Starting today, state sales tax in California is 6 percent. With added local sales tax from various regions in California, most Californians will now be paying about 9 percent sales tax.

Retailers are worried this could drag purchases of expensive items such as cars and furniture even further down.

Fuel to the fire?

The new higher sales tax means people in California will be paying one of the highest rates in the country. While the added funds should help California’s ailing budget, businesses and manufacturers worry that it will lengthen the recession.

At 9 percent, the sales tax on many big ticket items could be as big as the average payday loan.

All new taxes

Sales tax isn’t the only tax that is increasing in California this year. Personal income tax will also climb higher. Also, on top of the additional sales tax Californians will have to pay if they purchase vehicles, they’ll also face higher licensing fees.

Auto worries

With the auto industry already facing huge obstacles, California auto dealers are particularly panicked.

“There’s no doubt in my mind that our sales will go down because of this,” said Beau Boeckmann, vice president of Los Angeles-based Galpin Motors. “It’s an unfortunate truth. I hope the governor will reconsider doubling our car taxes. I think the sales tax is going to hurt us and the car tax can cripple us.”

The big picture

Governor Arnold Schwarzenegger signed the budget that contained the tax hikes as the state faced a $42 billion deficit. The tax hikes are expected to bring in $12.5 billion that will go toward closing that gap. The sales tax alone is expected to bring in $5.8 billion.

Kicking and screaming?

Another provision in the budget reduces the dependent care tax credit.  Schwarzenegger’s finance team insists that the governor would not raise taxes without absolute necessity.

“Governor Schwarzenegger abhors taxes. Always has, always will,” said his finance spokesman, H.D. Palmer. “That said, you could not in his view close a record budget gap of $41.6 billion by cuts alone without decimating education and health care and other critical programs.”

It’s been a torrid morning and it’s left me in a ratty mood. If I had staff working in my office I would fire everyone right now! However, mine is a one-man business. It’s kept pretty busy, or as busy as I want it to be. It allows for such pleasures as a nap after lunch, a visit to a grandchild, or an extra-long lunch hour with a friend. The office is a few steps away from the bedroom and it boasts all modern conveniences such as a computer, fax and telephone.

It’s not all fun and games

The biggest disadvantage of my business is the long hours – I work 24 hours a day. This doesn’t mean that I am working all the time, but the office is open to anyone who calls.

Financing the business

The financing arrangements are simple. I finance everything. I have a partner who makes no contributions at all. When there is a cash crisis, I apply for and receive a Payday Loan which sees me through to the next payday.

Why do I feel like the IRS is now my business partner?

My Partner the IRS

I have a partner, aka the Government, alias the IRS, also known as the Income Tax Department and secretly known by me at various times of the month as “The Bloodsucker,” “The Parasite,” “The Thief” and some shorter 4 letter versions of all the above.

My partner knows everything

Because we are such close partners, we meet regularly. I, as the active partner, divulge all the intimate secrets of the business. I tell him about my old clients and about my new clients. I boast about the amount of work I have been doing in order to properly impress him. He, being the sleeping partner, simply gazes at everything and remains silent.

The partners meeting

I was at his office this morning. We decided a long time ago to meet there and not in the place where I do the actual work. Unlike my desk which is always covered with stacks of papers, little notes on scraps of paper and the back of coffee-shop napkins and a hundred reference books, his desk is clear, containing only a computer screen and keyboard. Sometimes I wish I could be as organized as he is.

The partnership arrangement

We have a partnership agreement. It is simple and straightforward and is based directly on the sharing of income. This is what led to the argument this morning. After I had formally tabled the trading results for the past year, my partner looked at me, smiled, nodded his head in delight and said “thirty-seven point three percent.” I laughed and thumped the table with my fist saying, “very funny indeed! Got any other jokes for me?”

“I’ll check it,” he grumbled and went back to the keyboard and the screen and then said, “I beg your pardon, you are right. I made a mistake. Thirty-seven point one percent.”

This time I hit the top of his desk with the palm of my hand, sending off a loud bang and causing the keyboard to leap into the air.

My partner is upset

“There is no need for that,” said my partner. “We have an agreement, after all.”
“What about your contribution?” I yelled. “What did you do to justify your share?”
“I am upset by your attitude,” he said.
So my partner is upset? Who cares!

Why do people look for a payday loan now and then? It’s not just because it’s a fast, convenient and discreet way to obtain emergency cash. The simple fact is that the cost of living has made it difficult for many American families to stretch their budgets to cover surprise situations. And according to a recent Belleville News-Democrat editorial by Holly Sklar, it’s only gotten worse since 1973.

