California Gained an Extra $1 Billion in Tax Collections Last Year
In July, the California Department of Finance announced that California brought in $1 billion more than projected in its last financial year. The announcement came a month after Governor Newsom and lawmakers approved the $215 billion state budget, which relies on a large projected surplus to fill the state’s reserve accounts with over $19 billion. Lawmakers are hoping that the extra money saves them from having to make deep cuts when the next economic recession hits. The unexpected tax collection increase means the state’s general fund revenue was 0.7 percentage points higher than predicted when lawmakers approved last year’s budget. It’s important to note that the state’s fiscal year runs from July through June.
Where exactly did this extra windfall come from? According to the Sacramento Bee, about half of it came from personal income tax revenue, which was $523 million higher than forecast. Also higher than predicted were taxes from sales, corporate, and insurance. These increases made up for the lack of revenue from alcohol sales, which was $32 million lower than expected. Apparently, California collects around 70 percent of its general fund revenue from personal income taxes, with almost half of the money coming from the wealthiest one percent of households. We will have to wait and see if the tax collection increases again next fiscal year.