Businesses leaving Taxifornia In Droves

Tsing Tao

Tsing Tao

- Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com/2012/03/california-tax-revenues-plunge.html

California Tax Revenue Plunges

Inquiring minds have noticed a huge plunge in California Tax Revenue for the month of February compared to February 2011.

California%2BRevenue.png


That is a 22.55% plunge in spite of the fact that this February was a leap year adding a day to the calendar.

Madeline Schnapp, at TrimTabs Investment Research sent me a quick note regarding that plunge a few days ago.

Madeline writes...

Hello Mish

I came across this little tidbit from the February report from the Comptroller's office of the State of CA.

In Feb 2012 income tax receipts are down $328 million y-o-y, or 16.5%. Ouch!

What about retail sales taxes? CA had a "temporary" sales tax hike of one cent that expired last July. Adjust the data to reflect that change, it looks like sales taxes in February are $400 million y-o-y +/-, a decline of about 12.4%. Double ouch!

That doesn't sound like robust growth to me.

Something About the Economy Doesn't Add Up

In Piecing Together the Jobs-Picture Puzzle, Jon Hilsenrath at The Wall Street Journal wonders "How can an economy that is growing so slowly produce such big declines in unemployment?"

Something about the U.S. economy isn't adding up.

At 8.3%, the unemployment rate has fallen 0.7 percentage point from a year earlier and is down 1.7 percentage points from a peak of 10% in October 2009. Many other measures of the job market are improving. Companies have expanded payrolls by more than 200,000 a month for the past three months, according to Labor Department data. And the number of people filing claims for government unemployment benefits has fallen.

Yet the economy is barely growing. Many economists in the past few weeks have again reduced their estimates of growth. The economy by many estimates is on track to grow at an annual rate of less than 2% in the first three months of 2012. The economy expanded just 1.7% last year. And since the final months of 2009, when unemployment peaked, the economy has expanded at a pretty paltry 2.5% annual rate.

How can an economy that is growing so slowly produce such big declines in unemployment?

Trimtabs thinks the problem lies in the heavily massaged BLS employment data and the highly suspect BEA personal income data.

That said, withholding tax data is also messy and not a perfect measure either, but no matter what I do with the data, I can't get to 200,000+ jobs unless a huge percentage of the workforce is suddenly working for McDonalds

Best,

Madeline Schnapp
Director, Macroeconomic Research
TrimTabs Investment Research
More...

Many Explanations for the Unemployment Puzzle

There are many explanations for the "miracle drop" in unemployment.

Disability Fraud: Disability Fraud Holds Down Unemployment Rate; Jobless Disability Claims Hit Record $200B in January
Exploding growth in student loans and middle-aged job hopefuls returning to school: Consumer Credit "Demolishes Expectations" Really? No Not Really! The "Non-Bounce" in Non-Revolving Credit
Involuntary Retirement: Boomers of retirement age that still want and need a job have involuntarily retired to collect social security because unemployment benefts rans out and they have no other source of income.


Divergence with Gallup

Those there things piece together the "unemployment puzzle" nicely except for one thing. Gallup polls do not agree as noted in Gallup Reports Large Jump in Unemployment to 9.1%, Underemployment to 19.1%.

U.S. unemployment, as measured by Gallup without seasonal adjustment, increased to 9.1% in February from 8.6% in January and 8.5% in December.

gallup%2Bunemployment%2B2012-03-08A.png


The 0.5-percentage-point increase in February compared with January is the largest such month-to-month change Gallup has recorded in its not-seasonally adjusted measure since December 2010, when the rate rose 0.8 points to 9.6% from 8.8% in November.
More...

So, is the BLS carefully massaging the data, or are their seasonal adjustments simply that far out of line with reality, tax collections, and common sense?

Businesses Exit California in Droves

Madeline and I are not the only ones who noticed the plunge in California. Chriss W. Street on Beitbart discusses the California Exodus behind the drop. Street has the reason: Businesses fed up with high taxes have fled the state.

California politicians seem delusional in their continued delusion that high taxes have not savaged the State’s economy. Each month’s disappointment is written off as due to some one-time event.

The more likely reason tax collections continue falling is that businesses and successful people are leaving California for the better tax rates available in more pro-business states.

Derisively referred to as “Taxifornia” by the independent Pacific Research Institute, California wins the booby prize for the highest personal income taxes in the nation and higher sales tax rates than all but four other states. Though Californians benefit from Proposition 13 restrictions on how much their property tax can increase in one year, the state still has the worst state tax burden in the U.S.

Spectrum Locations Consultants recorded 254 California companies moved some or all of their work and jobs out of state in 2011, 26% more than in 2010 and five times as many as in 2009. According SLC President, Joe Vranich: the “top ten reasons companies are leaving California: 1) Poor rankings in surveys 2) More adversarial toward business 3) Uncontrollable public spending 4) Unfriendly business climate 5) Provable savings elsewhere 6) Most expensive business locations 7) Unfriendly legal environment for business 8) Worst regulatory burden 9) Severe tax treatment 10) Unprecedented energy costs.

Vranich considers California the worst state in the nation to locate a business and Los Angeles is considered the worst city to start a business. Leaving Los Angeles for another surrounding county can save businesses 20% of costs. Leaving the state for Texas can save up to 40% of costs. This probably explains why California lost 120,000 jobs last year and Texas gained 130,000 jobs.

California Governor Jerry Brown’s answer to the State’s failing economy and crumbling tax revenue is to place a $6 billion tax increase initiative on the ballot to support K-12 public schools. He promises to only “temporarily” raise personal income rates by 25% on any of the rich folk who haven’t already left.
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Taxed to Death

If Brown continues to suck up to the public unions responsible for the mess California is in, expect still more businesses to leave, expect the unemployment rate to rise, and expect a continued plunge in revenue.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
 
Yet Californians keep re-electing their liberal legislature and another liberal governor. Does Hollywood and the S.F Bay area have a controlling influence on state elections or has the entire state turned self destructive?
 
The one silver lining were the increases in the Alcoholic Beverage Tax and Cigarette Tax. So the solution to California's woes is obvious -- encourage alcoholism and smoking.
 
ALL of the rich people and successful business should leave Calfornia.

Perhaps THEN they would wake up and realize... "We ain't go nothin' unless we have successful people and companies to bleed".

FUCK THE LIBTARDS!!
 
Quote from pspr:

Yet Californians keep re-electing their liberal legislature and another liberal governor. Does Hollywood and the S.F Bay area have a controlling influence on state elections or has the entire state turned self destructive?
More...

The sheer numbers of present and retired public union employees voting for their own outrageous benefits to continue overcome all else.
 
California has both income tax and sales tax. They tax your retirement even after you leave the state! They give benefits to illegal Mexicans who have all the service sector jobs and treat Whities like dirt any chance they get. I don't get this "we've gotta cut our own throats" mentality among white liberals, I guess they are so stupid they won't get it until they are homeless or something.. but they still won't get it probably.
 
Quote from tomdavis:

http://online.wsj.com/article/SB100...7277242682364690.html?mod=WSJ_Opinion_LEADTop


"From the mid-1980s to 2005, California's population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000..."

That pretty much sums it up.
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In that time period Aerospace packed up and left the State. That was the big income thingy for California. The leadership never even understood how much of their tax revenues came from Aerospace until the industry had relocated to Georgia. The furniture making industry has been replaced by Mexicans building furniture in their garages, i'm not making this up, the best way to buy [cheap] furniture is through a swap meet. A large part of the economy is underground nowadays and that exacerbates the revenue shortfall problem.
 
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