Shocker: California overestimated tax revenues again
posted at 10:56 am on May 4, 2009 by Ed Morrissey
The budget compromise reached in California, for which Governor Arnold Schwarzengger heavily lobbied, made a series of optimistic forecasts about tax revenues that flew in the face of the recession and the effect of California’s tax hikes. How badly did they miscalculate? The Golden State has fallen more than $2 billion behind in income tax collections alone, including a $1.8 billion bath in April, which should have been the state’s best month. And sales taxes are next:
The state may get more bad fiscal news this week when the state controller makes his final tally of April sales taxes. …
April, the state’s largest tax-collection month, has fallen short of expected revenue by more than $1.8 billion in personal and corporate income taxes. The state was $750 million behind projected tax collection on April 1.
There’s good reason to believe April’s sales tax receipts may disappoint, too. New car sales the first three months of this year fell by 43 percent compared with the same period last year, according a report last week by the California New Car Dealers Association.
Auto-related sales tax (car sales, parts, etc.) make up about 20 percent of the state’s sales tax receipts, said Paul Warren, a revenue and taxation analyst for the Legislative Analyst’s Office.
The state has a series of referendums on the ballot to get Californians to increase taxes to make up for these shortfalls. So far, they’re all looking to fail by wide margins. Voters have finally reached their limit of tax hikes and spending sprees from a legislature dominated by Democrats for more than four decades.
Schwarzenegger had his opportunity to lead California into a semblance of fiscal sanity. Instead, he pressured the GOP to cave on tax hikes in a budget compromise that did little to roll back spending, but instead put an even higher tax burden on a state reeling from the recession. To no one’s surprise except the terminally clueless political class in Sacramento, the tax hikes helped deepen the recession by cutting back on discretionary spending, especially on big-ticket items like cars.
Just a few months after supposedly plugging their budget hole, Schwarzenegger and his fellow Democrats* will have to deal with another gaping hole in the budget. Will they learn anything from the last round and start redlining the budget to get spending under control? Not if the last few decades give any indication. The Governator had little problem beating up Republicans to get a tax hike passed the last time, and I’d be shocked if he didn’t try it again.
* – Schwarzenegger’s a Republican? No way.