Higher State Tax Refunds: Good News or Bad?

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News item: in February, Californians claimed more in personal income tax refunds than had been expected, according to the legislative analyst's office.

Is this good news for a nearly broke state?

Answer: Maybe.

To the bad, when taxpayers are getting more money back, the state has less money to balance the budget and provide its three main services: education, medication and incarceration. And the larger refunds are at least in part a product of a budget-balancing gimmick -- the state under Gov. Schwarzenegger required more tax withholding to make its books look good. Since more was withheld, taxpayers now want more back.

To the good, the amount of tax being withheld is still running higher than last year. Which may be a sign of renewed economic strength and a healthier job market. And overall tax revenues continued to exceed projections.

So is the increase in refunds good news for the state? We don't know.

What we do know is that if you already have your tax refund, you've already got your taxes done. Which puts you one step ahead of your lead blogger at Prop Zero.

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