The Legislative Analyst's Office has looked back at periods when the stock market dropped suddenly to see what happens to income tax revenue. There has been concern that the AI boom might turn into a bust, similar to the dot-com boom and then bust. When you look back at that period, income tax revenue dropped sharply, but with a lag. (Taxes are paid on past earnings.) Revenues did not recover for a prolonged period:
The adverse consequences of such an event on UC's budget are evident. So, if you want to worry about something, you can add this to your menu.
The LAO report is at https://lao.ca.gov/LAOEconTax/Article/Detail/852.
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And there's this:
https://www.nytimes.com/2026/03/16/opinion/financial-crisis-private-credit-ai-iran-taiwan.html
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