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chart of the week - Year over Year California Tax Revenues
Many times in the past, questions have been raised in regard to the 'reality' of official gov't economic data. Actual Tax Revenue Receipts is one official gov't statistic that is extremely difficult to 'spin' ... from
(snip)Inquiring minds have noticed a huge plunge in California Tax Revenue for the month of February compared to February 2011
http://1.bp.blogspot.com/-a9nhZYztoo...%2BRevenue.png
(snip)"That is a 22.55% plunge in spite of the fact that this February was a leap year adding a day to the calendar.
Madeline Schnapp, at TrimTabs Investment Research sent me a quick note regarding that plunge a few days ago.
Madeline writes...
Hello Mish
I came across this little tidbit from the February report from the Comptroller's office of the State of CA.
In Feb 2012 income tax receipts are down $328 million y-o-y, or 16.5%. Ouch!
What about retail sales taxes? CA had a "temporary" sales tax hike of one cent that expired last July. Adjust the data to reflect that change, it looks like sales taxes in February are $400 million y-o-y +/-, a decline of about 12.4%. Double ouch!
That doesn't sound like robust growth to me.
Something About the Economy Doesn't Add Up
In Piecing Together the Jobs-Picture Puzzle, Jon Hilsenrath at The Wall Street Journal wonders "How can an economy that is growing so slowly produce such big declines in unemployment?"
Something about the U.S. economy isn't adding up.
At 8.3%, the unemployment rate has fallen 0.7 percentage point from a year earlier and is down 1.7 percentage points from a peak of 10% in October 2009. Many other measures of the job market are improving. Companies have expanded payrolls by more than 200,000 a month for the past three months, according to Labor Department data. And the number of people filing claims for government unemployment benefits has fallen.
Yet the economy is barely growing. Many economists in the past few weeks have again reduced their estimates of growth. The economy by many estimates is on track to grow at an annual rate of less than 2% in the first three months of 2012. The economy expanded just 1.7% last year. And since the final months of 2009, when unemployment peaked, the economy has expanded at a pretty paltry 2.5% annual rate.
How can an economy that is growing so slowly produce such big declines in unemployment?
Trimtabs thinks the problem lies in the heavily massaged BLS employment data and the highly suspect BEA personal income data.
That said, withholding tax data is also messy and not a perfect measure either, but no matter what I do with the data, I can't get to 200,000+ jobs unless a huge percentage of the workforce is suddenly working for McDonalds
Best,
Madeline Schnapp
Director, Macroeconomic Research
TrimTabs Investment Research"(snip)
As with all tax revenue analysis, the underlying reasons for a reduction in tax revenue collections usually are the result of two major forces - an actual reduction in earning / spending levels, plus active 'behavioral' changes aimed at tax reduction. Thus the reduction in state sales tax receipts is due to some combination of actual spending levels at California merchants, plus some increase in internet / out of state purchases subject to lower sales tax rates. Similarly the reduction in state income tax receipts is due to some combinatnion of actual paycheck reductions / job losses from California employers, plus some increase in legal tax avoidance measures ( tax free muni bonds, 'green energy' investor tax credits etc. ) by higher earning Californians.
The reduction in California corporate income taxes must either stem from lower profitability for existing corporations, or from the 'exodus' of some number of ( former ) California corporations, or from 'creative tax accounting' ( i.e. legal assignment of foreign income to a non-California based corporate subdivision, for example ).
Curiously, tax receipts for alcohol and tobacco appeared to be the only major 'rising' segments.
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Re: chart of the week - Year over Year California Tax Revenues
I think the economy is changing, not necessarily getting worse, and that the measuring sticks will be changed to reflect this in the next five or ten years.
When I see Starbucks shutting its doors en masse, I'll worry. The good news is we've had pretty decent growth for the past twelve thousand years, and I believe that trend will continue. Within that time frame, what we're experiencing now is but a hiccup.
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Re: chart of the week - Year over Year California Tax Revenues
Quote:
we've had pretty decent growth for the past twelve thousand years, and I believe that trend will continue. Within that time frame, what we're experiencing now is but a hiccup.
