State’s irresponsible tax policies creates chaos in budget planning and drives away some well-heeled residents.
Gov. Gavin Newsom and the California Legislature will have to make significant cuts to programs before they pass a new state budget in June.
The market tumbled in 2022. So California’s stock players had less income to report in 2023 — and significantly less in taxes to pay. That’s a dramatic drop and it’s primarily why state politicians currently face a budget deficit of around $40 billion, if you accept Gov. Gavin Newsom’s latest numbers from January. But the gap could be as big as $73 billion, according to the nonpartisan Legislative Analyst’s Office.Either way, it’s a gargantuan hole in the proposed $292 billion state spending plan Newsom sent the Legislature in January. As he does every year, the governor will revise the budget proposal in mid-May.
If Newsom and the Legislature do their jobs properly, there’ll be lots more cutting before they pass a new state budget by the June 15 deadline. Schools, parks and health care could be targets. The income tax supplies two-thirds of the state’s general fund. Back in 1950, when our tax system was stable, it accounted for only 10%. Then, the sales tax was the main revenue source. But we’ve become less of a retail economy and more of a service economy. And we’re one of the few states that doesn’t tax services.
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