Two Critical Budget Dates Approaching

Franchise-Tax-BoardJan. 17, 2013

By John Seiler

On PBS NewsHour yesterday evening, Gov. Jerry Brown enthused about his new budget:

“The budget is fixed. I inherited a $27 billion deficit. That’s what it was two years ago.

“And that’s gone. This budget will be balanced. Now, is the world absolutely safe from any contingency? No. 1, the world is changing and turbulent. So, if the economy gets worse, then we get less money.”

He believes that his Proposition 30 tax increases of $6 billion did the trick. But what if his tax increase, along with numerous federal tax increases, cause the economy to “get worse”?

We’ll know pretty soon because of two critical dates coming up. The first is around Feb. 7 or 8, when Controller John Chiang releases the numbers for tax collections for January 2013, the first month on which the new taxes hit with full force. Then we’ll know how much the economy has been affected. (The exact date depends on how long it takes the controller’s office to do the calculations.)

We’ll know if the wealthy are starting a mass exodus.

Hints

We already have some hints. The numbers for Nov. 2012 showed that income taxes were down 19 percent from Nov. 2011. That was the month that Prop. 30 passed, boosting the top state income tax rate to 13.3 percent from 10.3 percent. Were rich people, contrary to the governor’s assurances, leaving the state, or finding ways to avoid paying higher taxes?

Also revealing were the numbers from the next month, Dec. 2012, when income tax collections actually rose by 13 percent from Dec. 2011. That might seem to confirm Brown’s contention that rich people love paying high California taxes.

But Chiang’s own comments told a different story:

“Income tax revenues ran above expectations as individuals may have moved certain types of income, such as capital gains, to 2012 to avoid the possibility of higher federal taxes in 2013. January’s revenue totals will bear close scrutiny to see … whether revenue projections remain on track….

“As we look toward the second half of the fiscal year, several issues will be important. Will the economic recovery be strong enough to support increases in income and sales taxes along with some firming in corporate taxes?”

Chiang, who actually does understand numbers, almost sounds like a supply-sider. In any case, his numbers for January tax collections will be out in three weeks.

April 12

The second big date is April 12. That’s the last business day before Tax Day, which this year falls on a Monday, April 15.

April 12 is important because that’s the date rich people will have to cash in some of their stocks and bonds to pay, on April 15, for their taxes for 2012. And this year, rich folks are going to be especially walloped by California. That’s because Prop. 30 was retroactive. It is paid not only on 2013 income, but on income for 2012 — last year.

If it isn’t withheld from their paychecks, normally rich people make quarterly payments on such income. But because the election was late in the year, on Nov. 6, they haven’t had much chance to do so. So the bulk of the added taxes will be due on April 15. For example, if someone has $11 million of income, the new “millionaire’s tax” applies the extra 3 percentage points from Prop. 30 to the portion above $1 million; that is, it will apply to $10 million. Which means $300,000 will be due.

That means the person will have to, say, sell $300,000 in stock on April 12. Now, tens of thousands of millionaires will be doing the same thing on April 12. California is a large state with a lot of rich people.

If this sell off on April 12 is large enough — and it could be — it could hammer equities in California companies. Of course, Californians can own stock in other states and countries; and investors from other states and countries invest in California companies. But in general, rich Californians invest more here than elsewhere, if only because many top executives have large investments in their own companies.

Mark those two dates on your calendar: Around Feb. 7 or 8 and April 12. If the numbers turn out badly, they’ll give California unwelcome news before Brown puts together the May Revision of his budget proposal.

17 comments

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  1. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 January, 2013, 03:27

    The budget is light years away from being “fixed” and everyone knows that.

    Reply this comment
  2. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 January, 2013, 06:04

    “The budget is fixed. I inherited a $27 billion deficit. That’s what it was two years ago.
    “And that’s gone. This budget will be balanced.”

    I wonder how long Jerry’s nose grew with that whopper lie????

    The BIGGEST problem in the state is the elected officials are liars. They simply lie and lie and refuse to come clean, and there are no consequences to it whatsoever.

    CalTURDS perpetrated one of the largest financial crimes in the history of the world with SB400 and nothing has been done about it. At least Grey Davis was recalled.

    Reply this comment
  3. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 17 January, 2013, 06:53

    It’s almost like posters out here WANT the Gov to fail…curious.

    Reply this comment
  4. Dirtbos
    Dirtbos 17 January, 2013, 07:58

    It is not that people “want the Governor to fail”, logic and common sense show the inevitablitly. “Moonbeam” can throw up all of the smoke and BS he wants to, but the truth will come out in the end. I can remember the interview years ago when he indicatied relief that he was no longer in elected office, as he no longer had to lie to the people. Well, he has been elected again.

