As part of one of California’s bad budget deals, sales and income tax rates were temporarily increased by 1% and 0.25%, respectively, for two years. Despite the protests of Jerry Brown and Democrats in the California legislature, those temporary tax increases did turn out to be temporary.
Tomorrow, California sales tax rates decrease by 1%. In Orange County, this means that generally sales tax will fall from 8.75% to 7.75%.
Income tax rates will also fall; California’s top bracket (excluding the millionaire tax) will fall from 9.55% to 9.3%.
I have not seen a dime from this expiration. Is it something the state has done or is our payroll service wrong?
While the income tax rates have decreased, the state has left the withholding brackets the same. So unless employees take proactive action (increasing allowances), nothing will change. What this effectively does is have employees over-withhold and give California some extra interest income.