California’s budget deficit reportedly now might be billions of dollars more than Democrat Gov. Gavin Newsom expected, reportedly prompting fears about the Golden State’s fiscal future.
Last month, Newsom stated that California will have a $22.5 billion budget shortfall in the 2018 fiscal year.
The sum was a significant decrease from the previous year, when the state enjoyed a surplus of almost $100 billion as a result of federal COVID relief and increasing capital gains.
While the expected year-to-year decline seems significant, it may not have been substantial enough.
In a report released last week, the California Legislative Analyst’s Office (LAO), a government office that analyzes the budget for the state legislature, estimates that Newsom’s prediction undershot the mark by around $7 billion due to about $10 billion less in tax receipts than predicted.
Tax collections are already much lower this year than last.
California’s monthly tax collection in January was nearly $14 billion lower than in the same month last year.
Nevertheless, according to the Wall Street Journal, tax collection in the current fiscal year, which began in July, is nearly $23 billion lower than the previous year.
This is despite the fact that California already has the highest top income tax rate of any state, at 13.3%.
According to current data, the richest 0.5% of taxpayers pay 40% of California’s state income tax.
In a recent interview with California Public Radio, H.D. Palmer of the California Department of Finance stated that in 2020, 1% of all income tax returns filed were responsible for more than 49% of all personal income tax paid in that year.
The situation which paints a dire picture of the future for a state that has witnessed record outmigration in recent years, with citizens frequently fleeing to red states in order to avoid rising taxes and increasingly poor public services.