California to boost amount it withholds for state income tax

SACRAMENTO — California state income taxes are going up again in November.

Sort of.

In a little-noticed piece of the budget plan signed last month, the amount of state income taxes withheld from paychecks will increase 10 percent starting with wages paid after Oct. 31.

The accelerated withholding program comes on top of a genuine state income tax increase, approved by the Legislature as part of February's budget deal. Rates went up 0.25 percentage points for each tax bracket for the 2009 and 2010 tax years.

The latest move doesn't generate additional revenue. Rather, it front-loads it, bringing cash in more quickly in an effort to keep the depleted state treasury from running dry. State officials believe the move will generate an additional $1.7 billion in the current fiscal year, which ends June 30.

An individual's total annual income tax bill won't rise. The amount owed the following April will be adjusted accordingly.

"There's no overall tax increase; you just pay the taxes sooner," said Loren Kaye, president of the California Foundation for Commerce and Education, an affiliate of the California Chamber of Commerce.

The changes go beyond payroll withholding. Those who pay quarterly estimated income taxes will see their payments accelerated starting in January.

Under the new law, they'll pay 70 percent of their estimated taxes in the first half of the year. Currently they pay 60 percent.

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