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.
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