Taxifornia Lessons

Townhall.com ^ | December 11, 2012 | Mike Shedlock

[Kaslin]

California revenue is up from a year ago. Unfortunately, California revenue is not up as much as expected, while spending is up way more than expected.

Please consider California Finances in November 2012 by state controller John Chiang.

November's tax receipts fell 10.8% short of expectations contained in the 2012-2013 State Budget, although they were above the year-ago level. Total revenues year to date are now 2.6% less than anticipated at this time, with shortfalls among all of the major sources.

Expenditures are 4.9% above estimates contained in the Budget, with assistance to local governments driving the overage.

Total revenues were $806.8 million below projections in November, with corporate taxes accounting for a significant amount of this divergence. Compared with a year ago, total revenues year to date were up by 2.5%, with an impressive gain in income taxes offset-ting shortfalls in the other revenue sources.

The difference between actual and estimated numbers is larger on the spending side. For the first five months of the fiscal year spanning July through November, actual disbursements exceeded projections by $2.2 billion, or 4.9%. Education and health care accounted for the majority of the difference.Here are a couple tables I put together from the report.

Fiscal Year 2012-2013 Revenue To-Date

Revenue Source	Actual Jul-Nov Revenues	Estimates	Miss	Percentage Miss
Personal Income Tax	$18,905.90	$19,023.00	-$117.10	-0.615570625
Retail Sales and Use Tax	$7,921.50	$7,989.00	-$67.40	-0.844911754
Other Revenues	$1,710.40	$1,889.20	-$178.80	-9.464323523
Total General Fund Revenue	$29,665.80	$30,468.20	-$802.40	-2.633565488
Non-Revenue	$1,667.60	$1,373.30	$294.30	21.4301318
Total General Fund Receipts	$31,333.40	$31,841.50	-$508.00	-1.595716282

Fiscal Year 2012-2013 Spending To-Date

Recipient	Actual Jul -Nov Disbursements	Estimate	Miss	Percentage Miss
Local Assistance	$36,249.30	$33,701.70	$2,547.6	7.559262589
State Operations	$10,146.70	$10,638.30	-$491.60	-4.621039076
Other	$225.30	$117.20	$108.1	92.23549488
Total Disbursements	$46,621.30	$44,457.10	$2,164.2	4.868063819

Spending Problem, Not Revenue Problem

Here are a couple images from the report showing want any rational person knew anyway: California has a spending problem, not a revenue problem.



November 2012 vs. November 2011



Key Revenue Facts

• Total Revenue is up $608.3 million from a year ago. Unfortunately, total revenue is down $806.8 million vs. expectations.
• Income tax is up $367.0 million from a year ago. Unfortunately, income tax is down $842.5 million vs. expectations.
• Corporate taxes are down 160.1% from a year ago and $187.8 million vs. expectations. 
• Sales taxes are the only bright spot, up $386.1 million from a year ago. Yet, sales taxes are only up $99.0 million from expectations.

Corporate taxes are skewed by early payment in November. However, the overall bottom line shows rampant optimism. And that is just the revenue side.

Bottom Line

• Fiscal year-to-date, in spite of healthy growth in revenues, California revenue came in 2.63% lower than expected.
• Fiscal year-to-date, California managed to spend 4.87% more than budgeted.
• Total receipts were down a mere 1.60% only because non-revenues were 21.43% greater than expected.

6.46% in the Hole

Taking into consideration the jump in non-revenue, California is 6.46 in the hole, for July through November.

Fear-Mongering and Tax Hikes

Is this a spending problem or a revenue problem?

The answer should be clear, but thanks to fear-mongering by governor Jerry Brown, fear-mongering by teachers' unions, fear-mongering by police and fire unions (and fear-mongering by every other public union in the state), California voters were stupid enough to pass Proposition 30.

The proposition hikes California’s sales tax to 7.5% from 7.25%, a 3.45% percentage increase over current law. It also "temporarily" hikes income taxes for seven years, on four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000, $300,000, $500,000 and $1,000,000.

The top income bracket in California is now 13.3% tax rate on taxable income over $1,000,000--a percentage increase of 29.13% over current "millionaires tax" policy of 10.3%.

Proposition 30 Will Backfire

I confidently predict Proposition 30 will backfire.

Indeed,  proposition 30 will be the final straw prompting many millionaires to exit the state. I expect some major businesses will follow as well.

