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Surprise! State is raising your taxes even though you got no pay raise

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POSTED August 28, 2009 2:05 a.m.
If you’re like most Californians and still have a job you probably haven’t gotten a raise in the last year.

No problem – at least as far as the State of California is concerned.

Your misery is the state’s gain.

The state is increasing all tax rates by 0.25 percent starting with the current tax year.

That is on top of the California Legislature lowering the dependent credit from $309 down to $98 as part of its charade of a budget balancing act.

At the same time standard deductions are decreasing due to deflation.

That’s right. The state is taking even more from you because of “deflation” and they’re blaming it on an existing law that indexes tax brackets to inflation. Fair enough. But why didn’t our fearless leaders take this into account when they were so busy “not” raising taxes by whacking back on exemptions? Here’s a news flash for the mental heavyweights in Sacramento. Any time you reduce exemptions you are raising taxes. You can call it whatever you want but at the end of the day it is more money out of our pocket into the state’s to feed the legislature’s insatiable addiction to bureaucrats.

Everyone’s taxes will be going up next year. If you’re single with no dependents and have an adjusted gross income of $51,000 you’ll fork over an additional $41. If you are married, have two dependents, and are fortunate enough to make $90,000 you get to pay $71 more.

It gets better. The IRS is also pondering whether it “must” also adjust brackets due to de-inflation.

So you understand all of this, you are making no more money while the costs of some things have gone down. Yet you are still cutting back on your spending habits. The state says they’re cutting back but not one single state employee has been laid off – at least not yet.  Meanwhile, the federal  government is going full speed ahead hiring people and spending money like there is no tomorrow.  You will have less money and the state and federal government will have more money in comparison when it comes to income taxes.

Of course, this is all the result of the massive drop in housing prices that are collapsing on everyone robbing them of perceived or real money.

The state – unlike the federal government – refused to index tax brackets for inflation which is why voters adopted indexing as a permanent part of the tax code in 1982 by passing Proposition 7. Turnaround is fair play.

However these are not normal times. The state spent the last decade spending full speed ahead with no regard to fiscal responsibility or upcoming downturns. It is nothing new that what goes up must come down.

You’ve got to give the devil their due, in this case probably another $100 or so by the time deflation indexing, and new tax rates are put in place. If you’ve bought a home in the past few years, you’ll get it back and then some thanks to the lowering of property assessments.

What about those who have been in their home for more than four years or rent? Well, the government doesn’t care about you. They have a bureaucracy to underwrite.

Of course, if you have an adjusted income of less than $11,698 the state isn’t going to take any more from you. However if you have a gross income above that you’re dead meat.

Yes, it is only fair that tax brackets are adjusted for deflation if they are adjusted for inflation. The legislature, however, had to know this was coming when they upped tax rates and reduced exemptions and they could have cared less. Actually, that’s not fair. They were probably completely ignorant of Proposition 7’s impact as most of the time the Gang of 120 looks no more than a day or so into the future as they keep jamming spending bills and costly regulations through the process.

Come to think of it, it is safe to assume legislators are ignorant. Not only have they rammed the ship of state into an iceberg but instead of manning the lifeboats they keep going full speed ahead with the full bureaucracy intact.

Look on the bright side. You – like most taxpayers – may be in steward class but you’re getting up charged as if you are cruising with the Vanderbilts.
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