Eureka! California Revenue Plunges 22%

MARCH 13, 2012


State Controller John Chaing continues to uphold the California Great Seal Motto of “Eureka” — I have found it.  But what Chaing is finding as controller is that California’s economy as measured by tax revenues is still tanking.

State tax collections for February shriveled by $1.2 billion, or 22 percent, as compared to a year earlier.  The deterioration is more than double the shocking $535 million reported decline for the previous month, January.

The cumulative fiscal year decline is $6.1 billion, or 11 percent down versus this period in 2011.  While Gov. Jerry  Brown promises strong economic growth is just around the corner, Chaing proves that the best way for Sacramento politicians to hurt the economy and thereby generate lower taxes is to have the highest tax rates in the nation.

California politicians seem delusional in their continued optimism that high taxes have not savaged the state’s economy.  Each month’s disappointment is written off as due to some one-time event.  The controller’s office did acknowledge that higher than normal tax refunds for February might have reduced the collection of some personal income taxes.

Given that 2012 has an extra day in February for leap year, there might have been one day more of tax refunds sent out.  But one day out of 29 is just 3 percent. Yet the controller’s report shows personal income taxes fell by $325 million, or 16 percent versus last year.

Furthermore, leap year would have added another day for retail sales and use taxes, but those taxes also fell during February by an even larger $813 million, or 25 percent over 2011.

Business Exodus

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.  Derisively referred to as “Taxifornia” by the independent Pacific Research Institute, California wins the booby prize for near the highest personal income tax rates in the nation and higher sales tax rates than all but four other states.  Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst combined state tax burden in the United States.  

Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26 percent more than in 2010 and five times as many as in 2009.  According SLC President Joe Vranich, the “top 10 reasons companies are leaving California”:

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.

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 percent of costs.  Leaving the state for Texas can save up to 40 percent of costs.  This probably explains why California lost 120,000 jobs last year and Texas gained 130,000 jobs.

Tax Increases?

Brown’s answer to the state’s failing economy and crumbling tax revenue is to place a $6 billion tax increase initiative on the ballot to support K-12 public schools.  He promises to only “temporarily” raise personal income rates by 25 percent on any of the rich folk who haven’t already left.

Recent statewide polls show that support for the measure has fallen from 72 percent to 52 percent of likely voters since January.  Democrats favor the tax increase by 71 percent, while Republicans oppose it by 65 percent.

But independent voter support is now down to only 49 percent favoring versus 41 percent opposed as these swing voters begin to learn the initiative also raises their sales taxes, and the initiative will also be available to fund public safety realignment and freeing up dollars for “other spending commitments.” According to Chaing, California has plenty of “other spending commitments”:

“The State ended last fiscal year with a cash deficit of $8.2 billion. The combined current-year cash deficit stands at $21.6 billion.  Those deficits are being covered with $15.2 billion of internal borrowing (temporary loans from special funds) and $6.4 billion of external borrowing.”

Great Seal of California

When it comes to bankrupt California politics, the Great Seal of the State of California (picture above) provides some good laughs.  It was designed by U.S. Army Major Robert S. Garnett, who later became the first general to die in the Civil War.  The grizzly bear appears on the Seal to represent strength, but the last grizzly was shot 90 years ago.  The miner using his sluice box dredge represents golden opportunity, but such mining became a crime as of August 2009.  Sadly, the five ships that once represented the state’s economic power now represent the relocation companies taking that power away.

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  1. Beelzebub
    Beelzebub 13 March, 2012, 08:57

    I think the unemployment numbers we get from the government are complete BS. Revenue is down in several other large states too. Yet they tell us that more jobs are being created. If more jobs were being created there would be more revenue. Think about it. I think the employment numbers are being rigged due to the election year. Strange that the economy was in the hole until January – 10 months before the elections – and now it’s beginning to improve. Totally rigged.

    If the economy were improving revenue would be improving too. It’s not. Don’t fall for the lies.

    Reply this comment
  2. Rex The Wonder Dog!
    Rex The Wonder Dog! 13 March, 2012, 09:04

    Brown’s answer to the state’s failing economy and crumbling tax revenue is to place a $6 billion tax increase initiative on the ballot to support K-12 public schools. It is not a K-6 tax, it is a PENSION tax, and it is DOA, mark my words.

    He promises to only “temporarily” raise personal income rates by 25 percent on any of the rich folk who haven’t already left.

    There is no such thing as a “temporary tax” in this state. We have seen this whopper of a lie a million times in the past. In fact the last tax was a 2 year “temporary tax” that Arnold tried to extend to forever, Clown is no different.

    I think the unemployment numbers we get from the government are complete BS

    The REAL CA UE Rate is the U-6 rate-it has been at or around 22% for close to 3 years now. Not going down.

    Reply this comment
  3. Bob
    Bob 13 March, 2012, 11:04

    The answer from these DemoNcrats is ALWAYS higher taxes.

    Where I live they also want to raise our city sales tax, the phone tax, the sewer tax and implement a new tax on alcohol sales. Of course this would be on top of any tax increases from the state.

    I am so f’ng sick of this. These parasites are going to kill their host.

    Does anyone know what happen to the DemoNcrat Leno’s bill to institute a local income tax?

    The DemoNcrats wanted to let the cities and counties impose an income tax but I never heard what happened to it.

    Reply this comment
  4. George B
    George B 13 March, 2012, 13:14

    “If more jobs were being created there would be more revenue.”