Agreed that historical perspective is important. However, historically speaking, 'hiccups' can be rather unpleasant. I offer up within your 12.000 year time frame the comparatively short 'hiccup' of the Roman Empire ... which enjoyed ~500 years or so worth of economic growth driven by technological innovation, military dominance, and economic exploitation of 'colonies'. Rome then began its decline by global overreach, followed by debasement of the currency, followed by the gov't resorting to 'bread and circuses' public spending to placate the average citizens whose standard of living was declining, followed by a gradually deteriorating domestic economy, and ending in a 'hostile takeover' by the formerly exploited foreign powers once Rome was no longer able to afford to maintain a dominating military presence in those exploited foreign countries. Of course this 'hiccup' merely resulted in 1200 years or so worth of economic depression in the 'west' most commonly known as the 'dark ages'. A similar post-Roman reference could be made to Byzantium, to China etc.
The point being that all 'regional' economies are historically cyclical in nature. Multi-generational upswings can and have been followed by multi-generational downswings.
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Re: chart of the week - Year over Year California Tax Revenues
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Originally Posted by
Melonie
Agreed that historical perspective is important. However, historically speaking, 'hiccups' can be rather unpleasant. I offer up within your 12.000 year time frame the comparatively short 'hiccup' of the Roman Empire ... which enjoyed ~500 years or so worth of economic growth driven by technological innovation, military dominance, and economic exploitation of 'colonies'. Rome then began its decline by global overreach, followed by debasement of the currency, followed by the gov't resorting to 'bread and circuses' public spending to placate the average citizens whose standard of living was declining, followed by a gradually deteriorating domestic economy, and ending in a 'hostile takeover' by the formerly exploited foreign powers once Rome was no longer able to afford to maintain a dominating military presence in those exploited foreign countries. Of course this 'hiccup' merely resulted in 1200 years or so worth of economic depression in the 'west' most commonly known as the 'dark ages'. A similar post-Roman reference could be made to Byzantium, to China etc.
The point being that all 'regional' economies are historically cyclical in nature. Multi-generational upswings can and have been followed by multi-generational downswings.
I hate to do this to one with whom I agree so much and so often, but the "Dark Ages" did NOT last for 1200 years. Rome declined for about 300 years , from the death of Marcus Aurelius to about 476 when the last Emperor was deposed by Odoacear. During that time there were occasional periods of stability and even growth as under Constantine. The "Dark Ages" lasted into the reign of Charlemagne ( about 800 A.D.) Remember also that the Eastern or Byzantine Empire went on until the fall of Constantinople in 1453.
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Re: chart of the week - Year over Year California Tax Revenues
I know people in California and they tell me it's a sinking ship so to speak. I am in Illinois and we are following right behind courtesy of a governor (and the governor he succeeded who's in prison)who never met a tax increase he didn't like along with tax revenue drops because companies are moving out io Illinois and so are many middle class families. If this keeps going (and it will if we still keep electing Chicago politicians of one certain political party to state offices)Illinois will become a state where the largest growth will be in welfare and the largest drops will be in taxes.
There's of course many things Illinois and California have in common but due to the politics ban will not expand except to say I think other states will be in the same problem with huge unemployment and huge underemployment.
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Re: chart of the week - Year over Year California Tax Revenues
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the "Dark Ages" did NOT last for 1200 years. Rome declined for about 300 years , from the death of Marcus Aurelius to about 476 when the last Emperor was deposed by Odoacear. During that time there were occasional periods of stability and even growth as under Constantine. The "Dark Ages" lasted into the reign of Charlemagne ( about 800 A.D.) Remember also that the Eastern or Byzantine Empire went on until the fall of Constantinople in 1453.
Specifically, I was referring to the decline in the economy of the 'west' ... which, from the viewpoint of the 'middle class', experienced a world of hurt from somewhere near the year 400 'collapse' of the Roman Empire until the early stages of the 'renaissance' trade guilds and a new source of colonial income from the Americas starting somewhere around the year 1600. I cited the Byzantine history separately ... which in fact experienced 1000 or so years worth of economic growth following the fall of the 'western' Roman empire ( plus the fall of other eastern mediterranean powers ) circa 400, but then shifted into 'decline' mode for the next 600 years or so.
