A bunch of conservative blogs are breathlessly reporting that despite the glorious victories of the people of California over the greedy rich in the last election, the state's tax revenues are down significantly in November. I clicked around the blogosphere and found lots of crowing about the Laffer Curve, but the real data (PDF) from state controller John Chiang told a bit of different story.
Tax revenues are down from projections in the state budget, but in some cases, they are up from last year. To me, the numbers and Mr. Chiang's analysis give mixed support to the anti-tax case*, but what absolutely leaps out at you is the total incompetence of the people who crafted the budget. While taxes may be down a bit, spending is out of control.
|A chart of variance from budget. Taxes are a bit lower than expected, but spending is much higher.|
Expenditures are 4.9% above estimates contained in the Budget, with assistance to local governments driving the overage.My interpretation: Assistance to local governments = lifelines to stave off municipal bankruptcies. That was as predictable as the sun rising this morning. How could you possibly lowball an estimate of that when you've already had 4 major bankruptcies?
Here's another tidbit in John's report. These days, Christmas shopping has little effect on government revenues.
While January sales tax receipts are better than average, the holiday returns are a less impressive specter than Marley’s ghost. Blame it on the state’s reliance on the personal income tax or changes to a service economy, but revenues derived from retail sales in 2012 are not as important as they were in the 1940s. For example:
- The sales tax accounts for about one-fifth of the General Fund. (Contrast this with the situation for Christmases Past: Two generations ago, the sales tax was the dominant revenue source.) So, even if there were a pronounced spike in the sales tax returns in January, its effect is swamped by what is happening with other taxes, especially the personal income tax.
It's still interesting to watch Christmas sales figures, but if you're hoping that smashing Christmas numbers will bail out the state, think again.
Finally, if you dive into the report, one of the things you notice is how revenues are higher this year than last, but they are well short of expectations in the budget. Accusations of Peronist fascism aside, the inability to create a realistic budget is a mark of incompetence. For a state in fiscal crisis, to badly overestimate tax revenues and understate spending, it's absolutely criminal.
And we just voted for lots more of it.
* - Mind you, I think raising taxes will end up disastrously for the state, but it doesn't seem to have really hit home yet. Give it time. It's only a month or so since the voters chose Justicialism and bankruptcy.