CA Takes In $5B More Than Expected in Taxes

But can the state resist spending it?

California was flooded with tax dollars in January, according to a new report, and the state received $5 billion more revenue this month than Gov. Jerry Brown had anticipated. …

The analyst's office floated three possible causes for the surge in tax revenue. The most positive theory is also the simplest -- the economy has improved and there's more income to tax.

The others are less optimistic. It's possible that wealthy residents, fearful that federal budget negotiations would increase their taxes, decided to cash out investments early. If so, that means the state could see less tax revenue in the next fiscal year.

Comments

[JWatts]

"The most positive theory is also the simplest -- the economy has improved and there's more income to tax."

LOL, the Fed just reported that the US economy contracted in the 4th quarter. So I'm thinking that this theory doesn't fit the facts.

"The others are less optimistic. It's possible that wealthy residents, fearful that federal budget negotiations would increase their taxes, decided to cash out investments early. If so, that means the state could see less tax revenue in the next fiscal year."

Both California and Federal taxes both went up at the end of the year. Included in that was the new Obamacare capital gains tax. And the stock market was at a relatively good position, at least compared to any point in the last 5 years. So, it seems most likely that a lot of people cashed out and paid their capital gains tax at the much lower 2012 rate.