By now many Californians probably realize that the state Legislature has increased their sales, income and vehicle taxes, albeit "temporarily" for two years.
Some may even have heard that the income taxes they pay will be accelerated, beginning in November, so the state can get that money sooner, which means effectively for several months taxpayers will pay even more than they otherwise would have.
The bad news doesn't stop there. There will be yet another increase in income taxes for Californians, and in this case they can share the blame.
In 1982 voters approved a measure to tie state income tax rates to inflation. It pays to read the fine print. Annually the Franchise Tax Board adjusts tax brackets and some deductions and credits to account for inflation, based on changes in the California Consumer Price Index. The index usually goes up, which means the changes prevent people from being bumped into higher brackets and paying higher taxes, as long as their incomes rise proportionately with inflation.
Unfortunately, when the CPI goes down, indexing works in reverse. Tax brackets and credits are adjusted downward, and taxpayers whose income remains the same can find themselves in a higher tax bracket. Consequently, their tax bill increases.
The Franchise Tax Board, for only the second time in more than a quarter century, has adjusted brackets downward to reflect a 1.5 percent decline in the index from June 2008 to June 2009. Because adjustments include credits and deductions, the Los Angeles Times reported, "Everyone will pay more, even people whose bracket or income doesn't change."
How much more? Up to $140 per family. And that's on top of the additional taxes already imposed this year.
The bracket adjustments apply to the 2009 tax year, in which many Californians already face hundreds, if not thousands, of dollars in additional taxes, including a .025 increase in income tax, plus nearly a doubling of vehicles fees and a 1 percentage point increase in sales taxes, all imposed by the Legislature in February.
Adding insult to this injury is the fact that tax increases further darken the economic picture as people become even more reluctant to spend what money the government has left them. Taxpayers should know the assault hasn't ended. Legislative Democrats are calling for even more new taxes, and the governor has called a special session to consider revisions in tax codes. "Revisions," we suspect, is code for increases.