October revenues almost flat
(Calif.) October revenues closed just under expectations, now the second month in a row where tax income was flat, adding to the bafflement among experts about when Wall Street profits will swear state coffers.
Overall, the first four months of fiscal year are running ahead of projections by almost $500 million with total collections of $32.7 billion, 1.7 percent, above estimates made last June.
Personal income taxes fell just $50 million short at $23 billion, but are still running $166.4 million ahead for the year.
Corporate taxes were off by almost 22 percent, or $78.1 million.
The one bright spot were sales taxes, which totaled almost $1 billion for the month, and $45 million ahead of estimates.
Neither September nor October are considered big revenue months, so the fact that tax collections in recent weeks has not met expectations isn’t significant. But there is growing focus on trends given that December and January are crucial to the state’s fiscal health.
The linear line between Wall Street’s bull market and a spike in personal income taxes has been disrupted over the past year by expectations that a Republican-controlled Congress would come to an agreement with the Trump administration on a rewrite of the nation’s tax codes.
As both the House and now the Senate have offered versions of a tax bill, it is likely that big investors will continue to hold off profit-taking until the legislation is finalized.
Perhaps more important to Gov. Jerry Brown and his staff as they prepare the 2017-18 spending plan that he will bring forward in January is how the tax bill might impact California going forward.
Congressional leaders appear to be still working out key provisions in the context of both prudent fiscal policy and political considerations, but there is a growing sense that high-tax, high-cost states like California will emerge as net losers.
Both versions of the bill would eliminate the deduction for state and local income and sales taxes. The Senate version would also eliminate the deduction for state and local property taxes, while the House bill would allow for up to $10,000 on property taxes.
The likelihood is that many taxpayers in California will be paying more if either proposal gets into the final draft and becomes law. Several Republican House members from Southern California are already raising concerns about supporting a plan that would raise taxes on their own constituents. But state fiscal officers are also watching developments carefully, especially because of the impacts on the state’s housing industry..
Brown issued a statement in the wake of the House bill being released, calling it “hurried” and “bad economic policy.”