Saturday, April 11, 2015

State Revenue: Still Reliant on the Boom/Bust Tax Sources

The controller's cash report for the state through March (first nine months of the fiscal year) is out. Headline news is that revenue is ahead of projections. But it's useful to look at the big three taxes - personal income, sales, and corporate profits - relative to the same period least year to see which sources are strong and which are weak. The percentage gains are below:

Personal Income Tax: Up about 12%
Sales Tax: Up about 4%
Corporate Profits: Up about 30%
All Revenues: Up about 11%

The trend inflation rate is around 2% so the real economy as experienced by most Californians - measured by sales - is growing at a two percent-ish rate. We are still heavily dependent on the boom/bust taxes (personal income and corporate profits) that could easily drop in any downturn. Keep that in mind when you think about the multi-year deal the governor wants on budget and tuition. What would happen in the outyears in such a deal if a downturn occurred? Would the governor be able to keep his end of the bargain?

You can find the cash report at:

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