    Not necessarily. We are at the point where about 50% of Americans pay no taxes. If the jobs that are being created are in the bottom 50% of wage brackets, those jobs could create no revenue whatsoever. That is why one person who makes $100,000 leaving the state or one such job being eliminated can be the same as hundreds of lower paying jobs. Many of those lower paying jobs pay little or nothing in taxes so creating those kinds of jobs adds little or nothing to tax revenue.

    The economics education of Gov. Brown would be funny if it wasn’t so painful.

    Reply this comment
  5. Rex The Wonder Dog!
    Rex The Wonder Dog! 13 March, 2012, 16:57

    Not necessarily. We are at the point where about 50% of Americans pay no taxes. If the jobs that are being created are in the bottom 50% of wage brackets, those jobs could create no revenue whatsoever.

    George this is totally false. Maybe 47% of Americans pay no INCOME tax, but everyone pays taxes everyday-sales, excise, user, disposal, toll road, bridges……

    Reply this comment
  6. Capitalist Pig
    Capitalist Pig 13 March, 2012, 17:48

    In California, the takers outnumber the producers and therefore this is what you get. I say let it collapse already and then maybe some of the center-left voters will wake up. You can thank the unions for most of this.

    Reply this comment
  7. Hondo
    Hondo 13 March, 2012, 19:20

    So Jerry Brown wants to raise the tax rates on the richest 1% in Kali again. They already pay half of personal income taxes. They are the people who can most easily pick up and move out of state, along with their taxes. They can afford to walk away from their big homes or sell them for pennies on the dollar. The poor can go wherever there is more welfare. They have nothing holding them.
    It’s the middle class, whose homes are most likely underwater and cannot sell, that are stuck in Kali.
    But the $100,000 pubic pension goons can go to lower tax states like Idaho and can have their check sent there.
    Time and time again, too high of tax rates, equals lower tax dollars received.

    Reply this comment
  8. Hondo
    Hondo 13 March, 2012, 19:43

    These stories and statistics are very personal to me for I have many family members back in California and they are having a very tough time and cannot get up and move like I did 30 years ago. They have underwater mortgages and jobs and lives in my beloved home state and cannot flee the coming debacle. I call my brothers and sister less and less to avoid the obvious topics. We can say that California should go down the tubes but I have family who will go down too.
    But I see no hope. I have met and worked with Jerry Brown on his 92 Colorado presidential primary victory here. For someone so smart and so well read and so caring, how can he not see he is doubling down on his past failures. I consider myself fairly intelligent but after talking to Jerry several times I can see just how much smarter he is than me.
    But not in common sense. May be he is educated to the point of functional illiteracy.
    May God have mercy on my beloved home state. It needs it.

    Reply this comment
  9. Beelzebub
    Beelzebub 13 March, 2012, 22:53

    “For someone so smart and so well read and so caring, how can he not see he is doubling down on his past failures”

    Jerry Clown has been in politics for 40 years. He’s owned lock, stock and barrel. And he doesn’t make a move unless it’s cleared through his owners first. And he’s done well in politics for 40 years fooling people into believing that he’s a ‘caring’ individual.

    Reply this comment
  10. Chriss Street
    Chriss Street 14 March, 2012, 23:07

    I appreciate all of you who have commented on my article. The challenge for California is that the political class has become so entitled, they have no emotional resilliance to admit that they are the problem. California needs to hit the equivalent to a financial Fukushima before there will be real change. The financial tsunami is building.

    Reply this comment
  11. David
    David 28 March, 2012, 06:57

    It astounds me that people cannot see the handwriting on the wall. My wife and I are both engieers and do well. We have to, our kids are gone and we have only a few years to save enough money for retirment. Salaries are pretty much the same in Texas as they are in California. So, we moved. We left in 2006 and left behind a $1500/month state tax bill, overprice housing, high utility bills, and higher everything else.

    It is an easy move to make and I would say have my neighbors here are from California. These people are accountants, engineers, business people, IT people, etc. Basically, well educated high skilled people.

    In the sixty months we have lived in Texas, we have saved nearly $100,000 in state income taxes and probably another $100,000 in costs. This has allowed us to increase our savings.

    California needs to realize that it just isn’t a good deal and a lot of talent is going. I don’t think the rich feel the pressure because, like Molly Munger, they are insulated by their money. But, it is the well off who feel the pressure. Families making between $100,000 and $300,000. They are leaving.

    Reply this comment
  12. Taxpayers
    Taxpayers 11 April, 2012, 15:51

    The Governor should make additional cuts to Regional Center and Ability Counts, because they do fund raising for alot of money(small businesses, selling unidentified ownership products on eBay, and golf tournaments) without reporting exact number or changing to a small dollar amount in order receiving full funding from taxpayer’s money funding in a full amount without any substraction each year, while they give out tax credit letters to their donors which in turn reduce tax revenue coffin of the State and that why State of California always cannot get out of deficit. Not to mention cheating and wasting for providing services to autism disabled(the funding goes to or slit among the top directors and business manager, while autism consumer earns less than $3.00 an hour working up to 8 hours)(SSA should review their continuing disability because they can handle part time to full time jobs; therefore, Ability Counts can put them on regular payroll and pay them minimum wage if Ability Counts call it is a real job helping the community or something is hidden here or a real purpose is to get funding from state taxpayer’s money). California state is funding/providing to many special services to autism disabled and it costs too much (besides, group home and so call job training). Why California state just gives autism disabled people SSI and SSD; that’s it and shut down all non-senses services like Regional Center and Ability Counts. It costs too much(more than 3 billions each year). This is the right time to shut them down and let the millionaire relatives of autism disabled people to take care of them under SSI and SSD funding only. I am sure State of California will save alot of money for the taxpayers.
    Costs Summary for each autism consumer:

    Reply this comment

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