The state Franchise Tax Board announced earlier this week it is
readjusting the state’s income tax brackets downward for the first
time in nearly three decades.
By Sandra Emerson, McClatchy News Service
For California taxpayers, the bad news keeps on coming.
Already socked with income, sales and vehicle registration tax hikes this year, many taxpayers will take another hit in the wallet come tax season.
The state Franchise Tax Board announced earlier this week it is readjusting the state’s income tax brackets downward for the first time in nearly three decades.
That’s another way of saying that many taxpayers will be bumped into higher brackets for 2009, or that more of their income will be taxed at higher rates.
Although the cost for most filers will be less than $80, the bump comes on top of a series of other temporary tax increases approved by the Legislature and signed by Gov. Arnold Schwarzenegger earlier this year – amounting to hundreds of dollars or more for many families.
The announcement by the tax board stems from a little-noticed initiative approved by voters in 1982 – Proposition 7. The measure requires that the state’s tax brackets be tied to inflation. The idea was to avoid a situation in which people were bumped into higher tax brackets – and thus forced to pay higher taxes – simply because they got a cost-of-living salary bump.
The law has worked as intended all but one year since then – 1983. But this year, because of the down economy, the California Consumer Price Index dropped by 1.5 percent. Because of that deflation, the tax board adjusted the income-tax brackets and other tax credits downward by the
same rate. That means many taxpayers will fall in a higher tax bracket than they otherwise would have.
Assemblyman Curt Hagman, R-Chino Hills, said the lowering of the threshold for higher income tax brackets is a triple hit on taxpayers.
“Higher sales taxes, more withholding, and now this excuse to take more from working people will hurt our economic recovery,” Hagman said. “When will it stop?”
Earlier this year, Schwarzenegger signed a budget proposal that included more than $10billion in temporary tax hikes to help erase the state’s colossal deficit. The changes included raising the income tax rate by 0.25 percent across the board; lowering the tax deduction for dependents by two-thirds, from $309 to $98; nearly doubling the vehicle registration fee, to 1.15 percent of a car’s value; and increasing the sales tax 1 percentage point.
The new income brackets will have a chilling effect on California taxpayers, said state Sen. Bob Huff, R-Walnut.
“Anytime you add to the burden of people that are already taxed almost out of their existence, it’s going to be worse,” Huff said.
Those in the top 1 percent income brackets already pay nearly 50percent of the taxes in the state, and readjusting the brackets will force the middle class to share in the burden, Huff said.
An increase in income tax in addition to other tax and fee increases changes the idea behind “taxing the rich.”
“I’ve come to realize if you make money, you’re considered rich,” Huff said.
