Businesses Exit Taxifornia in Droves

Townhall.com ^ | March 16, 2012 | Mike Shedlock

[Kaslin]

California Tax Revenue Plunges

Inquiring minds have noticed a huge plunge in California Tax Revenue for the month of February compared to February 2011.

The numbers below represent a 22.55% plunge in spite of the fact that this February was a leap year adding a day to the calendar.

Madeline Schnapp, at TrimTabs Investment Research sent me a quick note regarding that plunge a few days ago.

 

Madeline writes...

Hello Mish

I came across this little tidbit from the February report from the Comptroller's office of the State of CA.

In Feb 2012 income tax receipts are down $328 million y-o-y, or 16.5%. Ouch!

What about retail sales taxes? CA had a "temporary" sales tax hike of one cent that expired last July. Adjust the data to reflect that change, it looks like sales taxes in February are $400 million y-o-y +/-, a decline of about 12.4%. Double ouch!

That doesn't sound like robust growth to me.

Something About the Economy Doesn't Add Up

In Piecing Together the Jobs-Picture Puzzle, Jon Hilsenrath at The Wall Street Journal wonders "How can an economy that is growing so slowly produce such big declines in unemployment?"

Something about the U.S. economy isn't adding up.

At 8.3%, the unemployment rate has fallen 0.7 percentage point from a year earlier and is down 1.7 percentage points from a peak of 10% in October 2009. Many other measures of the job market are improving. Companies have expanded payrolls by more than 200,000 a month for the past three months, according to Labor Department data. And the number of people filing claims for government unemployment benefits has fallen.

Yet the economy is barely growing. Many economists in the past few weeks have again reduced their estimates of growth. The economy by many estimates is on track to grow at an annual rate of less than 2% in the first three months of 2012. The economy expanded just 1.7% last year. And since the final months of 2009, when unemployment peaked, the economy has expanded at a pretty paltry 2.5% annual rate.

How can an economy that is growing so slowly produce such big declines in unemployment?

Trimtabs thinks the problem lies in the heavily massaged BLS employment data and the highly suspect BEA personal income data.

That said, withholding tax data is also messy and not a perfect measure either, but no matter what I do with the data, I can't get to 200,000+ jobs unless a huge percentage of the workforce is suddenly working for McDonalds

Best,

Madeline Schnapp
Director, Macroeconomic Research
TrimTabs Investment ResearchMany Explanations for the Unemployment Puzzle

There are many explanations for the "miracle drop" in unemployment.

1. Disability Fraud: Disability Fraud Holds Down Unemployment Rate; Jobless Disability Claims Hit Record $200B in January
2. Exploding growth in student loans and middle-aged job hopefuls returning to school: Consumer Credit "Demolishes Expectations" Really? No Not Really! The "Non-Bounce" in Non-Revolving Credit

3. Involuntary Retirement: Boomers of retirement age that still want and need a job have involuntarily retired to collect social security because unemployment benefts rans out and they have no other source of income.

Divergence with Gallup

Those there things piece together the "unemployment puzzle" nicely except for one thing. Gallup polls do not agree as noted in Gallup Reports Large Jump in Unemployment to 9.1%, Underemployment to 19.1%.

U.S. unemployment, as measured by Gallup without seasonal adjustment, increased to 9.1% in February from 8.6% in January and 8.5% in December.



The 0.5-percentage-point increase in February compared with January is the largest such month-to-month change Gallup has recorded in its not-seasonally adjusted measure since December 2010, when the rate rose 0.8 points to 9.6% from 8.8% in November. So, is the BLS carefully massaging the data, or are their seasonal adjustments simply that far out of line with reality, tax collections, and common sense?

Businesses Exit California in Droves

Madeline and I are not the only ones who noticed the plunge in California. Chriss W. Street on Beitbart discusses the California Exodus behind the drop. Street has the reason: Businesses fed up with high taxes have fled the state.

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 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.

California Governor Jerry Brown’s answer to the State’s failing economy and crumbling tax revenue is to place a $6 billion tax increase initiative on the ballot to support K-12 public schools. He promises to only “temporarily” raise personal income rates by 25% on any of the rich folk who haven’t already left.Taxed to Death

If Brown continues to suck up to the public unions responsible for the mess California is in, expect still more businesses to leave, expect the unemployment rate to rise, and expect a continued plunge in revenue.

[volunbeer]

Californian’s are counting on a bail-out. I don’t think the rest of the country is down for it.

---

I agree. There is no way the rest of the country will want to take on the payments for six figure pensions of public workers.

However, Obamacare shows that the left can get what they want no matter what the people think. There are not many people that know this but California state retirements are often much more generous than Federal retirements.

California’s economy is enormous and the potential for social unrest is probably the greatest of any state. The key will be who controls the Presidency and at least one house of congress. There is no state with more political power in D.C.

[silverleaf]

excellent

[silverleaf]

also excellent

[Elsie]

Californians are relocating there, and bringing along with them their idiot ideology.

Been to Moab or Grand Junction lately?

[DiogenesLamp]

Been to Moab or Grand Junction lately?

No, but I understand what you mean. The infection is spreading to non-sick states. Utah I don't worry about, but Colorado is becoming worse every year.

[bert]

A hair dryer or other such can gently warm the sticker and allow it to be lifted and carefully transferred to a smooth surface. The process can be reversed applying the sticker to an old plate

For the record, is the $370 a lump sum fee or is it a composite of several lesser fees?

[builder]

Just the regular registration fee for one year on a 2003 dodge p/up. A pick-up is considered a commercial vehicle in Ca. And in fact it is my business vehicle. Construction. Which there is almost none of, here in northern California