Are higher taxes killing CA tax collection?

California tax chart, Jan. 2013Feb. 11, 2013

By Chriss Street

In January, California state tax collection beat Gov. Jerry Brown’s 2013-14 budget projections by $4.3 billion, or 39.1 percent.  The out-performance was due to two expected one-time events that took place: $1 billion in delayed sales tax deposits and $3.3 billion of taxes on capital gains, dividends and bonuses collected in January for a prior period.

But something should be very disturbing to giddy state politicians and lobbyists who are cranking up for a new spending spree: January sales taxes plunged by $582.7 million, or 27 percent.  It seems that Taxifornia finally raised taxes so high that affluent residents are moving their investments and spending elsewhere.

Many financial analysts declared the California debt crisis over two weeks ago, after the Legislative Analyst’s Office said the state was on track to collect $5 billion more in tax revenue in January than estimated in the governor’s budget.  The revenue was expected to come from high-income earners cashing out of investments early to beat the rise from 15 percent to 20 percent in federal capital gains tax rates as part of the congressional fiscal cliff deal.

But according Department of Finance Spokesman H.D. Palmer, “As we always caution, you can’t assume or build a long-term trend — good or bad — off of one month’s worth of data, because any number of factors can swing one month either way.”

January windfall

California clearly enjoyed a windfall in January, with affluent residents paying $3.3 billion more in retroactive estimated tax payments under November’s voter-approved Proposition 30 tax increase initiative and booking of capital gains, business income, and other income not subject to withholding prior to the January 1 federal tax increase.  But income tax collections fell far short of the anticipated $5 billion bonanza; and sales taxes tanked.

During the campaign for Proposition 30, the $6 billion tax increase voters approved, the Howard Jarvis Taxpayers Association  and other opponents warned that there is an inverse relationship, called the Laffer Curve, between rates of taxation and the resulting government tax collections.  Lowering tax rates incentivizes more investment, and the volume of taxes rises.  Raising tax rates strangles investment incentives, and the volume of tax collection falls.

Brown, who led the pro-Prop. 30 campaign, pooh-poohed concerns of competition from low-cost states, like Texas, if California imposed the highest statewide income tax at 13.3 percent, the highest sales tax at 7.5 percent (plus local levies) and 2nd highest gasoline tax at $.67 per gallon.  Brown promised that if voters approved new taxes and he cut spending, California’s 2013-14 Budget would achieve the first surplus in a decade.  At the news conference celebrating the passage Prop. 30 Brown said:

I think the real lesson here is that voters have trusted the elected representatives, maybe even trusted me to some extent, and now we’ve got to meet that trust.  But we’ve got to make sure over the next few years that we pay our bills, we invest in the right programs, but we don’t go on any spending binges like we did in the days when we had the dot-com boom.

When asked how he would maintain discipline, Brown cited a mantra he performed every night before bed while studying at a Zen monastery in Japan in the 1980s:

Desires are endless, I vow to cut them down.”

As Palmer said, it’s too early to say if the current trends will continue. But if they do, Brown is going to have to cut down a lot more desires that take the form of state spending.

CHRISS STREET & PAUL PRESTON
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30 comments

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  1. us citizen
    us citizen 11 February, 2013, 15:12

    bahahahahahahha………Brown is one of the leading IDIOTS in CA. He can pray all he wants to. He still is a jerk. Personally I hope all the rich people leave. It would be worth it to just see him squirm.

    Reply this comment
  2. 2nd class citizen
    2nd class citizen 11 February, 2013, 15:18

    I look forward to the day California is forced into bankruptcy so the healing can finally begin.

    Reply this comment
  3. DavidfromLosGatos
    DavidfromLosGatos 11 February, 2013, 17:37

    We are leaving by the end of this year. It’s tough to relocate in my 50s, but every time I see a quote from Brown or some other mouthpiece that the “rich” won’t leave CA because of the prop 30, I am more motivated than ever to make it happen.

    Texas is grim, crowded, and too hot in the summer (we are spoiled living near the Pacific), so now considering Colorado or (shhhhh) western South Dakota. We can always visit California as tourists. Heck, saving over $100K a year in income taxes pays for at least a few weeks in Carmel.

    Reply this comment
  4. Hondo
    Hondo 11 February, 2013, 18:02

    Illinois and Connecticut had huge tax increases in 2011 and both had big deficits the next year. Kalifornia raised taxes in 2009 and had huge deficits the next year.
    I project Kali will have another deficit problem this year for two reasons. The Demoncrats can’t stop spending and can override Clowns veto. And the huge tax increases will stifle business and tax revenues. The unemployment rate will most likely rise or stay the same. But with the huge tax increases at all levels of govt from Obama on down will stifle job creation.
    America is in another recession and unemployment is going up. A fine time to raise taxes. Kalifornia can’t sustain its spending unless unemployment gets under 8%. Let alone pay off it’s huge unfunded pension plans.
    Hondo….

