CA Workers' Paychecks to Have More Withheld in 2025 for Disability Insurance

All California workers are about to experience a change in their paychecks starting from January 2025. A small but significant tax increase has been quietly approved by state officials to enhance the state's disability insurance program. This increase will have a direct impact on the finances of workers across the state.

"California Workers' Paychecks Impacted by SDI Tax Hike"

Impact on Low-Income Workers

Starting from January 2025, workers making less than $63,000 a year will benefit from an increased wage replacement rate for disability insurance and paid family leave benefits. Currently, they receive 70% of their pay, but this will rise to 90%. For example, a couple or individual with $100,000 in taxable annual wages will have an extra $100 withheld from their pay. This increase will provide them with more financial security during times of illness or when caring for a loved one. It helps make these important programs more accessible to those who need them the most.Moreover, this change will give low-income workers the opportunity to take time off work without the fear of financial hardship. It allows them to focus on their recovery or the well-being of their family members. This is a crucial step in supporting working families and ensuring that they have the necessary resources during difficult times.

Effect on Higher Earners

Higher earners, on the other hand, will see a slightly different change. Their wage replacement rate will increase from 60% to 70%. While the increase may not be as substantial as for low-income workers, it still makes a difference. It provides them with some additional financial support during periods of absence from work.However, it's important to note that the removal of the cap on the tax under SB 951 of 2022 has led to a large tax increase for higher-income Californians. This has raised concerns among some taxpayers, as they now have a larger portion of their pay withheld. But it's a necessary measure to fund the important disability insurance program.

Role of State Officials

The Employment Development Department (EDD) is responsible for administering and overseeing the State Disability Insurance program. A spokesperson confirmed that the SDI rate will increase from 1.1% to 1.2% in 2025. This increase was the result of SB 951, a state law approved by the California Legislature in 2022.EDD officials have stated that they will post more information about the program on the State Disability Insurance webpage later that day. This shows their commitment to keeping taxpayers informed about the changes. However, it's worth noting that the EDD did not issue a press release or notify the public of the tax increase until KCRA 3 began asking about it this week. This has led to some questions about the transparency of the process.Taxpayer advocacy organization, CalTax, was the first to notice the change and post about it on X. This highlights the importance of organizations like CalTax in keeping an eye on tax policies and ensuring that taxpayers are aware of any changes that may affect them.David Kline, the vice president of communications and research for CalTax, emphasized the need for taxpayers to be informed when money is coming out of their paychecks. He pointed out that before 2024, there was a cap on the amount of pay subject to this tax, but SB 951 removed that cap.Assemblyman Joe Patterson, R-Rocklin, expressed his concern about California workers paying the brunt of the fiscal policies of the majority party. He noted that just days after the majority party said they wanted to reduce costs, this tax increase was implemented. It seems to be a broken promise, according to him.Democratic State Sen. Maria Elena Durazo wrote SB 951, and KCRA 3 is waiting for her comment. Before being elected as Speaker of the Assembly, Robert Rivas coauthored the legislation. He vowed to have the Assembly focus on addressing California's cost of living and affordability issues. KCRA 3 is also waiting for his comment.In conclusion, the SDI tax increase in California will have a significant impact on workers across different income levels. While it provides much-needed support for disability insurance and paid family leave benefits, it has also raised some concerns among taxpayers. It remains to be seen how these changes will play out and how the state will address the issues raised by taxpayers.See more coverage of top California stories here | Download our app | Subscribe to our morning newsletter