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Tax hike expires, paychecks expected to grow

December 15, 2010 12:00:00 AM PST
Welcome news for weary taxpayers: Workers in California could actually be headed for slightly bigger paychecks.State workers could see a bit more in their paychecks as a temporary tax hike on state income taxes expires. But some lawmakers are already looking for ways to extend the taxes.

For workers in California, the expiration of the one-quarter-percent tax hike on state income taxes means their paychecks will be slightly bigger starting next month.

And for those with kids, they'll be able to take advantage of a bigger dependent credit. All that means a little more money in the wallets of 11 million taxpayers in California.

"It's a little extra treat. A couple of extra movies, dinner out. Something like that. Something nice," said Jennifer Dietrich, a taxpayer.

For a single person, making $100,000 without dependents, his or her tax liability will fall about $240.

For a married couple making the same and filing jointly, with two kids, they save even more, nearly $650.

That equates to $3 billion less for state coffers.

With California so broke, facing a projected $28-billion deficit over 18 months, it may be surprising that taxes are being cut, but that was the deal that was brokered between Governor Schwarzenegger and lawmakers in early 2009.

"These taxes were going to be temporary in nature and based on what happened last year, they were scheduled to go off the books at the end of 2010," said H.D. Palmer, deputy director for external affairs at the Calif. Finance Dept.

That's not all: The higher sales tax and vehicle license fee expires in June.

With all this money going away, there's speculation Governor-elect Jerry Brown will call special election to extend those temporary taxes for a longer period to stave off more major budget cuts.

"We have to present an opportunity to mitigate those cuts," said senate president, state Sen. Darrell Steinberg (D-Sacramento).

Voters, though, have already rejected extending those temporary taxes once.

But leaders might try a different tactic: specific tax increases

That would convince Michelle Dunn, a single mother, to vote for them if the money went toward education.

"I'd rather it go there than anywhere because my kids need an education, and you should see the schools. They're terrible right now," said Dunn.

California voters have already rejected extending those temporary taxes once before. It's hard to gauge where voters' mindsets will be next spring if in fact a special election is called.


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