Skip to main content Skip to secondary navigation

Withholdings, Salience and Tax Policy

On November 1, 2009, California introduced a 10 percent increase in wage withholdings. Curiously, this withholdings change was not accompanied by an increase in actual tax liability. In other words, taxpayers would see a larger amount taken out of each paycheck, only to receive that money back as a refund during the next tax-filing season. Under this plan, there is no significant gain in revenue for the state, just a change in the timing of tax payments. The aim of the policy is to cover short falls in the current budget by drawing on tax payments earlier than normal — a “payday” loan of sorts for the state government. The only difference is that this payday loan carries an interest rate of zero, with taxpayers fronting the cash.

Damon Jones
Publication Date
January, 2010