CA to withhold money from paychecks

October 30, 2009 12:00:00 AM PDT
If you are lucky enough to take home a paycheck in California, get ready to take a big hit soon to help cover the state budget deficit. Starting next week, the state of California will be withholding 10 percent more from your paychecks indefinitely.

It's part of the budget deal Governor Schwarzenegger and lawmakers agreed to to help the state ease the financial crisis.

Struggling families say this is hardly the time.

"To take it from peoples' weekly, monthly paycheck is just another dig in what's already a bad economy," said loss prevention officer Peter Haas.

"It hurts a lot and I got two kids. That's 10 percent out of their mouths," said musician Ayatollah Feesibiallah

"Without question, this is going to affect millions of taxpayers in the state. That said, the alternative would have been higher taxes or deeper cuts in programs like education," said H.D. Palmer from the California Department of Finance.

The state says this is not a tax increase because your overall tax liability does not change -- you'll get your money back when you file your income taxes. In essence, you're lending money to the state interest-free: $1.7 billion total.

The funny math angers state workers, who already must endure three unpaid furlough days a month.

"There are car payments, house payments, childcare. It's just one more blow," said state worker Gail Schurr.

You don't have to reach too far back in history to remember that California didn't have enough money to pay its bills earlier this year.

The state had to issue IOUs, even for some tax refunds.

"I filed my taxes on January 29th. I got an IOU," said IOU receiver Nicole Alleyn.

With the state's financial future still unclear, no one can say you'll get your refund next year in a timely manner.

If you don't want to be subjected to the additional 10 percent, you can change your state withholding form at work. But you should ask your tax preparer if that's wise, because you might end up owing the state money at tax time.

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