    Reply this comment
  5. BobA
    BobA 11 February, 2013, 19:46

    Hondo:

    Good luck trying to convince the libs in this forum. You could have all the facts on your side and it still wouldn’t convince them.

    They’re an incurious bunch of servile stooges who don’t want to be bothered with the facts if it runs counter to what their political masters tell them. That is the nature of sheeple.

    Reply this comment
  6. SeeSaw
    SeeSaw 11 February, 2013, 20:24

    Those of you talking the way you are: You are not really true, loyal Californians. The Governor is correct. The rich don’t have to leave; they don’t have to; they can live wherever they want. It is those like yourselves who want to see CA go down the black hole. Well, go ahead and go wherever you want to go. Those of us staying could care less. The state has enough people, that there is always going to be enough to support the it. The state cannot go bankrupt–if taxes have to be raised, they will be raised. Enjoy yourselves, wherever you are going. I am not one to want to see others unhappy. I want you to be happy—go!

    Reply this comment
  7. Dyspeptic
    Dyspeptic 11 February, 2013, 20:57

    SeeSaw, Kalifornia is going down the black hole because of drones like YOU! This state is full of moronic, infantile and stupendously ignorant knuckleheads who vote based on feelings, knee jerk reactions and mindless partisan loyalty. Don’t blame those of us who don’t drink the collectivist Kool Aid like you Progressive Fascist zombies.

    It’s all your fault. Everything that is wrong with this state is your fault. You and everyone like you have been busy screwing up this state with your foolish, misguided utopian dreams for decades now. And don’t dare attempt to judge who the real Kalifornians are because you haven’t earned the right. My people were farming this state in the 1870’s, long before yours could find North America on a map. Why don’t you leave and go back to what ever wretched state you ruined before deciding to screw up a place that used to be paradise before you and your ilk ruined it.

    Reply this comment
  8. BobA
    BobA 11 February, 2013, 21:24

    SeeSaw:

    I have to say, you’ve got some moxie and I applaud you for that. But I must also say that although you may be queen of your household, I don’t recall reading any news reports about you being named sovereign ruler of California.

    Thus, your invitation for those of us who don’t like what’s happening in California to leave is utterly preposterous on the face of it and completely laughable.

    But, alas, we’re still a mostly free country and you’re entitled to your opinion however ridiculous and insane it may be.

    I mean no offense so don’t take this the wrong way. Consider it as just friendly criticism from someone who was born and raised in California.

    Reply this comment
  9. David
    David 11 February, 2013, 21:28

    You worry too much about SeeSaw. I bet he makes very little income so taxes don’t mean much to him. I grew up in Detroit. There were legions like him who said, the auto industry will go forever, the state has plenty of money, and Detroit can raise income taxes as high as they need because no one will move out. Yep, heard everything SeeSaw said before. I left California for Texas in 2006. My wife and I have calculated that we saved about $100,000 in state income taxes in the last six years. Best move we ever made.

    Reply this comment
  10. Ted Steele, The Decider
    Ted Steele, The Decider 11 February, 2013, 22:41

    Calpers value today— 254.5 billion baby!!!!!!!!!!!!!!!!

    hurry!!!!!

    Reply this comment
  11. SeeSaw
    SeeSaw 11 February, 2013, 23:06

    You are hilarious, Dyspeptic. I faintly remember you accusing me of ruining my original home state before. I was born in Montana, raised in WY–was educated in good, public WY schools and left when I was 20. Didn’t have much time to ruin anything while I was growing up. I have been in CA for 57 years now, raised a family and worked for living. Have never been arrested for anything–never ever had a traffic ticket. I have been a good citizen in this state, and have done absolutely nothing to runin it. I would be content if all the other people in CA were like me. As for you, I don’t give a damn where you came from or where you are going. You are just one, giant joke!

    Reply this comment
  12. SeeSaw
    SeeSaw 11 February, 2013, 23:24

    That’s right David. If you are happy living in Texas and consider no state income taxes frosting on the cake, go for it. I choose to live in CA, and I do pay state income tax. I do not want to live in Texas–if I did, I would.

    Reply this comment
  13. SeeSaw
    SeeSaw 11 February, 2013, 23:40

    I don’t think I ordered you to go anywhere BobA. Just said, you should go where you will be happy. How can you ever be happy in a state like CA, that you show such disdain toward?

    Reply this comment
  14. Rex the Wonder Dog!
    Rex the Wonder Dog! 12 February, 2013, 07:14

    Must see TV, good stuff starts at 3:01 (when Daniels starts talking about waging war on poor people, he means seesaw and other public troughers);

    Reply this comment
  15. Ted Steele, The Decider
    Ted Steele, The Decider 12 February, 2013, 09:14

    Seesaw—- Thanks for setting the record straight! The two ment. midgets out here love to weakly re-charactorize what you say— I have noticed their juvenile debating skills!

    lame 7th grade chops!

    Reply this comment
  16. BobA
    BobA 12 February, 2013, 09:19

    SeeSaw:

    That’s where you’re wrong. My disdain is for the political morons who run the state. I grew up in California and I remember when California’s democrat and republican politicians where conservative and did what’s best for California and instead of themselves.

