While Californians are still feeling the sting of income and sales tax hikes signed into law earlier this year, now comes news that state tax authorities plan to take a little more from their pockets.
For only the second time in 30 years, the tax board is lowering the point where each tax bracket begins, bumping many people into a higher category. At the same time, officials are cutting back some deductions. Everyone will pay more, even people whose bracket or income doesn't change.
The extra sums will total as much as $140 per family, on top of the increases previously enacted.
Officials said the latest adjustments have been triggered by inflation, or rather the lack of it. This year, the state's inflation index was a negative number for the first time since 1983. When the economy takes a deep plunge, so do tax brackets.
The new changes apply to the 2009 tax year. Residents are already paying hundreds -- even thousands -- of additional income tax dollars under the quarter-point rate increase and other tax hikes approved in February as part of a budget deal.
"Everything is going up, up, up," said Othman Rabie, owner of a sandwich shop in downtown Sacramento. "And business is going down."
Back in February, state lawmakers and Gov. Arnold Schwarzenegger approved a slate of temporary tax increases in an effort to balance California's perennially out-of-whack books.
In addition to the income tax rate rising 0.25%, the dependent credit was slashed by more than two-thirds. The vehicle license fee nearly doubled to 1.15% of a car's value. The state sales tax climbed 1%.
This summer, lawmakers and Schwarzenegger decided to withhold 10% more from workers' paychecks starting Nov. 1 -- an accounting scheme to collect taxes faster. Under another bookkeeping maneuver, individuals and businesses that make estimated tax payments will pony up more of that money sooner starting in the first half of next year.
And some local taxes are on the way up. In Los Angeles County, a half-cent-higher sales tax approved by voters took effect in July to fund transportation projects.
Under the latest changes, for a married couple filing jointly, the top tax rate of 9.55% now begins at $92,698, down from $94,110. Combined with the earlier increases, such a couple with two children, earning $100,000, will see their California income tax bill rise by 22.3%, or $716, according to the state Franchise Tax Board. Their tax would go from $3,208 to $3,924, factoring in a $110 drop in the standard deduction for joint returns.
For singles, the top tax threshold has dropped from $47,055 to $46,349. This year, a single filer without children who earned $30,000 in 2008 and 2009 would pay 13.8% more: $617 instead of $542. The standard deduction for sole filers will fall by $55.
The state automatically adjusts its tax brackets. They have moved in taxpayers' favor for the last 25 years, with the amount of earnings required to kick people up a notch continually increasing. But that doesn't salve the pain of the latest changes, said Assemblyman Chuck DeVore, the Republican vice chairman of the Assembly Revenue and Taxation Committee.
"It takes more money out of the taxpaying productive sectors and scoops it into the government coffers at a time when taxpayers are already reeling," DeVore said.
It is unclear how much additional revenue the new brackets will yield for beleaguered state coffers; the state has not computed that yet, said Denise Azimi, spokeswoman for the tax board.
Meanwhile, experts such as Ted Gibson, who was chief state economist under both a Republican and a Democratic governor, remind policymakers even modest tax increases affect the state's financial health because they prompt people to further pinch pennies.
"It will hamper the recovery a little bit," Gibson said.
Some taxpayers say they are worried about their very livelihoods.
Martha Franco, 56, has struggled to keep open her family-run restaurant, Pepe's Tacos in Azusa.
"I average about $6 an hour [in receipts] and I'm open 12 hours a day," she said, sitting in the empty establishment as her son mopped the floor around her. "It already feels like I'm just working to pay my taxes," she said.
Not everyone minds paying more to protect such services as education, healthcare and parks, though.
An extra $100 or so, said Sharon Sugerman, a 59-year-old Sacramento resident who declined to give details about her job, "seems pretty reasonable to me."
Times staff writer Corina Knoll in Los Angeles contributed to this report.
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A taxing state
Californians are paying more taxes at both the state and local level. Among the changes this year:
Vehicle license fee
Raised from 0.65% to 1.15% of vehicle's value.
Rates raised by 0.25%. Standard deductions and tax brackets lowered.
Amount of income tax withheld to increase by 10% starting Nov. 1.
Lowered from $309 to $98.
State sales tax
Rates hiked by 1%.
Local sales tax
Some municipalities raised theirs. Los Angeles County's rose by 0.5% in July.
Sources: California Legislature, Franchise Tax Board