Yes, the rich get richer…

A glaring example of the workplace divide is what Merrill Lynch did while scores of workers were losing their jobs. Amidst the wreckage and broken dreams, Merrill Lynch paid a small group of employees (around 700) more than $1 million apiece in 2008 bonuses. This added up to $3.6 billion – all of it handed out while the company lost $27 billion.

Since 1973, workers have lost ground in the salary department. Adjusting for inflation, the average full-time workers made $41,198 in 1973 and $37,606 in 2008. CEOs, in the meantime, made 45 times more than workers in 1973. Today, that gap has widened to 300 times more. The tax rate for the top income groups has gone down from 70 to 35 percent, and capital gains tax has gone down from 36.5 percent to 15. This has played a large part in the current disproportionate distribution of wealth. So much so that people in the top income bracket may not even have to think about the aid a payday loan provides.

Brother, can you spare a few hundred thousand dimes?

Sklar bottom-lines it for us. She shares the latest IRS info regarding annual income for the top 400 taxpayers. The average adjusted gross income was $263 million each in 2006 (that’s more than $5 million per week), which was up from $221 million in 2005 and $67 million in 1992, all figures adjusted for inflation.

A lot of people are happy about President Obama’s plan to cap CEO pay at $500,000 for senior executives, but this will only apply to bailed out companies. Furthermore, various loopholes in the plan limit its effectiveness, according to Sklar. Cash Advance Mojo likes the idea Netflix CEO Reed Hastings had about a 50 percent income tax for CEOs who earn above $1 million.

Say you want a revolution

Here’s Sklars conclusion regarding this inequity. See what you think:

If we don’t start taxing the wealthy more now, then you can be sure that the mountain of debt created by tax cuts and the bailout will be used to drive “entitlement reform.” Workers’ last forms of security – Social Security and Medicare – will be on the chopping block to pay for the wreck the truly entitled made of our economy.

A payday loan can help a consumer absorb the shocks between their ever-shrinking paychecks. But a long-term solution to America’s disappearing middle class is needed. If the rich are not willing to submit to greater taxation and try to hide behind loopholes and shelters, they should be tracked down and forced to submit. For their own good and the good of all.

Related articles

• How Will Obama’s Tax Plan Affect Self Employed Americans? (internetbiztaxtips.com)
• Obama’s Old Solutions for a New Economy (spot-on.com)

The men in black suits who never give up

You can count on them. They never go to the wrong address. And they never forget you. It takes a payday loan to see one of these guys reverse back through the garden gate.

Grandpa’s theory on taxes

My wise old grandfather once told me, on the day I was crying about paying my very first income tax payment, that it was a good sign. “Paying taxes means you are making money,” he explained. “So you have to give the government their share. Think of all the things they do for you. No matter how much tax you pay, you will never have to pay one hundred percent of what you earn. There will always be something left for you. So pay the taxes and smile, my boy. You are winning!”

Okay, grandpa, may you rest in peace, I have always adopted your attitude toward paying taxes.

My current tax rate is 47%, probably double what grandpa paid. Half! I am paying half of what I earn to the government. I get the use of the money for most of the year and I pay small amounts in advances or in monthly installments during the year, but there’s always a big hit in about April, when the income tax department gets their act together and goes out hunting. And that’s when I need a Payday Loan.

My theory on taxes

My attitude towards taxes is simple. I do not wish to pay them. The government should find another way of raising money, especially the big money. How about hiring one of these major rip-off artists like that chap Bernie, and put him to work on something that we will all benefit from. The guy managed to raise 50 billion for himself. Imagine what he could do with the government backing him.

Maybe I should work less?

Feeling rather stupid and completely counter-productive, I did the exercise to see if there is a real difference between working less, earning less and paying less tax, as opposed to working more, earning more and paying more tax. The difference was not dramatic but I am still better off working. As grandpa said, they never hit you for one hundred percent, it just feels like it.

I also found that I was thoroughly disgusted with myself for doing such an exercise – this is me investing in the possibilities of working less? But the culprit here is actually the government who, through imposing these high taxes, is putting these thoughts into my mind. Make it worth my while, Mr. Government and I’ll work many more hours per day!

Facing the showdown

I will pay my taxes because I am a law abiding citizen. I will have to take a payday loan in order to make the payment and I may even have to extend the payback period for more than one month, but I’m sure they will agree to this. Good thing the government isn’t into the payday loan business as well!