent.

There's an easy solution for workers in CA. Ever heard of a state W-4?

Claim a ridiculously high number like 20. Problem solved.

I read the first 4 sentences...that was enough for me


Cali is fcuked up.... 10%.......damn

I lived in Mass for a few years. It's just as expensive to live except much colder.

The article does say people can claim a larger number of exemptions to get around this higher deduction. Problem with that is you also run the risk of having your employer withhold too little. And end up having to make an unusually large payment at the start of the year. Not to mention an underpayment penalty as well.

Most states (and the Fed for that matter) require that you have at least 90% of your total tax withheld and have NO MORE than 10% of your total tax remaining. So if you claim a ridiculously large amount of personal exemptions and your employer doesn't withhold a sufficient amount, regardless if you pay on time, you'll still be charged the underpayment penalty for under-withholding.

I'd probably just increase my exemptions by a few (maybe just double the number) and keep an eye on how much gets withheld.


As a sidenote, VA is currently offering a tax amnesty (no penalties and 1/2 interest) on all delinquent debts prior to 2008. We've successfully generated revenue with the last amnesty program we ran in 2003. Cali should take note. Offer your residents a break, and they'll fork over the money for what they actually owe, rather than just taking from them, only to give it back.

that's called tyranny, i hope the people of California do something about this.

It isn't even a real tax increase (because god forbid anyone actually PAY for public services anymore!), it's a "loan".

It takes a pretty elastic definition of "tyranny" to encompass 'creative bookkeeping'.

Now if they issue IOUs when the tax returns are filed then... well yeah it's gonna get messy.

Did that (IOUs) actually happen over there or was that a rumor? I heard it was true.

I just caught this part of the thread. If this is true, then who gives a shit. 10% of the normal state deduction is nothing.

Those who already live on a budget. The ones that don't have the extra $20-$30 to spare from each check.

The article quoted a lady saying that she already has to take into consideration where she drives to and what she buys for groceries based on how much money she has. I'm sure there are a few luxuries she could cut out, but that's kinda the point. Why should anyone have to sacrifice any of their daily living so that the state government's books can look a little better?

It might not bother you and I, but what about those that already have issues paying rent, bills and groceries and don't have any luxuries like a car note or cable or internet?

They were paying certain state employees with IOUs for a while (which some local banks refused to honor, which was funny in a 'gallows humor' kinda way) and they're still making with the de facto pay cuts of 'furloughs'....because, see, they're bound by law not to cut the pay of certain public servants...but they CAN just send them home for unpaid vacations.

You can't really overstate what a fucking mess our government is here in the Sunshine State.

That's just it. I think the people who think they are going to lose $20-$30 from each check are thinking "10% off of total income" and not "10% increase in state deduction".

Let's put it this way, if 10% of your state deduction on one bi-weekly paycheck is $30, you're living comfortably and you have no reason to complain. You're doing well for yourself.

My state tax deduction is like, a dollar or something.

ARNIE CAN HAVE THAT DIME WHEN HE PRIES IT FROM MY COLD, DEAD HAND!!111

Seriously, this is a non-issue.

In fact, you know what California? Don't even pay me back. Just keep it. And stop writing me bullshit traffic tickets and we'll call it even.

What's Florida got to do with this?

we got the sunshine AND the gold- they can be the Orange Juice state, or whatever.

They can sell naming rights and be The Minute Maid State.

Yep, there are a lot of people moving out of Boston and rightfully so. It is expensive, but Cali does top Mass. We now has a 6.25% tax hike, we are getting taxed for everything, thats why Mass is nicknamed `Taxachusetts`.

Faq, can I borrow some money too?

a loan requires someone to borrow, and someone else to lend, usually with interest.

when someone takes it (without asking for approval) under the promise of paying it back, are you sure you want to call it a loan?

It isn't the amount it's the fact that the state is so mismanaged they had to do it and secondly they just went ahead and did it without the public's consent. I don't hear other states having to use IOU's to pay people. I'm pretty liberal so I believe in social programs but I think you should budget for them. Just don't create them and get halfway through the year and realize you are broke. If people lived like that they would get evicted and have their car repossessed. Next year they need to decide how much they need (within reason) and set taxes accordingly.

more like they need to calculate how much they are collecting in taxes and then figure which programs they want to keep and which ones they want to get rid of.

It's got nothing to do with mismanagement- the problem is structural.
There IS no way to 'manage' California- it's been made literally impossible by years of idiotic ballot measures.


You can't budget for them in this state. It's impossible when any yay-hoo with a lot of money to burn can get whatever nutty idea they have put to a public vote.

Here's how it works:

Group A wants something, so they spend money to gather signatures & get their pet project on the ballot. Let's say they want every city to have a unicorn farm.
So they get it on the ballot, and they spend a lot of money on advertising, and the public thinks "wow, a unicorn farm would be cool!" so they vote yes.

So now, by law every city is supposed to have a unicorn farm.

Except, how do they pay for it?
Gee, the authors of the bill didn't think about that.

Politicians are what they are, but politicians aren't the problem in California- the system is the problem. Until they change the system, we're fucked.



They can't get rid of anything.
Or at least, the only things they can get rid of are requirements for a functional society (schools, cops, fire departments, etc).

You want to get rid of the financial obligations imposed by someone's ballot initiative?
Oh well!
You have to write your own ballot initiative and get it passed. And good luck with that, if the ballot initiative in question is a popular handout like Prop 13. Political careers get sunk here on the rumor that you might want to repeal prop 13.

You can borrow 10% of my state tax deduction any time buddy.



The amount I'm not mad about. The principle I can definitely understand someone being upset with. See my original post in this thread. If this was a more substantial jack move I'd be like fuck.

Not really relevant, but still funny

and i guess just to keep it fair