SACRAMENTO – State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in July, showing revenues were down $538.8 million (-10.3 percent) below projections from the recently passed state budget.In short, the Democrats' recent budget was complete hopium and relied on a miraculous economic rebound dropping magic revenues from the sky. Today's Dirty Fed announcement pours some cold water on that one.
"While July's revenues performed remarkably similar to last year's, they still did not meet the budget's projections," said Chiang. "While we hope for better news in the months ahead, every drop in revenues puts us closer to the drastic trigger cuts that could be imposed next year."
Income taxes were above projections by $89 million (2.9 percent) in July. But sales taxes were down $139.4 million (-12.5 percent), and corporate taxes were down $69.5 million (-19.3 percent) in the same month.
The State faced an $11.1 billion cash deficit on July 31. That deficit was covered by internal borrowing, or short-term loans from special funds, along with external borrowing.
For more details, read July 2011's financial statement and summary analysis.
And now that you understand California's fiscal situation, let me give you a micro view, the tale of one young entrepreneur who hoped to buy a house in a lovely beach town, run her business, employ a few people, and contribute to California's economy.
Meet Erica Douglass. I first met Erica a couple years ago in the comments at bubbleinfo.com, where she was waiting for home prices to drop to more reasonable levels in the beach areas of northern San Diego County. Today, it's a different story. Dear California, I'm leaving you. Here's why:
Examples of the Crap California’s Government has Put Me Through
Okay, you want examples. Here are a few things I’ve had to deal with:
1. The State of California arbitrarily decided that all businesses that gross over $100,000/year should have an account where you have to report quarterly on the sales tax your customers pay you for goods sold. The only problem? My company only sold services–not products–which aren’t taxed in California. When I closed the account (by going into a local office and spending nearly an hour explaining my situation), they forced it open again and sent me a nastygram explaining that I would owe fines for not filing the quarterly report. You have to file it 4 times a year, and it takes time to fill out, even if you haven’t sold any products and owe the state nothing.
2. The state charges an income tax of 10% on all income over $47,055. This is in addition to the Federal income tax of 25% on income over $34,001. This is also in addition to an 8.25-9.25% sales tax (depending on where you buy products.) I paid enough in income tax for 2010 to the state of California alone to hire another new worker for my business. I’d bet a lot of money that I’m far more efficient at creating jobs as a small business owner than the state is given the same amount of money. I’d rather have that money to hire someone.
3. And a really dumb law for small business owners, which Meg Whitman promised to repeal: An annual fee of $800 just to have a corporation in the state of California. (Most states don’t charge you, or only charge you a few dollars, as an annual fee to set up a business. California’s is exorbitant, and it applies as long as you, the primary officer of the corporation, live in California…no matter where you incorporate.)
The final straw, as I suspected, was the Amazon tax, which will raise precisely $0 in revenue while driving hundreds or thousands of businesses out of state. I also suspect that California's high cost of living and outrageous real estate prices have played a role. But this sharp young millionaire entrepreneur, like thousands before her, will be headed somewhere businesspeople are appreciated: Texas.