Political Humor. Or Absurdity?

arnoldHere’s a thought about my previous post and taxes – The 1% sales tax increase looming before all California tax payers is a result of the 2009 state budget package – A package authored almost exclusively by Democrats, and almost universally opposed by Republicans. If you follow the political pundits, that seems pretty normal.

But now consider the sales tax refund, an effective tax decrease. It is part of the Federal Stimulus package that was authored almost exclusively by the Democrats, and almost universally opposed by Republicans. Huh? The parties switched positions?

Yes, I know much more goes into the State Budget and the Federal Stimulus, but isn’t there just a bit of humor in both parties switching positions and just opposing each other on political grounds. You’re right, that isn’t humor, that’s sad… and absurd.

And just for the record, California, at 7.25%, already has the highest state sales tax in the nation. 8.25% seems way to high!

Tax Confusion

federalstimuluspackageEarlier today an email arrived from my local motorcycle dealer advising now was the right time to buy a new motorcycle. After the Federal Stimulus Package was enacted that provides for an income tax deduction of state’s sales taxes on motor vehicle purchases, but before California’s 1% sales tax increase goes into effect.

I had to think about that for a minute. Yes, the state’s sales tax rises from 7.25% to 8.25% on April 1, meaning that (hypothetical) new $20,000 motorcycle will cost $200 more in sales tax, or $1,650 total!

But the stimulus package will allow me to deduct the $1,450 (pre-Mar 31) or $1,650 (post-Apr 1) sales tax. Figure I’m in the 28% tax bracket – Then that translates to a $406 or $462 tax reduction next year!

What does all this mean?

  • Purchase bike today: $20,000 + $1,450 - $406 = $21,044
  • Purchase bike Apr 1: $20,000 + $1,650 – $462 = $21,188

OK, the dealer is correct that a purchase today will save some money ($144 to be specific), but that’s only a 0.68% savings *and* I won’t get the money back until I file my 2009 taxes a year from now.

So I’m probably not going to buy a new bike today …