The taxes paid by those of us in California are a conglomeration owed to the state and federal government plus local municipalities. Those who follow the old saying that there is nothing so sure as death and taxes, may not have looked at the last California ballot with its multiple propositions.
Keeping up with California tax law and federal tax law is one of the reasons why many choose to rely upon experienced tax professionals. It can be daunting for the lay person to try to keep up. This year's tax changes came in the form of Proposition 30, which passed by a margin of 54 in favor to 46 percent opposed.
Proposition 30 is partially in response to the dire state of affairs for municipalities in the state, some of which have filed for bankruptcy protection and all of which were limited in their ability to raise property taxes due to the passage of an earlier Proposition 13.
In response, Proposition 30 boosts the income tax rate for seven years on those individuals who earn more than $250,000 a year. It also raises the state sales tax by a quarter of a percent for four years. It is estimated that this will result in placing $6 billion in the state's coffers on an annual basis.
What does this mean to a taxpayer or small business owner? In the short term it means that business owners that sell taxable goods or services will need to change their computer software or sales tax charts to comply with the new sales tax. Their costs will most likely be passed along to consumers.
Those who earn more than $250,000 per year have several options just one of which is to take advantage of gifting or other means to minimize their tax exposure. As we reported in an earlier post, being a high-tax state has not seemed to have driven millionaires out of our luscious state. Many view it as a necessary cost for the privilege of living in California.
Those who wish to minimize their exposure to income taxes would be encouraged to work with a tax professional to determine an individualized plan.
Source: The Fiscal Times, "California Taxes the Rich to Save the Schools," Brianna Ehley, Nov. 7, 2012
Source: Bloomberg, "California Voters Add Local Taxes on Top of New Levies," Alison Veksin, Nov. 8, 2012
- At our San Francisco law office we assist both individuals and small businesses as they manage their exposure to tax audits as well as other IRS and state tax liability issues.