A Cynical Look On Loaning to the Government

California is at it again--raising taxes that is.
Or are they?

What they're really doing is raising their income withholding rate--by an incredible 10%.
"Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less." - Latimes
Which is interesting, because a forced loan without interest seems to be much more of a tax and much less of a loan.
I don't know about you, but when I give out a loan I expect to make a decent rate back on it.
In addition to Californians not getting their money on time, the money withheld will also take a hit from inflation--whatever percentage the dollar is devalued the year that the money is withheld--while the government holds it. This year that percentage is quite a substantial amount.
Because no interest is given during this period, the holdings are indeed a tax. The tax on this sum can can be calculated by taking into account inflation and the potential that the money would have earned if it were actually loaned at interest, or invested elsewhere.(It would have to be something you were actually going to do with the money)
In any event, when California officials mean that they are holding onto the taxpayer money, they really mean that they are "spending it all as fast as they can in a desperate attempt to turn around budget deficits"
Unfortunately, spending your way out of deficits has never worked very well for the United States. It's exactly like trying to fill a hole, by digging at the bottom of the hole. It just doesn't make any sense. The only way California is ever going to fix it's financial problems is by cutting spending--something California has never been very good at.
As it stands, the good news is that the withholdings will probably go away after the state fixes its deficit problem. The bad news is that the state will probably never fix its deficit problem.
The withholdings tax doesn't look like it's going anywhere, and it will probably increase again for Californians in the future.

What am I going to do about it? My job is to complain about things, not to fix them.
I do have one suggestion for Californians though: move to Florida, where companies are allowed to pay employees a little more of what they earn.

Src: Cbs2
Src: Latimes