California Controller: Tax Receipts Continue to Lag in March

SAN FRANCISCO - Tax receipts in California continued to lag during March, state Controller John Chiang announced last week.

"Two of the state's largest sources of revenue were down by significant margins," Chiang said in a statement issued with his office's latest monthly cash report on Thursday. "Corporate and retail sales tax receipts sent March's balance sheet into the red, while only the personal income tax held up against the latest estimates."

Actual general fund revenue in March was down more than 10% from estimates in Gov. Arnold Schwarzenegger's most recent budget proposal, a $618 million shortfall.

Sales tax receipts were down $164 million, or 7.5%, and corporate taxes were down $266 million, or 16.1%.

Personal income tax totals surpassed estimates by $9 million, or 0.5%. The state will receive a much clearer picture of personal income tax revenue after tomorrow's filing deadline.

Through the end of March, the state's actual revenues for fiscal 2008, which began July 1, 2007, are $818 million below the most recent budget projections made by the Department of Finance, released with the governor's January budget proposal for fiscal 2009.

If the cash report numbers weren't gloomy enough, the monthly report also included an article by Christopher Thornberg, founding principal of Beacon Economics LLC and a member of the Controller's Council of Economic Advisors.

Thornberg, in the article, said California is "unfortunately leading the U.S. into what we predict will be a serious, but hopefully not record-breaking, recession in 2008."

The recession will be driven by the continuing precipitous drops in real estate values, which are causing formerly equity-driven consumers to cut back drastically, he said.

California's budget deficit will continue to grow worse, according to Thornberg, because current projections are still based on positive growth in the state government's three main income sources: income taxes, sales taxes, and business taxes.

"It is highly probably that one or more of these revenue sources will actually fall next year - making the gap even larger," he wrote. "Finally, there will be no bounce in revenues the way there was back in 2003. There are no more bubbles in the works to provide another round of windfall gains."

 

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