My basic point, of course, is that there is ample historical precedent for multi-generational economic growth periods, followed by multi-generational periods of economic decline. Recent thinking that American 'recessions' last for months and American 'depressions' last for years is arguably in direct contrast to historical cycles lasting decades or centuries.
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Re: chart of the week - Year over Year California Tax Revenues
^^^ Got it. Thanks. In THAT context, you are correct. As usual lol.
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Re: chart of the week - Year over Year California Tax Revenues
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There's of course many things Illinois and California have in common but due to the politics ban will not expand
It's not a violation of the politics ban to cite the fact that a significant number of Illinois and California based businesses are relocating to different states or closing up shop !
It's also not a violation of the politics ban to point out that when employers move out of state, the state loses corporate income tax revenue. And when employers move out of state, so do their employees ... taking their state personal income tax payments, state sales tax payments etc. with them.
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Re: chart of the week - Year over Year California Tax Revenues
Living in tax everything once and some things twice North Carolina, I understand why some businesses might want to move to Illinois. However, I grew up in Indiana, and I cannot understand why any business would pick Illinois over Indiana.
Z
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Re: chart of the week - Year over Year California Tax Revenues
^^^ Illinois' personal and business tax burden, and regulatory burden, are now even greater than Indiana !
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Re: chart of the week - Year over Year California Tax Revenues
Illinois is a mess. The idiot governor keeps raising taxes for the companies and since NW Indiana is close to Illinois they are moving there. Can't blame them, I would too. With the companies moving just over the border not all employees are moving but of course are now paying more in personal income tax to make up for the corporations moving. To make up for the corporations leaving the legislature is increasing taxes on everything.
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Re: chart of the week - Year over Year California Tax Revenues
^^^ and some economic theories point toward a clear unintended consequence. When high tax rates begin to drive out 'middle class' workers and 'private sector' companies, what usually remains behind is ...
- low income low skill level workers who aren't directly affected by personal income tax rate increases
- very high income 'professionals' and the 'rich', who are able to sidestep personal tax rate increases via tax favored investments / tax credit investments
- companies / industries that cater to the 'public sector', or are subsidized by gov't spending
By 'sheer coincidence', the above corresponds fairly accurately to the economic demographic of most 'third world' countries.
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Re: chart of the week - Year over Year California Tax Revenues
That's exactly what is happening and it's scary. So basically the middle class are now subsidizing everyone else until they move out. Of course I don't need to mention that both Ca and Il are generous welfare states as well.
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Re: chart of the week - Year over Year California Tax Revenues
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Originally Posted by
Kellydancer
That's exactly what is happening and it's scary. So basically the middle class are now subsidizing everyone else until they move out. Of course I don't need to mention that both Ca and Il are generous welfare states as well.
I think we ought to define "welfare" very broadly to include the very generous pay and benefits ( especially pensions ) paid to state workers.
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Re: chart of the week - Year over Year California Tax Revenues
Agreed. That is a BIG problem here. I used to work for a government agency and there were a lot of lazy workers who only got the job because of who they knew. I don't need to tell anyone how dirty our politicians are.
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Re: chart of the week - Year over Year California Tax Revenues
OK here's a question for anybody interested ! Is the following development regarding California SUBWAY restaurants positive or negative for tax revenues ?
(snip)"Subway can't make sandwiches for $5 anymore. Not in San Francisco
The catchy Subway sandwich shop jingle involving a variety of foot-long sandwiches available for $5 doesn't apply in San Francisco.
The sandwich-making chain stopped selling the five-dollar footlongs in San Francisco due to the "high cost of doing business," according to SF Weekly.
Signs posted at Subway sandwich shops sadly inform San Francisco patrons -- we hear Willie Brown is a big fan -- that "all SUBWAY Restaurants in SF County DO NOT PARTICIPATE IN Subway National $5.00 Promotions," according to the newspaper.
Customers can still buy the sub of the month for $5, according to an employee at Subway on Market and Castro streets.
