We predicted there was no tax ‘windfall’

April Come She Will, Simon and GarfunkelFeb. 19, 2013

By John Seiler

The office of Gov. Jerry Brown and the Los Angeles Times finally are catching up with what we reported earlier here on CalWatchDog.com. The Times reports today:

“SACRAMENTO — The surge of revenue that showed up unexpectedly in state coffers last month may well be offset by a revenue dip in coming months, according to Gov. Jerry Brown‘s administration.”

But here’s what Chriss Street wrote here on Feb. 11, eight days ago:

“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.”

April Come She Will

The Times writes:

“Taxpayers were paying a share of their bill early, getting income off their books in the hope of limiting exposure to the tax hikes that recently kicked in.

“The administration was expecting that money to arrive in April. Now, officials are saying it won’t, and that just as January’s receipts soared, they’ll be offset by a spring plunge.”

I had a little bit different take on what’s happening, but noted things were not going turn out as the Brown administration expected. I wrote on Jan. 17, more than a month ago:

“[April 12” is 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.”

Tax increases hurt

The bottom line is that people react to tax increases. When he was plumping for the $6 billion Proposition 30 tax increase last fall, Gov. Jerry Brown touted a study by two Stanford sociologists that rich people supposedly don’t leave to avoid paying higher taxes. I debunked that study here and here. Wayne Lusvardi did so here.

In about two months we’ll know much more about how Prop. 30 — and the federal Obamacare and fiscal cliff — tax increases have affected tax receipts and employment.

Meanwhile, keep reading CalWatchDog.com, where we give you the heads up before anybody else.


Write a comment
  1. Sean Morham
    Sean Morham 19 February, 2013, 14:54

    It is a silly position to take that higher taxes don t make people think about moving. They always have. States like New York, New Jersey, Connecticut always knew they lost retirees to Florida. What is stinging is that many of the retirees are gov t retirees, and they (like all of us) are living longer than ever. These folks are taking their gov t pensions and spending them in a new state. Sure, the weather has always appealed to the snowbirds, but the lower taxes seal the deal. Those pensions mean the state where earned loses the impact of that spending, except for the money given to the grandkids back in the snow. I tnink this will become a growing issue in California(move to Nevada?) as quality if life declines(cost of living, taxes, traffic, crime, etc.). It is a great state, but a of people, including public sector workers and retirees, are pessimistic about the future of the state.

    Reply this comment
  2. larry 62
    larry 62 19 February, 2013, 14:59

    A little off subject John, but did you know that on top of the tax increases because of prop. 30 we are now paying an extra one per cent on all lumber purchases and a recycling fee on all paint products. I bought a gallon of concrete sealer yesterday and up pops a 75cent recycling fee on the register. I don’t remember hearing anything about this new charge, but then again we don’t hear anything about most added ‘fees’. People that vote in favor of tax increases and bonds are absolutely clueless. The voters in Ca. are brain dead.

    Reply this comment
  3. stolson
    stolson 19 February, 2013, 15:03

    It will be interesting to see what really happens mid-year. The healthcare cost and payroll tax increase will be a factor. Businesses are being courted by TX, AZ, Utah, NV, and even ID. The public sector workers still will fare well compared to others. In certain areas such as Indian Wells and RAncho Mirage, and Bay area locales, there will probably be little change–people won’t move out.
    I think it will be more the middle class non-union that will have to move sooner or later. What will be a marker is if Walmart loses money here this year!!!

    Reply this comment
  4. eyeamok
    eyeamok 19 February, 2013, 17:30

    “These folks are taking their gov t pensions and spending them in a new state.”

    And I have a simple solution to fix this problem, remember these are the very same [expletive deleted] Union Members that supported every last tax and regulation to ever come down the pike.

    No Taxpayer funded pension, or Taxpayer Funded Retirement benefit for any person, who is Not a Full Time Resident of California, shall exceed the maximum dollar amount available under the Federal Program known as Social Security.

    Reply this comment
    NTHEOC 19 February, 2013, 19:46

    eyeamok says:
    the very same [expletive deleted] Union Members
    [expletive deleted] union members? Why don’t you [expletive deleted]!!

    Reply this comment
  6. Dyspeptic
    Dyspeptic 19 February, 2013, 20:11

    “People that vote in favor of tax increases and bonds are absolutely clueless. The voters in Ca. are brain dead.”

    Great minds think alike Larry62 🙂

    “[expletive deleted] union members? Why don’t you [expletive deleted]!!”

    My, you state worker parasites are getting so sensitive. The truth hurts doesn’t it?

    Reply this comment
  7. SeeSaw
    SeeSaw 19 February, 2013, 21:19

    My aren’t you refined, eyamok! I’m glad you were never any union colleague of mine. No, I don’t think you could make that fly! The Federal Government is the entity that decided retirees did not have to pay taxes to the state where they earned the money, if they no longer live in that state. Save yourself the trouble–what you propose is very federally, unconstitutional.

