I have not posted a tax blog since last Spring not because there was nothing noteworthy or entertaining in the tax world, but because I just can’t seem to find the time to do it. Some court cases and pronouncements would make great fodder for discussion, but it seems there is always something a bit more pressing at the moment.
Well, the elections have forced me to sit down and take up the pen (ok, keyboard) once again. I won’t speculate on what types of tax changes MAY happen as a result of the reelection of Pres Obama and the status quo in Congress, but I can tell you what absolutely did change on Tuesday.
Here in California we had two propositions on the ballot that were passed that will somehow affect every person and business in the state.
First, state sales taxes will be increasing ¼ of a percent statewide. Since localities are able to pile on additional sales taxes, the total sales tax rate will vary by area. Bottom line: the sales tax you pay (or collect, if you are a business) will go up starting January 1, 2013.
Along with that personal income tax rates were raised between 1-3% for those earning $500k or more. These rates were retroactively increased effective January 1, 2012. If you have been planning your taxes at the former levels you may now be surprised to find that you will owe more money for 2012. We now have the highest income tax rates in the nation.
To add to the fun, companies that do business both within and outside of California now are forced to calculate the California portion of their earnings in a manner that is expected to skew the California tax upward. It’s a conversation too large for this forum, but suffice it to say that if your business does business out of state and you end up filing in various states, the California tax piece just got bigger. This will be effective January 1, 2013.
I’ll write on the Federal changes that are currently scheduled to go into effect January 1, 2013 in a future posting.