California wants interest-free loan

From the Wall Street Journal:
To help close yet another gaping budget deficit, Sacramento lawmakers have authorized a 10% increase in the amount of taxes withheld from worker paychecks starting November 1 and through 2010.

WSJ link

I don't wish to start a political discussion here though clearly what the state of California is doing is outrageous.

The lost interest (and opportunity cost) of the interest-free loan is small. For example, a married person earning $90,000 with two dependents would receive $25 less in monthly pay (latimes.com).

Would it make sense for some of us to submit modified W4s to avoid giving an interest-free loan to the state? However, the numbers are just small enough that adding an allowance may result in a penalty next year. But what the state is doing is unfuriating.

My understanding of this (from previous articles) is that it simply increases the w/h for most workers, not their actual tax rate.

In other words, for that 90% of people who never pay attention to their w/h vs. their liability and use their tax refund as a windfall. They'll just get a smaller windfall next year.

I still feel it's an underhanded move, but not outright despicable.

hahahahahaha

makingmovies said: Would it make sense for some of us to submit modified W4s to avoid giving an interest-free loan to the state? However, the numbers are just small enough that adding an allowance may result in a penalty next year. But what the state is doing is unfuriating.
Sure, I often go through 2 or 3 W4s a year. I believe California is like most states - you aren't subject to a penalty if your withholding is at least as much as the prior year's tax liability. So, after you file your '09 return with the FTB, figure out how much excess withholding you'll have in '10. Then you can look at the FTB's employer tax guide to figure out how much an additional allowance will reduce your withholding. Multiply that amount by the number of paychecks remaining in the year, and see if you're in the safe zone. You may be able to take more than one allowance, for that matter.

The FWF motto is applicable not only to individual people, but also to states and countries who try accounting shenanigans like these...

PAY YOUR BILLS DEADBEAT!

time to terminate the terminator!

"Cash for California"

wilesmt said: makingmovies said: From the Wall Street Journal:
To help close yet another gaping budget deficit, Sacramento lawmakers have authorized a 10% increase in the amount of taxes withheld from worker paychecks starting November 1 and through 2010.

WSJ link

I don't wish to start a political discussion here though clearly what the state of California is doing is outrageous.

The lost interest (and opportunity cost) of the interest-free loan is small. For example, a married person earning $90,000 with two dependents would receive $25 less in monthly pay (latimes.com).

Would it make sense for some of us to submit modified W4s to avoid giving an interest-free loan to the state? However, the numbers are just small enough that adding an allowance may result in a penalty next year. But what the state is doing is unfuriating.


HAHAHAHAHAHAHAH. This is such a gimmick I just cannot stop laughing. HAHAHAHAHAHAHAHAHAHAH.

California couldn't even pay tax refunds right away last year, they issued fake money to cover them. Who in their right mind wouldn't adjust their withholding to make sure they don't have a refund due to them at the end of the year? Wait, I forgot, this is California, where they voted in the politicians that caused the states financial mess - if they cannot even vote for financially competent leaders how do you expect them to take care of their own finances.

This is true, but a large portion of us "voting in" crappy representatives is due to the gerrymandering of districts here. It's probably the 2nd worst state as far as gerrymandering. The budget crisis is partly due to this, and also due to the stupid state constitution that requires every tax to be voter-approved and any hair-brained new spending bill approved by voters to be carried out by legislature.

As such, every year we approve tens of millions in new spending on stupid, short-sighted ideas and reject tens of millions in taxes needed to cover it. Thus, we are screwed. Democracy works when you have representatives determine things for you, not when every single tax or spending item is voted on by the entire state.

The governator has done a good job passing prop 11 to correct the gerrymandering issue (which undermines some of the core necessities of democracy), but unfortunately we won't see the benefits of that for probably a decade and we still need to correct the state constitution to stop this endless cycle of overspending.

qcumber98 said: "Cash for California"Or, "Cash for a Clunker."

miserly said: tell Sacto to do a 0%BT like the rest of us in a MEGA-AOR!
Have you looked at CA's FICO score lately

This is what I can "10 toilets with only 9 covers"; it doesn't really matter which one you move, it still stinks. LOL

Bankgeek said: Where does it say in the state constitution the state government has a right to get an interest free loan from the residents?Since they've been collecting withholding for many decades, I don't perceive that the constitution has to be changed to address an increase in the current withholding rates.

Predatory business!

I like this way better than having the federal government bail out California. I think they should raise income taxes on California residents by whatever they need to to balance the budget. Why make just the state employees suffer? Make the citizens suffer too. Ultimately the tax payers are the payers of last resort anyway. suck it up and deal with it.

Everything that happens federally on the left-wing agenda always happens in Cali first. Increased gun control, increased socialist programs, etc.

When we get universal healthcare, we can expect the fed gov withholding an extra 10% of our federal taxes to temporarily balance things out too.

I am sure this has been covered before, but didn't they already give out IOUs for refunds last time, so come April they are going to give out even more of these because of this? How is this even legal?

This is all fun and cookies; however, it is a reality that CA cannot continue business as usual.

The cutting of programs will have to occur - that cannot be avoided.

The only issue is sooner or later. CA is just on the vanguard

I keep waiting for The Big One to happen and Cally just breaks off and falls into the ocean.

mod edit: removed political remark

The politicians never try to solve any problem the right way. They transfer the problems to next person in line. 2 months of extra withholding will get them what? They were already 1 Billion behind in Oct from their estimated taxes. California is also borrowing like crazy. In past 2 months they have borrowed more than 10 Billion. As long as vote of poor can be bought, the system will not be fixed.. Why? Cannot affect the poor.. to get the vote.. cannot affect the rich.. they will pay the money to buy poor peoples vote.. Connundrum..

Even better planz:

- claim enough allowances to reduce withholding to zero in months 1 to 9,
- in months 10 to 12, maximize withholding so that total withholding for the year about equals taxes owed.

wd said: I like this way better than having the federal government bail out California. I think they should raise income taxes on California residents by whatever they need to to balance the budget. Why make just the state employees suffer? Make the citizens suffer too. Ultimately the tax payers are the payers of last resort anyway. suck it up and deal with it.

But then how will incumbents get re-elected? That's the most important problem for government today, at least according to government.