April’s Tax Take Keeps California’s Revenues Above Estimates

A solid performance of California’s three primary revenue engines -- personal income (PIT), corporate, and sales taxes -- means that the State’s receipts for the first 10 months of the current fiscal year are running about $1.9 billion above projections.   Based on the Governor’s January Budget, the Controller had estimated that the three main General Fund revenues would total about $75.0 billion when the Franchise Tax Board (FTB) and Board of Equalization (BOE) stopped counting the checks last night.  Actual results showed that revenues reached $76.8 billion, about 2.5 percent higher than estimated. PIT beat projections by 2.5%, while corporate taxes exceeded estimates by 11.3%. Only sales tax receipts fell shy of estimates, although the variance was only 0.3%.

Tax receipts for the month of April were $258 million above projections, representing a positive difference of 2%. The April 15 tax returns were strong enough to keep the favorable variance going into the month intact. Although PIT refunds were significantly greater than expectations, final tax payments, estimated taxes, and withholding also were well above projections. As a result, net PIT was about $92 million, or a slight 1%, above forecasts.

April corporate tax receipts were very strong, besting the forecast by $180 million, or 12%. April retail tax receipts were the only somewhat disappointing source, falling a slight $14 million below projections, or 2%.

California enters the final two months of its fiscal year on a strong footing as increases in jobs, incomes, stock prices, and the real estate market bolster its financial position.  However, the State’s revenue sources remain vulnerable to cyclical swings, which underscore the ongoing importance of paying down California’s debt and building up its reserves.