California is in trouble financially. With ever-increasing government spending and shrinking tax revenues, as people flee the state, the inevitable has come home to roost.
While California Gavin Newsom predicted a deficit of $22.5 billion for the upcoming fiscal year, Fox News reports that the shortfall may be far worse due largely to a decrease in tax revenues:
The California Legislative Analyst’s Office (LAO), a government agency that analyzes the budget for the state legislature, estimates in a report published last week that Newsom’s forecast undershot the mark by about $7 billion, thanks to about $10 billion less in tax revenues than expected.
“In particular, using recent revenue collections and economic data, we estimate there is a two‑in‑three chance that state revenues will be lower than the governor’s budget estimates for 2022‑23 and 2023‑24,” writes Gabe Patek, the legislature’s budget analyst. “Our best estimate is that revenues for these two years will be roughly $10 billion lower — implying a larger budget problem by about $7 billion.”
California receives 49% of its personal income tax revenues from 1% of its taxpayers and with the highest top income tax rate in the country at 13.3%, many of the rich and famous are simply deciding to leave.
This year’s deficit is in sharp contrast to the $100 billion surplus the state experienced the year previous, due to one-time Federal Covid payments and an unexpected Capital gains windfall.
READ: Gavin Newsom predicted massive budget deficit for California. Reality was even worse, analysis finds