State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka”, i.e., ‘I have found it’. But what Chaing is finding as Controller is that California’s economy as measured by tax revenues is still tanking. Compared to last year, State tax collections for February shriveled by $1.2 billion or 22%. The deterioration is more than double the shocking $535 million reported decline for last month. The cumulative fiscal year decline is $6.1 billion or down 11% versus this period in 2011.
While California Governor Brown promises strong economic growth is just around the corner, Chaing proves that the best way for Sacramento politicians to hurt the economy and thereby generate lower tax revenue, is to have the highest tax rates in the nation.
California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.
The State Controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes. Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out. But the Controller’s report shows personal income tax collections fell by $325 million, or 16% versus last year. Furthermore, leap year would have added another day for retail sales and use tax collection, but those revenues also fell during February-by an even larger $813 million, 25% decline from 2011.
The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.
Derisively referred to as “Taxifornia” by the independent Pacific Research Institute, California wins the booby prize for the highest personal income taxes in the nation and higher sales tax rates than all but four other states. Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst state tax burden in the U.S.
Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26% more than in 2010 and five times as many as in 2009. According SLC President, Joe Vranich: the “top ten reasons companies are leaving California: 1) Poor rankings in surveys 2) More adversarial toward business 3) Uncontrollable public spending 4) Unfriendly business climate 5) Provable savings elsewhere 6) Most expensive business locations 7) Unfriendly legal environment for business 8) Worst regulatory burden 9) Severe tax treatment 10) Unprecedented energy costs.
Vranich considers California the worst state in the nation to locate a business and Los Angeles is considered the worst city to start a business. Leaving Los Angeles for another surrounding county can save businesses 20% of costs. Leaving the state for Texas can save up to 40% of costs. This probably explains why California lost 120,000 jobs last year and Texas gained 130,000 jobs.
Read the rest here.
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Don’t forget also that California taxes capital gains – short and long term – as regular income at 9-10%.
Atop the usual idiocy that passes for California’s budget, in other words, is the fact that in a good year for the stock market, California rakes it in, and in a miserably volatile year like 2011, tax receipts dry up.
Good point. And that is why taxing the wealthy at high rates makes the recessions even worse. Their incomes are extremely volatile compared to the middle class. When the recession hits, and most of the tax revenues come from the wealthy, there will be a large shortfall.
Do they get the full deduction on their REal Estate losses?
State household survey data shows an increase of 306,000 civilian jobs from Dec. 2010 to Dec 2012:
http://www.dof.ca.gov/HTML/FS_DATA/LatestEconData/documents/BBCLF.XLS
If the truth were known and published it would become apparent that there haven’t been that many new hires in the entire US let alone just the state of Cowleefawnia.
Imagine how many jobs would have been created had California not run 254 businesses out of the state.
http://www.ocregister.com/articles/california-332753-businesses-business.html
http://jan.ocregister.com/2011/04/15/more-firms-move-jobs-facilities-out-of-california/57653/
Personal income tax receipts for fiscal year to date are down less than 2% through February 2012.
$4.7 billion of the drop in tax revenue is from a decline in sales and use tax – a temporary increase in the tax rate expired in 2011.
http://www.sco.ca.gov/ard_state_cash_summaries.html
3/12/2012
Contact: Jacob Roper
916-445-2636
SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in February, showing monthly revenues came in $146.3 million below (-3.2 percent) the latest projections contained in the Governor’s proposed 2012-13 Budget. That shortfall was likely caused by a large increase in early tax refunds going out during the month of February.
“While revenues continue to track below projections, the cash conservation measures that were quickly and decisively adopted last month will ensure that the State will be able to pay its bills for the remainder of this fiscal year,” said Controller John Chiang.
The Controller’s Office had warned that General Fund cash could dip below the minimum safety level of $2.5 billion on February 29, and slip into the red in March. That shortfall was avoided by a series of short-term cash solutions developed by the Controller’s Office, the Department of Finance and the Treasurer’s Office.
The solutions included some internal and external borrowing, and a small number of delayed payments. Today’s report shows disbursements being $1.7 billion below projections, but at least $533 million of that amount is due to the delayed payments intended to conserve cash.
The State ended last fiscal year with a cash deficit of $8.2 billion. The combined current-year cash deficit stands at $21.6 billion. Those deficits are being covered with $15.2 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.
http://www.sco.ca.gov/eo_pressrel_11742.html
With all the rich liberals in Cali. you’d think they would be fine.