Reasons Why I'm Not Moving to California, Part 97,412

This hasn't been getting nearly enough coverage...

Some call it California's cash advance.

Effective today, the amount of state income taxes withheld from California workers' paychecks will increase 10 percent.

That might sound like a tax increase, but state officials insist that's not the case.

Tax experts agree, saying this bump up in withholding taxes gives the state some wiggle room in managing California's treasury in a year that saw a titanic political battle to get a handle on the state's budget.

The increased withholding comes on top of a 0.25 percent state income tax increase and a reduction in the dependent credit, also enacted as part of the state budget.

Essentially, the accelerated withholding program does not generate additional tax revenue. Instead, it front-loads it, bringing cash in more quickly in an effort to keep the state treasury stocked with funds, which is where the "cash advance" tag comes in.

State officials have estimated that the move will generate an additional $1.7 billion in the current fiscal year.

The bottom line is that a worker's total annual income tax bill won't rise, and the amount owed at April 2010 tax time will be adjusted accordingly.

Simply put, if you owe taxes when April 15 comes along, the balance due will be less based on what was withheld from your paycheck in the last two months of the year. If you're due a refund, you can expect a little more.

Look, withholding of taxes is always a tricky thing, because a taxpayer who fails to manage the withholding allowances properly will almost certainly end up with a large refund, which is also known as a tax-free loan to Uncle Sam or the state. And unlike if you fail to pay adequate withholding, Uncle Sam won't be giving you interest.

But there's something notably awful about this -- as Megan McArdle notes, this is essentially a forced loan by taxpayers to the government so the government can balance its books a little better. This isn't normal withholding -- and it's one more reason taxpayers are revolting around the country. The government solution to pay for its own runaway spending is always to take more money out of taxpayers' pockets. The practice is the same, but the methods are getting more brazen.