This is a common risk when you have an extremely progressive tax system, or rely heavily on taxing companies. Companies and high income people have volatile income, making tax revenues volatile.
If you want to avoid it, you'll need a more regressive tax system that leans heavily on the poor/middle class (e.g., the sort you find in Europe).
New York, for one. NY's tax revenues (both the state's and the city's, since NYC has its own income tax) are heavily dependent on year-end bonuses on Wall Street, so if Wall Street has a bad year, so does NY.
Hold on there. Even at the low end (i.e. "hundreds of millions" less than $1.9 billion), that's more than 1% of the state budget ($91.3 billion). They can't just ignore that. Besides overall revenue it will impact things like cash management, especially since the impact is irregular over the course of the year.
So, they made an estimate. It was off. That's life. Nevertheless, in making an estimate they're going to be substantially closer to reality than ignoring the impact altogether. That's what's supposed to happen.
California state and local municipalities make judgements off forecasts of tax revenues from the dot com boom and housing boom.
I'm interested at what the relationship is like at that level. Is there a Facebook staffer that communicates regularly with state congress staffers? Is there tit for tats going on?