Expect More Hikes in Taxifornia

A US recession started this summer or is on the way now (take your pick). Either way, since California could not bring in enough revenue in 2011, it will fail to do so in 2012, even with those monstrous tax hikes.

Expect unions to ask for still more tax hikes because tax hikes and unions go hand-in-hand. Good luck with that Taxifornia.

[TADSLOS]

The mass exodus to Texas is already underway. Welcome to TexMexifornia.

[Banjoguy]

Thanks for posting this...nice piece of work by Mike Shedlock.

[Trapped Behind Enemy Lines]

No one could argue that California isn’t totally screwed up with over $167 billion in debt outstanding, a reckless state legislature, cities filing for bankruptcy, out of control unions calling the shots, Gov. Moonbeam pursuing his multibillion high speed train boondoggle, state over-run by illegal immigration....I could go on......the problems are endless here.....

The problem with all of this is that on a national level, the rest of the nation seems hell bent determined to follow our misguided path. Sacramento may have $167 billion debt
but Washington DC has over $16 trillion in debt. Yes CA did pass tax increases in November, but Washington is about to pass huge tax increases as well....the GWB tax rates are about to expire in just two weeks....plus there are are whole a bunch of new taxes contained within Obamacare.

Yes California is screwed up beyond belief.....what troubles me so much is that the rest of the nation is following our descent into hell, not learning from our mistakes.

[Hotlanta Mike]

When tax the rich does not work, it will be tax the middle class. Or as Howard dean now admits, everyone’s taxes will have to go up. Elections have consequences, enjoy.

[txnativegop]

Please don’t come to Texas, It will simply become California.

[TADSLOS]

Too late.

[skeeter]

Thanks, Jerry Brown you chimp faced PO left wing S. Hope you and your union masters go very rapidly to a very hot place.

[Nevadan]

The problem with Californians leaving the state and going elsewhere is that even though they leave because things aren’t working right in California, so many of them end up demanding to transfer everything that is wrong with California into their new state. Nevada is a key example. It used to be a solid Red state. No more, between transplanted California and transplanted Mexicans.

[skeeter]

Please don’t come to Texas, It will simply become California.

Why would democrat voters flee to Texas? They're happy with the condition of California. Most of those who are moving are more likely republican californians.

[BitWielder1]

California revenue is not up as much as expected, while spending is up way more than expected.

That was entirely expected by most people who can do math. I'm not surprised at all.
The mere mention of more cash tomorrow makes politicians spend it right away. That's how they are.

[Teacher317]

One major point to consider for those thinking about this issue... while the US can (almost... barely...) sustain a 105% total-debt-to-annual-GDP ratio, states cannot. States cannot print money to (temporarily) put off the pain of paying the bills. So while CA's ratio is a seemingly mild 9%, it's actually a very large and ugly number.

(They can, however, copy the feds by selling bonds etc, so they do have SOME recourse. Not saying it's wise, just that it is one of the common escape routes.)

[Hoodat]

Same thing has happened to Virginia. Marylanders, quick to ruin their own state, took notice of the excellent schools, low taxes, and great quality of life in Northern Virginia compared to the cesspool of the Peoples’ Republic of Maryland. So they moved there. Soon after, they began demanding the same government services that they had before. Now, northern Virginia looks just like Maryland.

[paul544]

Wrong. Liberals never live in the world they create. They make the rest of us live there.

[Don Corleone]

Socialism works until you run out of other peoples money...then it becomes California or on a grander scale..the USA and eventually the WORLD!

[Arrowhead1952]

Most of those who are moving are more likely republican californians.

I have two CA tranplant neighbors and both families are very conservative. One is a Hispanic houshold and the other retired navy.

[diamond6]

Leftist remind me of cancer, they just metastize and spread everywhere.

[Hoodat]

Liberals never live in the world they create. They make the rest of us live there.

So true.

[skeeter]

Its plain ignorant to believe that everyone in this state is a liberal flake. In fact I'd bet California spawns some of the most rabid conservatives anywhere in the country.

Just not enough of em, obviously.

[blueunicorn6]

Two problems with California

1. Most of them do not understand the concept of CAUSE AND EFFECT.

2. Most of them don’t care about anything until it hurts them personally, and I mean it has to hurt them a lot.

Nice weather. Good beaches. Lots of wine. Everyone’s cool. Lots of big boobs to distract you. Great entertainment.