Like every state, California has been bracing for fiscal disaster thanks to plummeting tax revenue caused by COVID-19 lockdowns. But then a funny thing happened:
California’s state budget faces a dramatic boom-and-bust period over the next four years, analysts said Wednesday, a roller-coaster period that could begin with a $26-billion tax windfall and later plunge to a projected deficit of $17.5 billion by the middle of 2025…The large supply of extra cash — equal to almost 20% of all current-year spending out of California’s general fund — is a surprise, Legislative Analyst Gabriel Petek said.
….The state’s tax revenues have remained strong — in part, Petek said, because high-income residents have not suffered any notable setbacks and California’s budget relies heavily on those taxpayers. “The progressive nature of the personal income tax structure has actually worked to the state’s benefit in the current environment,” Petek said.
Shazam! An extra $26 billion that we didn’t expect. How often does that happen?
The weird part of this is that analysts across the board, including most Democrats, have long agreed that California’s heavy dependence on rich taxpayers is a problem. But apparently that isn’t always true. During the pandemic, the rich have actually done fairly well even as ordinary folks have gotten slammed. That’s a bad thing in a cosmic sense, but a good thing in a green-eyeshade tax revenue sense. I can hardly wait for the bloody battles that are about to begin over how we should spend all this manna from heaven.