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.                                      

Higher California Payrolls

Wage and salary payments represent the core of personal income taxes in California, which in turn are the state’s primary financial resource.  The recovery in jobs and earnings is giving the state’s revenue coffers a welcome fill-up.

Based on the total of all entities in California with payrolls (including government agencies, but not single proprietorships), wages and salaries totaled nearly $210 billion in the second quarter of 2013.  For the total year, payrolls probably approached $900 billion.

Last year’s gain in total payroll dollars was probably around 4.8 percent based on the latest available data.  This followed the 6.0 percent jump for all of 2012 and was in stark contrast to the 5.4 percent plunge of 2009.  This volatility points to the need to be cautious in ramping up spending during times of economic rebound and the need to build the state’s reserve fund.

Personal Income Taxes pass $10 Billion mark for April

Personal Income tax revenues hit the $10 billion mark yesterday with actual figures at just under $10.1 billion.  Today’s withholdings are estimated to bring the total to just over $10.1 Billion.  This brings the estimated total for the three revenue sources to nearly $12 billion for the month of April.

Corporate Tax Receipts Up

Although corporate taxes are the smallest of California’s three major revenue engines, they are likely to exceed $8.0 billion for fiscal year 2013-2014 and are surpassing projections made as part of the Governor’s Budget submitted in January.  Numbers for the year to date have been running about $0.7 billion or 13% above those forecasts. 

The pickup in corporate taxes reflects the economic recovery that has boosted company earnings nationally and in the state.  The period of large write-offs from losses incurred during the recession has also ended. 

It is good news to see that corporate taxes are no longer stalling.

Gap Between Revenues and Estimates Close

With great performances from personal income and corporate taxes this month, retail sales have been very close but just behind projections for the whole month of April.
 
Over the last five years, retail sales revenues, on average, have experienced a moderate but significant surge in the final days of collection for the month of April.
 
With the estimated $58.6 million received today, the margin between revenues and the estimate is getting smaller.