CalMatters:California’s tax system, which relies heavily on the wealthy for state income, is prone to boom-and-bust cycles. While it delivers big returns from the rich whenever Wall Street goes on a bull run, it forces state and local governments to cut services, raise taxes or borrow money in a downturn. During the Great Recession, the capital-gains taxes that sustained the state in good times plummeted. School districts handed out 30,000 pink slips to teachers, and the state was so cash-strapped it gave out IOUs when it couldn’t pay some of its bills.
California is now enjoying one of the longest economic expansions in state history, but the good times can’t last forever. With an “inevitable recession lurking in our future,” Gov. Jerry Brown has warned, state and local governments are more vulnerable than ever to teacher and police layoffs, park and library closures and cuts in health and welfare services for the poor.
Big battler, lasted almost a year and finally cam to a conclusion after Jerry Brown won his income tax hike. We also collect a capital gains tax of 13%. Pretty nice, thanks Obama and the California delegation. But it leaves the federals with a tax shortage, and we will be having the next tax battle in 2021. Thew federals charge another 14% on top.
All of this will be reviewed and refought once the Senate sees the future interest costs. This also means that California does not get a bailout, that is a goner. This predicament is why we are using the Fed to collect federal taxes.
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