January revenue surge $2.4 billion ahead of projections
(Calif.) The ink on Gov. Jerry Brown’s January budget proposal is barely dry and already his revenue assumptions are short by almost $2.4 billion, the state controller reported Tuesday.
The state collected $17.4 billion last month, which exceeded projections from the governor’s Department of Finance made only a few weeks before by almost 16 percent.
The surge, which began in December, almost certainly is tied to the new tax law Congress and the Trump administration agreed on in the closing days of 2017. The speculation is that big Wall Street investors waited until the new bill was finalized before deciding what to do with profits earned since the bull market took off in November, 2016.
Revenues in December ran almost $4 billion head of expectations.
The state’s fiscal condition is closely tied to Wall Street profits because of how the state taxes capital gains.
During booming stock market cycles, the state collects billions in capital gains—the bull market of 1999-2000, for instance, generated close to $130 billion in net capital gains. On the flip side, when the market slides, California coffers suffer—such as 2009-10 when only about $20 billion in capital gains was taxed.
Although the market has given up some gains over the past week, the Standard & Poor’s index has still risen more than 470 points over the past 14 months.
Brown’s tight-fisted policies have resulted in a rollback of tens of billions of dollars in state debt since he took over, and he has been careful over the past two years not to allow lawmakers to spend too much of the unexpected income on new, ongoing programs.
Most Wall Street analysts remain bullish about the market’s continued upswing, but exactly how that will translate in the coming months into taxes paid in California remains to be seen. Most policy experts in Sacramento are cautiously optimistic that higher revenues will continue through the spring.
Here’s the breakdown from January collections, according to the state controller:
- Personal income taxes came in almost $2.3 billion higher than expected, for a total of $15.6 billion.
- Corporate tax collected totaled almost $552 million, which was $211 million more than the governor was expecting.
- Sales taxes ended the month $138 million less than projections, totaling slightly more than $1 billion.
For the first seven months of the 2017-18 fiscal year, total revenues reached $74.6 billion. That’s about 4 percent higher than the administration’s projections, 7.5 percent above the assumptions made last summer as part of the budget process, and almost 12 percent higher than the same period in 2016-17.