The state of California is facing a budget crisis in the billions. How will the corrupt leaders in the state ever fix this?
California is facing a budget crisis. According to a report from Bloomberg this week, the state has a massive budget deficit.
California is in a bit of a pickle after tax revenues for October vastly underperformed estimates, Bloomberg reports.
As of Oct. 25, just $18 billion had been collected for the month – significantly lower than the $42 billion that had been projected, according to an update by the state’s Department of Finance late Friday. The shortfall is being attributed to the recent stock market slump and slowing wage growth, as the state’s collections are highly dependent on capital gains and personal income tax revenue.
Nearly half of California’s tax collections come from residents in the top 1% of income earnings, Bloomberg further notes.
It’s unclear how the budget outlook will impact the state’s bond sales, according to H.D. Palmer, deputy director for external affairs for the California DOF. The state has “never missed a schedule bond payment to a note holder,” he said in an interview Monday.
The state expected to receive $28 billion from personal income taxes and $14 billion from corporate taxes in October, but, income taxes have thus far yielded only $11.8 billion while corporate taxes have produced $6.2 billion through Oct. 25. -Bloomberg
We would also point out that California had a net loss of 342,000 residents in 2022, many of whom have cited high taxes as one of their reasons for moving.
The people that are moving out of California are not the lower income folks who benefit greatly from the state’s social programs but rather those who pay taxes.
This has been going on for some time. In my first book, Falling Eagle – Rising Tigers, I reported the following:
Revenue collections are a big deal as can be exemplified in the state of California. Throughout 2012 the California Controller’s office reported revenues in amounts materially less than the prior year. The reason for the decline in tax collections was due to businesses and successful people leaving California for the lower tax rates available in more pro-business states in the US.[i]
California, labeled derisively as “Taxifornia”, has the highest personal income taxes in the nation and higher sales tax rates than all but four other states. But this was before the 2012 elections where they passed legislation calling for an additional tax increase on the richer tax payers. “Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of [the] state [of California] 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 are: 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.” [ii]
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 [of California] 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.[iii] (Street, 2012)
Democratic California Governor Jerry Brown’s answer to his state’s failing economy and crumbling tax revenue was to place a $6 billion tax increase initiative on the November 2012 ballot. This was to support K-12 public schools.[iv] This initiative which passed in November is expected to bring in around $6 billion in additional revenues. However, California was expected to have a $28 billion budget deficit for fiscal year 2012.[v]
[i] Chriss W. Street, (2012, March 13). Exodus – California Tax Revenue Plunges by 22%. Retrieved December 24, 2012, from breitbart.com: http://www.breitbart.com/Big-Government/2012/03/13/exodus-california-tax-revenue-plunges-by-22
[v] Joseph Weber, (2012, December 22). New tax increases in California stir debate about adding to exodus. Retrieved December 24, 2012, from Foxnews.com: http://www.foxnews.com/politics/2012/12/22/new-tax-increase-in-california-stirs-debate-about-adding-to-exodus/