

California sales taxes collection drop 50.9%, income taxes 43.6% - ahwachu
http://sco.ca.gov/Press-Releases/2009/05-09summary.pdf 

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tc
Unlike a prudent household or business, when times are good governments spend
every penny, and commit themselves to future spending as if growth will
continue without interruption forever. Invariably then, when the downturn
hits, rather than cutting the spending and entitlements that caused the
problem in the first place, the politicians ask everyone to 'share' in the
sacrifice by higher and more ubiquitous taxes. Hence, the effect is like a
ratchet, always turning towards bigger government.

~~~
earl
Eh, yes, but no. You seem to take the fall in revenues as prima facie evidence
that CA is overspending. First, I'm not even sure there is a proper level of
spending, but in any case, CA has a peculiar funding structure where we are
overly reliant on highly cyclical taxes for revenue. This is by
design/evolution, since we enacted Proposition 13
([http://en.wikipedia.org/wiki/California_Proposition_13_(1978...](http://en.wikipedia.org/wiki/California_Proposition_13_\(1978\))
), severely limiting revenue from property taxes, which would be a more stable
/ less cyclical funding source.

To be fair, however, fundamentally, CA continues to vote for a government
which creates more goods and services than we want to pay for. Schwarzenegger
papered this over with a bunch of loans, but eventually we will run up against
a wall and be forced to align our desires with our willingness to pay.

Also, worst financial crisis since the Great Depression accompanied by a drop
in real industrial output that, IIRC, actually exceeds the Great Depression in
speed, and so forth and so on. Plus a state that has been particularly
devastated by the housing bubble.

~~~
anamax
> has a peculiar funding structure where we are overly reliant on highly
> cyclical taxes for revenue.

Taxable incomes haven't dropped by 50% in CA. What has dropped is the taxable
incomes of the small fraction of CA folks who pay the bulk of CA's income
taxes.

CA's income taxes are very progressive. That makes them very volatile.

Prop 13 has nothing to do with the volatility of CA's income tax revenues.

~~~
evgen
> Prop 13 has nothing to do with the volatility of CA's income tax revenues.

It has nothing to do with the volatility of income tax revenues, but it has
everything to do with volatility in the budgeting process. By gutting the
ability of local governments to fund themselves it pushed all of the taxation
up to the state level (and the state turns around and hands most of the money
back to the local jurisdictions.) Since the primary revenue generators at the
statewide level are income and sales taxes this introduces volatility that is
directly tied to the general economic condition, unfortunately the new burdens
placed on the state budget as a result of Prop 13 are mostly independent of
the general economic condition. This lethal combination leads to a never-
ending cycle of boom and bust in the state budget.

~~~
anamax
> [Prop 13] has nothing to do with the volatility of income tax revenues, but
> it has everything to do with volatility in the budgeting process. By gutting
> the ability of local governments to fund themselves it pushed all of the
> taxation up to the state level

Prop 13 doesn't make state-level taxation volatile.

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UncleOxidant
They seem to be living in fantasy land when they say:

"These numbers appear fairly grim, but there are encouraging signs that the
State’s situation is reaching bottom. Although sales tax revenues were down by
more than 50% as compared to last April, consumer spending increased by 2.2%
nationwide in the first quarter of 2009. Additionally, retail sales have
stabilized in the first three months of this year on a seasonally adjusted
basis."

Maybe so, but your state sales tax revenues are down 50% YoY! So what if the
Feds want to say that consumer spending was up 2.2% in April (a number that is
suspect precisely because of state sales tax numbers).

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nazgulnarsil
under a redistribution of wealth system you're relying on the top producers to
pay for all the shiny social programs. If all those top producers have a bad
year at once you're screwed (especially if you have commitments lasting
decades).

------
earl
To be clear, those are y/y per-month changes. Otherwise, this would be even
more terrifying than it is.

That being said, the majority of general fund revenue comes from (in order),
personal income tax (55%), retail/sales/use tax (27%), and corporation tax
(11.1%), and other (6.1%). So a drop in income taxes of 43.6% is _far_ more
important than the change in sales tax of -50.9% -- if those rates are
sustained, that implies we need to look for something to replace the
(0.55*.436 = 23%) of our general fund revenue. Suck.

