Corporate Taxes Up 20% From Last Year

Total corporate taxes are up to nearly $5.9 billion for the year through April 25.  

Compared to the nearly $4.9 billion at the same time last year, this is a 20 percent increase over the prior year, or a jump of about $1 billion. 

With another $130 million of estimated revenues through today, this increase will likely grow.

Sales Tax Receipts Score Best Day for April

Preliminary numbers for today, April 28, show that sales and use taxes netted nearly $85 million for the day, which also covers sales made during the weekend. This comes on top of Friday's sales tax take of $82.5 million and brings the month-to-date collection essentially equal to the number expected so far for April.

Although the year-to-date results are still slightly trailing projections made as part of the Governor's Budget presented in January, consumers may be catching up. In the meantime, the corporate and personal income tax segments remain well above their January forecasts.

Also of note: The number of limited liability corporations (LLC) keeps growing. In 2011-12, 80,275 new companies registered with the State. The following year, that number rose to 89,158, which marked a more than 10 percent growth rate. The number of total tax returns rose from 336,289 to 353,104, representing a gain of 5 percent. At the same time, revenues from LLCs grew from $627 million to $658 million, also a 5 percent increase.

Dividends Rise

Recovering company profits are not only boosting California’s corporate tax payments, but they are also raising dividends for individuals and contributing to the State’s intake of personal income taxes. In calendar 2013, dividend payments received by California residents reached an estimated $94.5 billion.

The economic boom based on housing’s surge elevated California dividends to a record $102.5 billion in 2007. After the financial crisis caused companies to hoard cash, dividends plummeted to only $66 billion-$67 billion in 2009 and 2010. Large gains in cash flow, limited opportunities seen by companies for investment opportunities, and shareholder pressure are again driving larger dividend payouts. 

The recovery in dividends is another good piece of news for the State’s financial coffers, but is also another sign of the cyclicality of California’s revenue base.

Also of note: As the Franchise Tax Board closes out its income tax return processing for 2013 returns, some staff will begin to focus their efforts on completing the refund cycle. At the end of last April, FTB had identified 479,000 taxpayers who still had refunds outstanding, at a value of about $500 million.