Taxifornia barely made budget in February, as personal income tax falls short

California barely made budget in February after two months of big deficits, but personal income tax collections fell short by another $137 million.

When Gov. Gavin Newsom was inaugurated in the morning of January 9, he proposed a record $144.2-billion spending plan for California's 2019–2020 budget. Having campaigned as a social justice warrior, Newsom trumpeted plans to spend another $5.2 billion for "Cradle-to-Career" education, $1 billion more for earned income tax credits for the poor, and $100 million for the caravans of Central Americans refugees supposedly fleeing violence.

But later in the day, the state controller revealed that California tax collection missed budget in December by $4.82 billion. A month later, the controller disclosed an added $2.87 billion shortfall in January and a 2018–2019 fiscal year net $2.41 billion deficit.

February personal income tax collection missed by another $137 million, but the budget was bailed above plan by $152 million in sales and $102 million in corporate taxes. But California is still under budget by $2.29 billion for the June fiscal year.

California gained the title "Taxifornia," because it has America's highest state personal income tax rate of 12.3 percent, plus 13.3 percent tax on incomes over $1 million. But the pain used to be shared with "Uncle Sam," due to unlimited federal income tax deductibility for state and local taxes, known as the SALT deduction.

But President Trump's "Tax Cuts and Jobs Act of 2017" capped SALT deductions at $10,000 for both single and joint taxpayers. The new rules have hammered residents of high income and property tax states, like California, New York, and New Jersey.

THE PROBLEM CALIFORNIA FACES:

With an average “SALT” bill of $18,438 in 2015, the ability to deduct all SALT payments saved the average Californian about $4,000 in federal taxes. But implementation of the TCJA for the 2018 tax year is expected to cost the average Californian $1,800.

According to the Cleveland Federal Reserve Bank, the resulting higher tax payments will also have a negative wealth effect of about 7.9 percent on California home values.

A Sacramento Bee study based on U.S. Census data found that about 130,000 more residents left California than arrived from other states in 2017.

The Newsom administration is afraid the combination of higher effective federal tax rates and falling home values will accelerate the “negative net domestic migration rate,” as very wealthy Californians “vote with their feet” by moving to low-tax states.

It seems most of us did not learn the lesson of 2009.

Anybody who goes to the U.S. Congress with a sufficiently butt-puckering Chicken Little tale of impending terror and doom WILL get a bailout. Regardless of how widely that is opposed.

The threatened collapse of our largest state would surely do the trick.

As California (and other high-tax states) have the massive federal subsidy of their taxes eliminated, their taxpayers will make attempts to minimize/avoid those taxes. Flipping the old axiom: If you STOP SUBSIDIZING something, you’ll GET LESS of that something. It’s an old TRUTH.

NY, CA, IL - all looking at budget gaps and huge liabilities - even though the economy is doing well, and stock markets are near all-time highs.

Their progressive uni-party states are completely out of control

One silver lining of the next financial crisis - these leftist places will be brought to their knees.

“As a Tennessean, not having to have my federal taxes go to California is a relief”

CA’s net overage of Fed taxes pays Tennessee’s net under payment.

Tennessee receives more in Federal expenditures than it pays in taxes. CA pays more in Fed taxes than it receives in expenditures.

Tenn has never subsidized CA.

Tennessee receives more in Federal expenditures than it pays in taxes. CA pays more in Fed taxes than it receives in expenditures. Tenn has never subsidized CA.

With individual red vs. blue state comparisons this is true. But I'm thinking that if California residents must pay more federal income taxes because of the elimination of some SALT deductions, then whole groups of states WERE subsidizing California and others. Those federal income tax dollars were made up somewhere before California residents had to pay them.

CA has paid more in Fed taxes than it received in total Fed expenditures since WWII.

Every year.

How can you equate that with subsidy by other states, when the very opposite is true?

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