Apparently, the city's new minimum wage, raised to $10.24 as of Jan. 1, make $5 footlongs an impossible business model.
Unless you want tuna fish, which is the sub of the month. Yum.
Copyright NBC Owned Television Stations"(snip) ... from
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Re: chart of the week - Year over Year California Tax Revenues
Quote:
Originally Posted by
Melonie
OK here's a question for anybody interested ! Is the following development regarding California SUBWAY restaurants positive or negative for tax revenues ?
(snip)"Subway can't make sandwiches for $5 anymore. Not in San Francisco
The catchy Subway sandwich shop jingle involving a variety of foot-long sandwiches available for $5 doesn't apply in San Francisco.
The sandwich-making chain stopped selling the five-dollar footlongs in San Francisco due to the "high cost of doing business," according to SF Weekly.
Signs posted at Subway sandwich shops sadly inform San Francisco patrons -- we hear Willie Brown is a big fan -- that "all SUBWAY Restaurants in SF County DO NOT PARTICIPATE IN Subway National $5.00 Promotions," according to the newspaper.
Customers can still buy the sub of the month for $5, according to an employee at Subway on Market and Castro streets.
Apparently, the city's new minimum wage, raised to $10.24 as of Jan. 1, make $5 footlongs an impossible business model.
Unless you want tuna fish, which is the sub of the month. Yum.
Copyright NBC Owned Television Stations"(snip) ... from
One could say that high taxes are crippling business, or one could say that the increased social welfare benefits are blowback caused by the rich hoarding money and opportunity, and the government saying "if you don't hire people and spend money, we will."
Obviously you can't go to either extreme. This debate came up a lot during the deficit negotiations. Too many benefits can bankrupt a government, yet too few can render the purpose of government, moot.
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Re: chart of the week - Year over Year California Tax Revenues
^^^ be that as it may, my question still remains unanswered. Does this situation increase or decrease California tax revenues. Putting politics aside ...
- the $10.24 an hour minimum wage worker in fact still pays zero federal and California income tax, thus the increase in minimum wage does not add to income tax revenues
- the $10.24 an hour minimum wage worker probably contributes additional California sales tax revenue, assuming the increased expenditures will go toward products on which a sales tax is leveed ... as opposed to paying higher prices for 'necessities' like rising local rent ( due to rising minimum wage labor costs for building security / maintenance ) or a more expensive lunchtime SUBWAY sub !
- the compressed profit margin of the Subway franchise owner maintaining the $5 foot-long price while incurring mandated higher labor costs would result in lower federal and California corporate tax payments.
- attempting to restore profit margin via the Subway franchise owner increasing the foot-long price to $5.50 or whatever may or may not be neutral in terms of overall profitability thus corporate tax payments, depending on how the higher $5.50 price affects future sales volume.
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Re: chart of the week - Year over Year California Tax Revenues
Quote:
Originally Posted by
Melonie
^^^ be that as it may, my question still remains unanswered. Does this situation increase or decrease California tax revenues. Putting politics aside ...
- the $10.24 an hour minimum wage worker in fact still pays zero federal and California income tax, thus the increase in minimum wage does not add to income tax revenues
- the $10.24 an hour minimum wage worker probably contributes additional California sales tax revenue, assuming the increased expenditures will go toward products on which a sales tax is leveed ... as opposed to paying higher prices for 'necessities' like rising local rent ( due to rising minimum wage labor costs for building security / maintenance ) or a more expensive lunchtime SUBWAY sub !
- the compressed profit margin of the Subway franchise owner maintaining the $5 foot-long price while incurring mandated higher labor costs would result in lower federal and California corporate tax payments.
- attempting to restore profit margin via the Subway franchise owner increasing the foot-long price to $5.50 or whatever may or may not be neutral in terms of overall profitability thus corporate tax payments, depending on how the higher $5.50 price affects future sales volume.
Didn't/don't some chains exclude Manhattan from their promotions for similar reasons? It has more to do with cost of living than with minimum wage, and the cost of living usually has more to do with how many people want to live somewhere. Aren't housing prices dropping in CA anyway?
