Wrong again, Doomers: State tax receipts are going *UP*!

- by New Deal democrat

A few readers wonder why occasionally Bonddad and I wrote posts excoriating "Doomers." Bonddad usually deletes the ridiculous stuff before I see it, although personally I think the proprietor of this blog should save it at treat you all to a "Tauntapalooza" so you can read some of the "plaudits" we get. Nevertheless, some of the stuff I do see and usually I just chuckle.

Here's one that came over the transom last week:

Obviously Gov. Schwarzenegger does not read Bonddad. He explained that the significant economic pain accruing to working class people resulting from his state budget was due to the “sour economy” and he went on to compare California to Greece.

If he were a regular reader of the “chicken in every pot” Bonddad blog he would know that the recession is over, the economy is growing and California’s budget problems are ‘lagging indicators’.

Don’t you just hate uninformed politicians?

{sigh} So much ignorance and lack of reading comprehension all packed tightly into 4 little sentences. I wonder if it takes practice, or whether it just comes naturally?

To begin with, of course, our Doomish visitor never bothered to read Happy Days are not Here Again. But, hey, why let a little thing like someone's actual positions get in the way of a misinformed insult.

Our correspondent also flunks out in the tax receipt department. I've been warning that Mish unintentionally bottom-ticked tax revenues, and last week

The Liscio Report, a newsletter that tracks state tax revenues, says 94% of the states that the Liscio report tracks saw sales tax revenue increase in April from April 2009. That's up from just 18% of states in March.

The average gain is around 2.5%, adjusted for population....

What that means is that March was a good month because sales-tax revenue in any given month reflects activity of the month before.

For the math impaired, 94% of 50 is 47 states, meaning only 3 states had YoY shortfalls in April. And California wasn't one of them. According to California Comptroller John Chiang:

⇒ Compared to April 2009, General Fund revenue in April 2010 was up $142 million (1.4%). The total for the three largest taxes was above 2009 levels by $150 million (1.6%). This increase was driven by sales taxes that were $450 million higher (103.2%) than last year. However, corporate taxes were down by $115 million (-7.6%), and personal income taxes came in slightly below last April by $186 million (-2.5%)T

Since California's revenues actually went UP, what was the problem? Mr. Chiang continues:

Compared to estimates from the 2010-11 Governor’s Budget, total General Fund revenues in April were $3.6 billion lower (-26.4%) than expected. Personal income taxes were well below expectations by $3.1 billion (-30.0%), and corporate tax revenues came in below projections by $541 million (-28.1%). Sales tax revenues were $123 million better (16.1%) than anticipated.

In other words, the problem isn't actual tax collections, which were up -- and in the case of sales tax receipts, have been up YoY for 4 months in a row. No, the problem in California is the pie-in-the-sky budget projections set by Der Gubernator. Surprise, surprise.

But isn't the fact that income tax receipts came in light in April a clincher for the Doomer? Ummm, no. Over to you, Prof. Krugman:

I’ve been hearing some muttering about the April tax receipts, which are well below those of a year ago. Doesn’t that mean that all hopes of recovery, either in the economy or in the budget, should be abandoned?

No.

Read the CBO’s Monthly Budget Review (pdf) for the lowdown. Basically, April non-withheld income tax payments were way down — because those payments reflect 2009 income, which was way below 2008. But those tax receipts that reflect the current state of the economy — payroll, withheld income, and corporate — are all rising.

Now, I don't want to sound callous to the uncounted Californians who will suffer through budget cuts that are now being proposed. But they aren't being proposed due to collapsing state revenues, because California's revenues have improved. They are being imposed because politicians lied last year in their future projections.

Even more importantly, Californians have known for at least a year just how badly hamstrung their budgetary process is due to the constraints imposed by a series of past Propositions, most importantly the infamous Proposition 13 with regard to property taxes, and mandating a 2/3 majority for any tax increases -- a majority that will never be obtained while one political party is resolutely intransigent on that issue. Yet not steps have been taken to enact a new Proposition to repeal or even just modify those constraints.

So, our misinformed Doomer should skidaddle on back to Doomerville, where he can stomp his feet in impotent rage and hold his breath till he's blue, because the facts sure don't support him.