California ignored tax reforms and now faces a $68 billion deficit

It is truly amazing – and not in a good way – that California’s politicians cannot grasp a phenomenon that has plagued state finances for years, known as “volatility.”

It’s this: The state budget is extraordinarily dependent on personal income tax revenues, most of which comes from a relative handful of upper-income taxpayers whose incomes vary year to year because much of it comes from investments.

When the affluent make lots of money, the state treasury overflows with revenue, but when the economy falters, incomes and tax revenues fall. Unfortunately, because politicians have short attention spans, they tend to increase spending when revenues surge, only to face deficits when they inevitably decline.

California flag with palm tree by Lesli Whitecotton is licensed under Unsplash unsplash.com

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Americans for Fair Taxation® is a 501(c)(4) non-profit, non-partisan grassroots organization solely dedicated to replacing the current income tax system with a fair, simple and transparent national consumption tax – the FAIRtax® Plan. We rely entirely on contributions from concerned citizens like you who want a tax system that will generate jobs and stimulate the economy. Welcome to the FAIRtax team!

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