Saturday, November 7, 2009

California's "Not a Tax", Tax

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What was that line that Whoopi Goldberg used about Roman Polanski? Oh, yeah! It wasn't rape rape when he drugged and raped a thirteen year old girl!
Well, in California, Whoopi is considered a genius! Listen to what they're saying about California's "Not a tax Tax"...
... there is now a 10% increase in the withholding tax rate that will last through 2010. Now this is technically not a tax increase, it just withholds more money from your paycheck while keeping your annual tax amount the same.

Technically not a tax increase? It's just the involuntary seizing of your assets by the government, which they put in the same account as the rest of their tax revenues, that you can get back if you "overpaid" by filing a...wait for return.

I will grant you that California is a mismanaged fiscal mess, but withholding taxes as an interest free loan to the state? I mean, more than they already are!

I think the effort is doomed to fail. This economy cannot pull itself up by its own bootstraps. Every dollar that the state takes out of the paychecks of Californians is a dollar that cannot be put to use buying goods (which would generate more tax revenue), or hiring those people who would be paying taxes or invested in instruments that would pay a return (and generate more taxable revenue for the state).

For working poor and lower middle class families, this decrease in disposable income could cause a deepening of debt or at least, put a damper on the upcoming holiday shopping season (the one which many businesses count on to sustain them through the rest of the year), or both.

This new withholding rate increase could have an adverse effect on the already weakened holiday spending, so you can imagine the dismay of some retailers and consumers in the Golden State. However, it will be interesting to see the actual outcomes based on estimated increases for each person individually. For example, someone with a taxable income of $51,000 and no dependents will see about an extra $18 withheld per month. That may not seem like a drastic decrease, but that monthly amount can add up to a big pressure on spending for some, as well as a potential decrease in sales for California businesses over the important holiday season.

I heard on the radio that this was supposed to start on Sunday. Yesterday's pay stub, however, showed that I am, in part, banker to the state of California. (Call me Mister Moneybags!)

Personally, it's a minor annoyance. Other than the principle of the thing! (Pun intended.) But taking money out of California's economy is not the way to stimulate or sustain growth. It is a regressive measure at best, that will, in all likelihood, produce the opposite results of what it was intended to do.

Oh, and a hearty "Bah, Humbag!", from the Governator of California!

Cross posted at Say Anything

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