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State to hike income tax

California to borrow an additional 10 percent from workers' paychecks in November

Posted: September 12, 2009 6:55 p.m.
Updated: September 13, 2009 4:55 a.m.
 
Californians will pay an additional 10 percent in state income taxes in November as state lawmakers try to raise $1.7 billion to bridge California's massive budget gap.

And the potentially jarring tax hike has some legislators angry.

"With unemployment skyrocketing, the government doesn't need to ... treat tax payers like a personal ATM machines," said state Senator Tony Strickland, R-Thousand Oaks, whose district includes the Santa Clarita Valley.

Beginning Nov. 1, California will take an additional 10 percent from wage earners' pay checks, said H.D. Palmer, deputy director for the California Department of Finance.

For a person paying $50 in state taxes each pay period, an additional $5 in taxes would be taken out, he added.

State lawmakers approved the tax increase as part of a 31-bill package aimed to balance the budget in July.

The California budget has been in shambles since the economy turned south in 2008. California legislators teetered on the brink of budget breakdown in February as a budget impasse almost threatened to shut down the state. In June the legislators drifted over the edge as the budget impasse forced the state to issue IOUs.

The state covered a $24 billion budget gap with accounting maneuvers and massive budget cuts.

"It's one of a number of steps necessary to close the budget gap," Palmer said.

The state is in effect borrowing the tax revenue in advance to help balance its books, Palmer said.

The taxpayers' money will be returned to tax payers who qualify for a rebate based on their individual tax liabilities. Those refunds could come in 2010 for taxpayers to whom the state owes due to increased withholding taxes in November and December, he said.
For those who overpay taxes in 2010, the refunds will come in 2010.

State Assemblyman Cameron Smyth, R-Santa Clarita, said the move is irresponsible and fails to fix the root of the problem.

"Accelerating income tax withholding in order to balance the budget is an accounting gimmick that I don't believe addresses the structural and overspending problems that plague California's budget process," Smyth said. "Instead, California taxpayers, who are already paying some of the highest taxes in the nation, are asked to shoulder an additional burden by giving more of their hard-earned money to the government.

"Whether you consider this a tax increase or not, the end result is that taxpayers are required to pay more money to the government up front," he said. "At a time when families are tightening their belts and cutting family budgets to the bone, I do not support reaching deeper into taxpayer pockets."

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