    Reply this comment
  5. Hondo
    Hondo 17 January, 2013, 08:38

    I can only hope that things turn around. I’m not a public union worker who can’t be fired. I have to work in the private market and a good economy is good for me.
    But the wall of debt was never 27billion dollars. It was 500billion. The unfunded pension funds. And as more people retire every day that the state can’t afford, it builds up exponantially. The economy would have to be increasing at 4 or 5% a year to treat water. Unemployment would have to be under 6%.
    Well, I hope I’m wrong. But history shows me different.
    Hondo…

    Reply this comment
  6. us citizen
    us citizen 17 January, 2013, 08:44

    ahhh yes…..another delusion of moon beam’s………….

    Reply this comment
  7. jimmydeeoc
    jimmydeeoc 17 January, 2013, 09:45

    “PBS News Hour”……….LOL LOL…..

    PBS News Hour is staffed by hoary, hidebound relics of the age when the alphabet networks ran the roost. It’s like a Federal post-retirement jobs program.

    People think: “Ooooh.. It’s PBS…..certainly THEY are reasonable and impartial……”

    Actually, what they are is napping. No one EVER asks a tough question on PBS. They pride themselves so much on their “civility” and “impartiality” and “ability to listen” that they sit there, mostly mute.

    So Brown spins his yarns, and the interviewers just nod their heads.

    Reply this comment
  8. jimmydeeoc
    jimmydeeoc 17 January, 2013, 09:51

    Ohh lookie here…..

    From NewsHour’s Wiki entry…..

    “In 1992, radio broadcaster David Barsamian called the NewsHour “stenographers to power.”

    Indeed.

    Reply this comment
  9. Marten purdy
    Marten purdy 17 January, 2013, 11:12

    While I support reduced government spending, I recognize that in a true emergency, the US Govt. may have a legitimate need to sell bonds and borrow money. Many people depend on the ability to invest in bonds as the last “safe” returns for their retirement. If Americans are doing their job of holding politicians accountable, there is no need for the concrete strait-jacket a constitutional amendment represents. We’d be more likely to get the Buffet amendment suspending Congressional pay until the budget is balanced and have more flexibility for future true emergencies.

    Reply this comment
  10. jimmydeeoc
    jimmydeeoc 17 January, 2013, 15:29

    Marten….you need to get out more.

    “We’d be more likely to get the Buffet amendment suspending Congressional pay until the budget is balanced…………”

    Spoken like a true NewsHour watcher……..lol lol

    Many – not all, but many – of those in Congress are wealthy enough such that the salary is irrelevant. Do you think Babs and DiFi care about $174 K/yr? That’s lunch money to them.

    Reply this comment
  11. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 January, 2013, 16:46

    Many – not all, but many – of those in Congress are wealthy enough such that the salary is irrelevant. Do you think Babs and DiFi care about $174 K/yr? That’s lunch money to them.
    ==
    Jimmy, last I heard 75% of the senate are multi millionaires, DiFi, through her hubby Richard Blum, is worth several hundred million.

    Reply this comment
  12. End of My Support
    End of My Support 18 January, 2013, 09:24

    I have a commentary on the state’s attitude toward the taxpayer. Yesterday, I spent almost an hour waiting at the Franchise Tax Board. When I entered the lobby there were 7 people ahead of me, but I took a number. At the end of the hour, there were 4 taxpayers of the original group waiting . Also, when I arrived there were 4 windows open with state employees. I watched as the first window closed but 2 more taxpayers arrived in the lobby. Then, another window closed and taxpayers still kept coming. Finally, another windows closed and there were 6 people waiting. I fully expected the last window to close and all of us taxpayers left waiting for answers to our tax problems.

    Reply this comment
  13. Rex the Wonder Dog!
    Rex the Wonder Dog! 18 January, 2013, 12:42

    LOL^^^ funny story end of support!

    Reply this comment
  14. Ted Steele, Navigator
    Ted Steele, Navigator 18 January, 2013, 13:41

    who read it to you Poodle?

    Reply this comment
  15. BobA
    BobA 18 January, 2013, 17:14

    End of My Support:

    I experienced something like that years ago at the DMV. The people behind the counter behaved as if they weren’t in a hurry to get anything done and exuded the attitude that you were an annoying cockroach to them and they were doing you a favor.

    I’m told that attitude is prevalent among state workers who deal with the public on a regular basis. It seems you had a similar experience. And some in this forum wonder where all the animosity towards state employees come from. Give me a break!!

    Reply this comment
  16. Rex the Wonder Dog!
    Rex the Wonder Dog! 19 January, 2013, 00:08

    I’m told that attitude is prevalent among state workers who deal with the public on a regular basis.
    ==
    Reminds me of When Trump rebuilt the ice skating rink in NYC, he said all the gov leeches would sit around doing nothing…..

    Reply this comment
  17. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 19 January, 2013, 10:00

    Private workers are ALL perfect—–no private companies go out of biz for incompetence…mmmmmmm

    oh

    wait

    8 out of 10 companies fail in the first 3 years?

    What????????

    Reply this comment

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