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Missed Fortune – California’s Latest Trick on Taxpayers

Posted on | December 6, 2009

California Pulls a Fast One on Taxpayers

The Los Angeles Times recently reported on how the state of California plans to make up their nearly $7 billion budget deficit. According to the article:

“Starting [November 1st], cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

“Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.

“Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.”

The state is still deeply in the red, even after bumping income tax rates up by 0.25 of a percentage point for every tax bracket, slashing the dependent credit by two-thirds, increasing the sales tax by 1 percentage point, and nearly doubling the vehicle license fee to 1.15% of a car’s value.

There are a few problems with this approach, namely the following:

  1. Tax attorneys say it is unconstitutional.
  2. The state is technically bankrupt. In the past they have postponed refunds and handed out IOUs. What proof do we have that they won’t do the same next year?
  3. Savvy taxpayers will increase their withholding allowance on their W-2 to simply avoid this.
  4. Ultimately, the average taxpayer will bear the burden, not knowing how it could have been avoided. They’ll just get used to the lower paycheck.

That last one is precisely what lawmakers are banking on. People won’t connect the dots, then they’ll praise the government when they receive an increased tax refund next year.

Implications at the Federal Level

The scariest thing about this is that the Obama administration also thinks it’s a good idea. The federal deficit is currently $1.8 trillion — four times more than a year prior.

So where will the money come from?

You guessed it. So what are you going to do about it? What is your plan for managing the inevitable increased taxation?

Missed Fortune has the best-kept secret for avoiding burdensome taxation. Our maximum-funded, tax-advantaged insurance contracts give you tax-deferred growth, tax-free withdrawals, and a tax-free transfer to your heirs.

Get started now to protect yourself against a mushrooming government and rising taxes and inflation.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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