Another $450 Million

April 14 has begun the week with another $450 million in total tax collections, according to preliminary figures. This would mark the third day this month that revenue mark has been breached, although revisions due out early tomorrow morning could alter the figure either upward or downward.

So far this month, personal income tax and sales tax receipts appear to be running somewhat below expectations for April, while corporate taxes are consistently running above projections. A clearer picture will come into view as this week proceeds with the deluge of personal tax filings.

Meanwhile, although sales taxes pale in comparison to California's collection of income taxes, they are still a significant source of revenue and also an important barometer of the overall economy. This morning’s positive report on retail shopping is thus good news.
 
National retail sales jumped 1.1% between February and March, which was the best performance in 1-1/2 years. Although some of this reflected a weather-related bounce not relevant to our state, the general upswing suggests that consumers are more optimistic about the economy and ready to spend.
 
Consumers were spending more on items across the board. These included spending for cars, furniture, sporting goods equipment, restaurant meals, and merchandise ordered online.   If the job market continues to gradually improve, Californians should keep shopping and help support the State's cash flow.

Which County Has Highest Median Adjusted Gross Income?

Adjusted gross income (AGI) is not spread evenly across the state.
 
According to FTB statistics for 2011, Marin County had the highest median AGI -- just over $52,000 -- among counties.
 
Over 118,000 taxpayers filed returns from the county. San Mateo and Santa Clara Counties ranked second and third in income, with a median income of nearly $50,000 and $48,000 respectively.  Returns from these two South Bay counties totaled just over 1.1 million.
 
Los Angeles County, with over 4 million returns and a median income of about $30,000, ranked 38th in income among the state's 58 counties. Imperial County’s 60,000 returns reported the lowest median AGI -- just above $23,000 and less than half the income of Marin, San Mateo or Santa Clara Counties.

See Which Group Fuels Income Tax Revenues

Who pays the income tax? There are many ways to answer this question.

According to FTB's annual report in 2011, there were 2.4 million taxpayers with adjusted gross income (AGI) exceeding $100,000. They accounted for 15.8 percent of the total 15.0 million residential taxpayers.  Cumulatively, they reported $592 billion of the $982.1 billion (60.3 percent) in the year's AGI.  Given the State's tax structure, these same taxpayers had $37.2 billion of the $43.9 billion (84.6 percent) of the year's residential income tax liability. 

A Big Week for the Franchise Tax Board

Bleary-eyed Californians will be pulling all nighters this week to complete their tax returns.  Their efforts will be critical to the State’s cash coffers. Last year, the five days surrounding the April 15th tax deadline netted $8.1 billion. This represented 65% of the total collected for all of April. Some of last year’s tax surge reflected the impact of higher tax rates approved by voters in November 2012, which were made retroactive to the beginning of the year.

With no change in tax rates during the past year, this year’s personal income tax take is likely to trail last year's. Nevertheless, this will again be a vitally important few days for the State’s finances.

For the 2013 tax year, FTB will likely process roughly 15 million returns from residents. For a little perspective, for the 1947 tax year FTB had 784,709 residents' returns with a liability of $45.4 million. In 2011 (the last year for comparable data), FTB had 15,042,359 returns with a liability of $43.9 billion. That represents an average annual growth rate for returns of nearly 5 percent and for liability of over 11 percent.

For Those Who Can't Make the April 15 Tax Deadline

For those who can’t quite make the April 15 tax deadline this year, the State of California offers an automatic filing extension through October 15, 2014.

Nearly 1.6 million taxpayers had an extension for the 2012 tax year. For those who are unable to make a timely tax return, FTB advises: If the taxpayer is due a refund, he or she must file their return by October 15, 2014. If the taxpayer has a balance due and wants to avoid penalties and interest, he or she must pay the amount owed by April 15, 2014, then file the return by October 15, 2014. (For more details on filing an extension, see FTB's website: https://www.ftb.ca.gov/individuals/faq/ivr/201.shtml).

Withholding Fuels Income Tax Revenues

While many Californians may be waiting until this weekend to complete their tax returns, companies have provided a steadier flow of revenues for the State through their withholdings. For the first 10 days of April, withholding taxes totaled about $1.7 billion. This compared with $1.1 billion in estimated and final tax payments and represented about 60% of the total gross personal income tax receipts deposited so far this month.

Tax filings will ramp up dramatically next week, but withholding taxes will continue to flow into the State’s coffers, providing a good source of support.

Californians Benefit From Refunds

Californians have been submitting their tax returns in recent days with many of the early returners looking forward to refunds. During the first 10 days of April, refunds on personal income taxes (PIT) totaled $1.1 billion. That compares with about $840 million a year ago.

When the State returns money to taxpayers, it is not a complete or permanent revenue loss. This is because refund recipients will turn around and often spend a significant share of their receipts on their homes or purchases for themselves and their families. This spending will both help drive California’s economy and come back fairly quickly in terms of higher retail sales taxes.

So far this month, for every three dollars of personal income tax payments the State has received, it has sent back more than one dollar in refunds. This is similar to the share sent back during the comparable period in 2013. For all of April, the share of refunds to gross PIT will be about half what it has been as fewer of the later filers receive money back. Last year, refunds were equal to 16.5% of gross PIT for the total month.  A similar experience is likely this year.