First Paycheck of the Year Redux – California Gets Greedy!

Today is the first paycheck of the year for me. I get paid 26 times a year, barring any sort of anomalies like a retroactive raise or bonus, which is rare. Pretty much all of these cheques will be the same, except for 1 or 2 where the gross will be over the $106800 social security wage base at the end of the year. That is, I won’t contribute social security taxes my last couple paychecks, which is always nice around the holidays. I wish social security didn’t exist; my retirement would be locked up solidly if I had an extra $6600 a year to invest.

So, here’s the run-down. Taxes this cheque included $857 in federal, $320 in California state (this was $275 last year), $63 in medicare, $271 in social security, and $48 in California disability/unemployment insurance. This is a total of $1558 or about 35% of my gross pay.

Interestingly, although I got a 1.5% raise last year, my paycheck is about the same as it was before the raise! California has decided to front-load their income taxes, making us pay more throughout the year and will give us a refund come tax filing season (April 2011). Supposedly the tax liability is the same, but they want cash faster. I’ll believe that my tax liability is the same when I see the returns. I wish I could get an interest-free loan somehow. Hell, California will probably just give me an IOU instead of a real refund. In all honesty, however, we generally owe a little bit of money to California for our taxes, so this might balance it out.

One thing that I don’t know whether to count toward taxes paid is the employer’s side of social security. Technically, our human resources department classifies this as a fringe benefit. Presumably it’s part of my total compensation and, if the tax didn’t exist, would have to be paid to me in cash as that’s what the market rate for my labor would dictate. Alternatively, if I was a contractor doing the very same job, I’d have to ask for a higher pay rate because I would be expected to pay both sides of SSI and Medicare. Oh well, it’s easy enough to calculate the overall tax percentage at the end of the year with it or without it. It would be another $6621.60 paid on behalf of me. I’d be interested to hear what you think about that.