Monday, November 9, 2009

Increased California withholding

George Skelton (whom I would add to my list of intellectually honest conservatives) has a column in today's LA Times about California's increased income tax withholding being effectively a $2 billion tax, because it is effectively a tax, because they take it away from you every month.
It's like this analogy:
You pay $1,000 rent on April 1, as you do the first of each month. Then the landlord says he'll need the future rent 15 days earlier. But not to worry, the rent won't increase. On April 15, you pay $1,000 for May. But wait a minute: Now you've forked out $2,000 in April.
You'll pay another $1,000 in May and each month thereafter until you decide to move. Finally your last month living in the rental, you make no payment. Only then do you recoup the $1,000 extra payment made that long-ago April.
He says this means it's just a tax, because it effectively keeps the money until you quit work or die. But that's not completely true. You get the money back each April, but you don't have to pay the whole thing back in May. The float the state is getting is a monthly payment to them. So what Skelton is saying is sort of true but a much smaller magnitude than he says. It's continual rather than continuous.

But more important, we have to raise taxes somehow to pay for what we want the state to do for us. The only way to increase the SRR, for example, is for the state to bring in more money. Our 2/3 budget system and state Republican party intransigence have conspired to make taxes impossible to raise in the ordinary way, by just voting an increase. They have to use sleight of hand and word games, because that's all they have in their quivers.

So Skelton is sort of right in how the system works but entirely wrong in his conclusions.

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