    That all change when northeastern liberals started moving into California and bringing their far left liberal ideology with them. The state hasn’t been the same since.

    You’d be surprised at how many of California’s politicians are east coast transplants. Same goes for the hardcore liberals in this state. Everyone of them that I know to a person is from the northeast.

    Myself and many other native Californians, republicans and democrats alike, resent the way these “invaders” from the northeast have changed California politics.

    Reply this comment
  17. Sean Morham
    Sean Morham 12 February, 2013, 13:12

    California is ok for time being. It is great to buy used from garage sales and classified, shop at Wal Mart. Avoid as much tax as possible. Oh, me and spouse are both gainfully employed with postgraduate degrees. Just love hearing how great the economy is in Cal and avoid spending as much as possible. Save, avoid debt. Waiting for the inevitable implosion of the state economy…7 million to be covered for healthcare and more coming through border crossing or uncontrolled breeding. Oh yea, times ar good and getting better. Hee, hee…

    Reply this comment
  18. Ted Steele, The Decider
    Ted Steele, The Decider 12 February, 2013, 17:17

    Sean— Pay off your house and you’ll be fine during the inevitable downturns! Doing that, and remaining mostly debt free worked for me!!

    Ted!!

    Reply this comment
  19. jimmydeeoc
    jimmydeeoc 12 February, 2013, 18:46

    Seesaw, Post #6:

    “Those of you talking the way you are: You are not really true, loyal Californians.”

    Insert “Deutsch” for California, and you sound like you came straight from central casting in 1942, about to walk onto the set of Casablanca….LOL LOL LOL

    You are hilarious.

    BobA, #16:

    Exceptionally observant. For the first half of the 20th century the vast majority of our transplants were from the Midwest (or South, especially during the Depression and WWII) They often voted Democrat, but were level headed sorts. My own parents came in ’56, from Detroit, for that matter.

    In the 60s and 70s that changed. More often the transplants were from the Northeast, and many brought their insane brand of liberal dogma with them.

    Reply this comment
  20. Ted Steele, The Decider
    Ted Steele, The Decider 12 February, 2013, 19:16

    Jimmydee—- You’re equating Calif. with Nazi Germany? LMAO— Did you EVER study ANY history?

    Reply this comment
  21. Rex the Wonder Dog!
    Rex the Wonder Dog! 12 February, 2013, 19:33

    Teddy, have you read anything besides “Where’s Waldo” as an adult?

    Reply this comment
  22. BobA
    BobA 12 February, 2013, 20:54

    Rex:

    Now you know why I don’t waste my time responding to him. What he has to say is at best a distraction and in no way contributes to the conversation.

    Reply this comment
  23. Ted Steele, The Decider
    Ted Steele, The Decider 13 February, 2013, 09:21

    Very easy to be dismissive BobA—-but I notice that you ALWAYS respond!!!

    LMAO

    Reply this comment
  24. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 February, 2013, 10:18

    Teddy never has any comment worth posting, as usual. It is a shame OCO got booted instead of you.

    Reply this comment
  25. jimmydeeoc
    jimmydeeoc 13 February, 2013, 13:22

    Teddy – you’re a tool.

    How do you infer that I am equating California and Nazi Germany?

    It’s Seesaw’s blind obedience to and irrational love of the state, of course. You don’t like the German example? Go ahead……pick another. Your choice.

    How about this: “Those of you talking the way you are: You are not really true, loyal Bolsheviks/Black Panthers/Shining Path/Symbionese Liberation Army.”

    How’s that…do any of those whet your whistle?

    I used to think you were educated. Wrong, but educated. I am having my doubts.

    Reply this comment
  26. jimmydeeoc
    jimmydeeoc 13 February, 2013, 13:28

    I’ve figured it out.

    TEDDY’S A KAOS AGENT!

    I’m reporting this to The Chief and 99.

    LOL LOL LOL LOL……………….

    Reply this comment
  27. Rex the Wonder Dog!
    Rex the Wonder Dog! 13 February, 2013, 13:36

    Teddy reminds me of Bernie Kopell, aka “Siegfried” the BUNGLING Kaos agent!

    🙂

    Reply this comment
  28. SeeSaw
    SeeSaw 14 February, 2013, 12:21

    Don’t know what you are talking about Jimmy. What “blind obedience”? Noone has asked me to do anything immoral or illegal, and I would not obey if that were to occur. I am not having my movement or my comments restricted. This is a pretty great country we live in, and a pretty good state. You are the one who is, “blind”.

    Reply this comment
  29. Rex the Wonder Dog!
    Rex the Wonder Dog! 14 February, 2013, 15:48

    Noone has asked me to do anything immoral or illegal, …
    ==
    seesaw, you rcomments are FELONY stoopid, they should be illegal 🙂

    Reply this comment
  30. SeeSaw
    SeeSaw 14 February, 2013, 20:41

    I could care less what you think, stupid dog!

    Reply this comment

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