November 17, 2009

An Insidious "Loan"

Hatched by Dave Ross

Because it takes a two-thirds majority of the legislature to raise taxes in California, the lawmakers and the governor last summer came up with something called “an involuntary tax-free loan” from you and me to the State. That did not require a two-thirds majority.

All of us who get paychecks now find that our state withholding tax is ten percent higher than it was last month. That’s not enough to notice for most people, which is the first reason why it’s insidious. And of course, next year we “might” be able to get the money back when we file our state income tax returns.

This might also be called “theft,” except that the State has general police power; presumably, even if the state government decided to confiscate all of our money, it could still be called “an involuntary tax-free loan.” It’s not real theft unless the man with the gun says it is.

Reminds me of Alfonse Capone’s avuncular saying: “You can do more with a kind word and a gun than with just a kind word.” So how does Governor Arnold and his fellow Democrats in Sacramento differ from Scarface Al?

Earlier this year, some of us who had tax refunds coming from the State were issued state warrants, i.e. IOUs. Even when the State said that it was going to make good on the IOUs my bank refused to let me deposit the warrant. So I was forced to open an account in Escondido just to get my hands on a few hundred dollars of my money. Oh and to my bank: thanks!

Which brings up the second insidious thing about this “loan.” Many people who file next year may be paid with state warrants. Some of those will, because the amounts are so low, just say “to heck with it,” and not try to cash the darned things. (Kind of like when you get a rebate from AT&T and they require you to do so many things to claim it that statistically only half of the people will actually qualify.)

A hefty percentage of the state’s residents will just let the State keep the money. So the involuntary loan becomes an involuntary gift.

Merry Christmas, Arnold!

Hatched by Dave Ross on this day, November 17, 2009, at the time of 2:12 PM

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The following hissed in response by: Geoman

“an involuntary tax-free loan” from you and me to the State."

From you and the other poor saps who stay in CA. As for me, born and raised in CA, I hit the eject button 15 years ago and have never looked back.

Speaking of which, some time ago I got a letter from CA saying that when I retire in 30 years they reserve the right to tax me on any interest that may have accumulated in my 401 k when I withdraw the funds. I wrote them back wishing them good luck ever collecting that money since, funny thing, when my 401 k tanked this last year the money lost was exclusively the old money I made while in California. The remainder is all new money I made elsewhere. First in first out, right?

The above hissed in response by: Geoman [TypeKey Profile Page] at November 18, 2009 5:04 PM

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