Tag Archives: Tax

New Taxes Puts More Burden on California Workers

On Wednesday, April 1st, the new temporary California sales tax increase officially took effect across the state as part of California’s new tax –and-spend state budget.  The one percent increase is due to expire on either July 1, 2011, or July 1, 2012, depending on the outcome of a statewide vote on May 19, 2009 on Proposition 1A, the Budget Stabilization Act.  The increase raised the rate from a minimum of 7.25% to at least 8.25% statewide.

If the proposition is approved, many of the tax increases passed in the Feb. 2009 budget package would be extended by one to two years.  Also, state tax revenues would increase by about $16 billion from 2010-11 through 2012-13, according to the Proposition 1A proposal.

The tax increase that recently went into effect is the largest one-time tax increase in the state’s history.  The increase will take between $1-2 thousand more per year from California families who are already struggling with everything from keeping up with car payments to putting food on the table.

Instead of repenting from overspending and government waste, 75 Democrats and 6 Republicans in the state legislature, along with Governor Schwarzenegger, voted to empty out the already thin pockets of Californians.  Once again, state bureaucrats have dug a hole and California citizens are being forced to fill it.

The increase will raise the rate higher than 8.25% in some California counties, according to the Los Angeles Times.  City and county level tax increases are added on to the one percent increase.  For some Californians the sales tax has been pushed over nine percent, and in Pico Rivera, CA and South Gate, CA, people began paying a 10.25% sales tax on April 1st.  The argument is that these people in cities with higher taxes can afford to pay them.  According to citytowninfo.com, Pico Rivera, CA is in the lower half of both cities in the nation and in California in terms of people at middle class or better.  In South Gate, CA, the person above the poverty rate is below 25%, as well as the number of people who are considered middle class or better.

There is no better example a city being pinched by the tax increase than Oakland, CA, where people above the poverty line is in the lower 25% compared to both state and national cities, and the city’s sales tax is the third highest in the state, but possibly not for long.  According to SFGate.com, there is a proposal to raise Oakland’s sales tax to between 10-10.25 percent, equaling the state’s highest sales tax.

Our “No new taxes” Governor has now presided over a record breaking tax hike in order to avoid defaulting on the state budget, which would have been catastrophic for our great state.  Running out of time and faced with making either a catastrophic or damaging decision, the legislature chose the damaging one.

Make no mistake, the tax increase is severely damaging.  Thousands of Californians are facing foreclosure each week.  One in ten Californians is unemployed.  While the federal government is cutting taxes and dishing money out to states, California is offsetting the help by making it difficult for people to make daily purchases.

The best to deal with an economic crisis is not taxing the people you depend on to revive the economy.  The Foghorn does not support the increase in sales tax.  All of the tax hikes in the two-year plan fall on the shoulders of California workers.  When they passed the budget, Gov. Schwarzenegger and the California legislature said everyone had to give a little to solve the state’s financial problems, but apparently that doesn’t apply to big California businesses.  The state budget has a plethora of corporate tax breaks and credits that would save businesses hundreds of mullions of dollars but would cost the California Treasury at least $2.5 billion over a five-year period.

The plan runs counter to the Obama Administration’s plan to give tax cuts to low and middle income Americans.  California law-makers are asking voters to approve five budget-related measures during a special election in May, including one that would implement a state spending cap in exchange for extending tax increase for one or two years.  The Foghorn does not support any of the five proposed measures in May, nor do we support any proposal in tax increase until the tax burden is more evenly distributed among workers and businesses.

Compromise Stimulus Bill Expands College Grants but Not Student Loans

After weeks of back-and-forth political jockeying over President Obama’s proposed economic stimulus package, Congress settled on a compromise bill that offers expanded federal grants and tax benefits to college students, along with funding for states to restore education budget cuts and for research institutions to expand their development.

Overall, the final stimulus bill will deliver between $50 billion and $75 billion to higher education, estimates Inside Higher Ed.

No Stimulus Help for Student Loans

In previous years, non-federal private student loans have offered undergraduate and graduate students a source for additional financial aid that they could use to supplement their federal student loans and grants. But in the face of the current credit freeze, most lenders of private student loans have suspended their private-loan programs or simply gone out of business altogether.

Those few lenders that still offer private student loans have tightened their credit criteria to the point that many students and families can no longer qualify — especially as borrowers’ credit scores continue to take hits from foreclosures, missed bill payments, and cancelled credit cards.

In the current economic environment, with unemployment climbing, home equity largely gone, the value of investments and college savings plans evaporated and private student loans hard to come by, more and more families are finding themselves unable to meet tuition and other college costs on federal student aid alone.

To help the growing number of cash-strapped students who will need additional financial aid on top of federal grants and student loans, the House of Representatives, in its version of the stimulus bill, had proposed to increase borrowing limits by $2,000 on unsubsidized federal college loans, which are available to eligible undergraduate and graduate students regardless of their financial situation.

The Senate version of the stimulus legislation, on the other hand, would have injected $61 million into the federal Perkins student loan program, providing additional funding for those subsidized federal college loans targeted at the neediest students,.

But the compromise bill does neither. The stimulus funds for higher education will go toward expanded grants, work-study, and tax benefits, with no money earmarked for federal student loans.

The Higher Education Stimulus for Students

 American Opportunity Tax Credit: Proposed by President Obama on the campaign trail, this tax benefit program will temporarily replace the current Hope Scholarship Tax Credit, raising the currently available maximum education tax credit from $1,800 to $2,500. The new tax credit will be available for up to four years of college and will be up to 40 percent refundable for those families who don’t owe any taxes.

 Federal Pell Grants: The federal grant program for low-income students will receive an additional $17.1 billion in funding.

 Federal Work-Study Program: This federal financial aid program, which allows eligible students to earn money working part-time in government-subsidized jobs, will receive $200 million in funding.

The Higher Education Stimulus for States

States will receive $53.6 billion in education stimulus aid over the next two years, $39.5 billion of which will be used to restore spending cuts made to education and public colleges as a result of state budget deficits, and $8.8 billion of which will be handed to state governors to be used for high-priority “critical” initiatives, which can include education programs and school facilities improvements and maintenance.

The Higher Education Stimulus for Research Institutions

 National Science Foundation: A federal agency dedicated to research and training in all fields of non-medical science and engineering, the NSF will receive a total of $3 billion, with $2.5 million allocated for research, $400 million for infrastructure, and $100 million for education.

 National Institutes of Health: Part of the U.S. Department of Health and Human Services and the primary federal agency for conducting and supporting medical research, the NIH will receive $10 billion — $8.5 billion for research and $1.5 billion for university research facilities.

 Department of Energy: The DOE, which oversees U.S. energy and nuclear security, will receive $2 billion for research, with $1.6 billion going to the Office of Science and $400 million going to the Advanced Research Projects Agency for Energy (ARPA-E).

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