    Reply this comment
  8. eyeamok
    eyeamok 20 February, 2013, 08:12

    ” Save yourself the trouble–what you propose is very federally, unconstitutional”

    Thats pretty funny, I thought Involuntary Servitude was Unconstitutional also, but that doesn’t stop the Asshole Union Members and their Bought and Paid for Politicians from ENSLAVING OUR CHILDREN IN DEBT THAT CAN NEVER BE PAID OFF, Or Enslaving them in DEBT to PAY FOR THE WANTS OF THEIR PARENTS WHILE RECEIVING ABSOLUTELY NO BENEFIT. But Hey I was always against Marxism. Seig Hiel

    Reply this comment
  9. Donkey
    Donkey 20 February, 2013, 08:50

    Dyspeptic, the RAGWUS feeders like ntheoc always whine when told the truth about their cabal of crooks.

    I am lookingforward to the state going broke, we need so social unrest to get us back to basics!! 🙂

    Reply this comment
  10. Cordo
    Cordo 20 February, 2013, 14:36

    eyeamok says:
    the very same [expletive deleted] Union Members

    I go to work every day to carry out the programs that are created not by me but by the people the “brain-dead” voters keep returning to office. I have not had a meaningful pay raise in over 20 years and have had to fend off at least two raids on my retirement. Studies how it would take a pay raise of around 60% just to catch my salary up to inflation, In the meantime, I still have to feed, clothe, and house my family while costs are going up. How much more “pain” do you want me to share?

    You want less government and lower taxes? Stop asking your government to take care of you and stop electing people who promise you high services and low taxes. Stop blaming me and my co-workers for your problems. You had a chance to change things in the last election, and you didn’t take it. You want to know who’s to blame for this mess? You should check out the guy behind the guy in front of you.

    Caliornia did at one time assert tax on the incomes of people who had retired and moved out of the state. The problem was that the only people they could enforce this theory against were state workers, because the state could take the tax out of their retirement before they paid it. Congress stopped that.

    BTW, Plato once said that the use of profanity denotes a simple mind trying to express itself. You should rememeber that.

    Reply this comment
  11. jimmydeeoc
    jimmydeeoc 20 February, 2013, 15:29

    “I’m glad you were never any union colleague of mine.”


    Those of us who are not state apparatchiks typically refer to each another as “co-workers”, Seesaw.

    Telling that you consider co-workers first and foremost as “union colleagues”

    Telling, but not surprising.

    Tell us, Seesaw…….do you wear your purple shirt on Eugene Deb’s birthday, you know, in commemoration?

    LOL LOL LOL ………………….

    Reply this comment
  12. SeeSaw
    SeeSaw 20 February, 2013, 18:45

    I think I did have a shirt Jimmy, but I believe it was blue with something orange on it. A friend of a friend sent it to me from another city. I used the term “union colleagues”, because those were the people being dissed in the post, to which I was responding. I was in an association that required dues of approximately $12/month. There was no activisim in our group, so to speak, and membership was not a requirement of my employment. I had more non-union colleagues than I did union colleagues, if that’s what you are trying to make a case of. I am a people lover first; I want to see everyone employed. I try to put forth an honest opinion on issues, along with factual information, if I have such. People like you are the ones who have nothing of your own to go on, so you resort to insults and condesending of those you don’t even know. I pity your ilk.

    Reply this comment
  13. Ftheunions
    Ftheunions 20 February, 2013, 22:49

    Although normally not fighting in California, Manny Pacquiao has sure responded to the high tax rates and is looking to hold his next fight outside of the U.S. That likely means a large chunk of change the treasury will not see. Good for him! So much for people not responding to higher rates of anything. My initial surprise that two Stanford professors would publish this quickly dissipated when I learned it was two sociologists–the true bottom feeders of academia!

    Reply this comment
  14. Ian Random
    Ian Random 21 February, 2013, 11:45

    My mom and dad were public sector workers in Kulifornia. They just wanted a job and could care less about the union. I too use the term union thugs, but only those that are actively supporting their union. Come to think of it, I don’t seem to remember a lot of opportunity in Santa Cruz outside of the public sector thanks to the public sector.

    Reply this comment
  15. DavidfromLosGatos
    DavidfromLosGatos 21 February, 2013, 19:11

    There are many income tax states that do not tax certain kinds of retirement income. Even high income tax Hawaii does not tax Ca government pensions – but does tax a self-contributed 401K.

    IMO, it will be several years, not just a few months, before the effects of Prop 30 are really known. Of course, a few heavy hitters can make a big difference, e.g., the Phil Mickelsons. Much easier for individual sports like golf and boxing (RE Manny Pacquiao: isn’t that why the big money fights are tradionally in Vegas?). Team sports and concert-style entertainers are stuck with CA venues, but I caould understand the players trying to at least mitigate by living elsewhere, and only being in CA for days/games in which they have no choice (ala Derek Jeter in NY).

    Reply this comment
  16. SeeSaw
    SeeSaw 22 February, 2013, 07:53

    Thankfully, the state of CA does not tax SS income.

    Reply this comment

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