[ad_1]
When I first started researching the legislation that would take effect in 2024, I was primarily focused on the new taxes that would go into effect on January 1st. If you know anything about California, you know that the broad term “tax” is only part of the story. .
The unfathomable cost of doing business in the golden age is the rising cost of literally everything associated with performing a service or selling a product, from rising raw material costs to ever-increasing labor costs per employee.
In addition to the proposed statewide sales and use tax (SUT) increase, California employers would also see an increase in their Federal Unemployment Tax Act (FUTA) rates. As has been reported in countless articles since the pandemic, the state’s unemployment system has been a disaster, resulting in more than $32 billion in fraudulent payments. During the pandemic, 22 states have borrowed money from the federal government to continue paying unemployment benefits, and those states must repay that money plus interest.
Most states already do this. However, California is one of five states that has not repaid these funds, and California currently has $18.9 billion in federal unemployment debt. California is expected to have a $97.5 billion budget surplus in the 2022-2023 fiscal year, and many businesses have asked the governor to use some of that surplus to pay down California’s federal unemployment debt.
The governor agreed to pay $1 billion toward the debt, but now Gov. Newsom wants to halt that spending to make up for the state’s budget shortfall.
As a result of California’s unpaid unemployment debt, the state’s FUTA interest rate will increase, totaling 0.6% in payments, but the big problem here is that this rate adjustment is retroactive, meaning that it will increase in 2023. This will be applied to payroll calculations starting from 2020. As you can imagine, small business owners are reluctant to pay off their debt. One reason for this is that states cannot efficiently provide for even the most basic functions of government.
In addition to the FUTA increase, many salaried workers will also see an increase in state disability payroll taxes. California has previously funded the state’s disability insurance program with a 1.1% payroll tax on wages up to $153,164. Starting in 2024, this wage cap will be lifted and all wage income will be subject to payroll tax. This means that the state’s top marginal personal income tax rate on employment income (but not all income) would be 14.4 percent.
As noted by the national nonprofit Tax Foundation, 34 states will begin the new year with notable tax changes, including 15 states lowering their individual or corporate tax rates. These states are in stark contrast to California, which plans to increase its state payroll tax by 1.1%, raise the wage cap, and implement the FUTA tax increase.
In 2022, Senate Bill 951 (introduced by Maria Elena Durazo of Los Angeles) would eliminate the wage cap on SDI fund contributions and make all wages subject to the SDI contribution rate.
Other big changes coming to Golden State employers include:
- The minimum wage for fast food workers will increase to $20 an hour starting April 1st.
- Medical workers will be the first to receive a minimum wage increase on June 1st.
- California workers will now receive at least five days of sick leave per year, instead of the three they receive after 200 days of employment.
- Businesses looking to purchase EVs will see federal tax credits for some EV models reduced by 50% or, in some cases, eliminated.
- Payroll tax increases, including SDI and FUTA rates.
Sara Catalan is president of the Orange County Taxpayers Association
[ad_2]
Source link