Without pasasing political judgment, slave/fascist economies are ultra-efficient, but do they serve the average worker? Beyond politics, there are multiplier efffects when money is distributed at the bottom, and long-term economic benefits when those at the bottom are kept off the dole thanks to the higher minimum wage.
Soviet Russia, China, Sparta, and Sweden all had/have functioning economies with widely different political philosophies. We could probably emulate any of them and still chug along. Where politics does enter the equation is with regard to an individual's relative tastes for individuals serving the government, or government serving the individual. On one extreme, you have a nation much wealthier than its citizens, and on the other, you have citizens wealthier than their nation.
Since political opinions are verboten here, I won't share my belief regarding which system I consider best. Just pointing out the different options.
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Re: chart of the week - Year over Year California Tax Revenues
Quote:
Originally Posted by
Melonie
Agreed that historical perspective is important. However, historically speaking, 'hiccups' can be rather unpleasant. I offer up within your 12.000 year time frame the comparatively short 'hiccup' of the Roman Empire ... which enjoyed ~500 years or so worth of economic growth driven by technological innovation, military dominance, and economic exploitation of 'colonies'. Rome then began its decline by global overreach, followed by debasement of the currency, followed by the gov't resorting to 'bread and circuses' public spending to placate the average citizens whose standard of living was declining, followed by a gradually deteriorating domestic economy, and ending in a 'hostile takeover' by the formerly exploited foreign powers once Rome was no longer able to afford to maintain a dominating military presence in those exploited foreign countries. Of course this 'hiccup' merely resulted in 1200 years or so worth of economic depression in the 'west' most commonly known as the 'dark ages'. A similar post-Roman reference could be made to Byzantium, to China etc.
The point being that all 'regional' economies are historically cyclical in nature. Multi-generational upswings can and have been followed by multi-generational downswings.
Pet language peeve: isn't it "dominant" rather than "dominating?"
"Save the PLANET? The PLANET will be just fine..." -- George Carlin
I think the German "hiccup" was pretty bad from 1923-1950 as well. Nature has a way of normalizing eveything long-term, which is why bubbles always burst. The level of human cooperation required for an economic reset is beyond our capabilities now.
What I don't get is that the wealthiest people, with the most to lose, should be the ones in a panic right now. You can't GO broke if you already ARE broke, after all. Gated communities and private security forces can do only so much. Wasn't Rockefeller Center built in the Depression for this reason? One door closes, another opens.
I'm also not sure the Dark Ages were caused by the "Roman bubble" bursting. One could just as easily tie it to the dominance of organized religions that were emerging, and a general anti-intellectualism that prevented the leaders of those eras from embracing intelligent solutions instead of a thousand years of poverty. The plague also played a role as it wiped out much of the workforce, effectievly freeing slaves, who suddenly commanded high prices on the open market.
Would it violate the political ban if I were to speculate that the recent H5N1 virus was a "dry run" to see how a truly deadly pathogen would spread if unleashed? That's my "gold foil hat" folly.
Regional economies are a good thing, I would think, lest the entire world rise and fall simultaneously. I don't think I'd want to see that. As for now, I still can't figure out if this is a "remake" of 1931, 1973, 1979, or 1982. What do you think?
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Re: chart of the week - Year over Year California Tax Revenues
^^^ the 'gold foil hat' crowd would probably tell you that today's economic conditions are probably closer to 1973 ... given the devaluation rate of the US dollar, the 'exodus' of US manufacturing, and the rapid expansion of gov't debt due to increased gov't 'social' spending.
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Re: chart of the week - Year over Year California Tax Revenues
I've got to call foul on the minimum wage issue. Subway in the Raleigh-Durham metro area pays $13.00/hour starting wage and still promotes $5.00 foot longs. If Subways in SF are not participating in $5.00 sub deals, then it has to do with rents or something else.
Z
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Re: chart of the week - Year over Year California Tax Revenues
I agree. When I've been to Subway, I've never actually timed how long it took to make a sandwich, but I estimate it to be less than 3 minutes. That would be less than 50 cents for each sandwich, for labor. As long as the store does enough volume, I don't think having to pay $10.24 would be a major problem.
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Re: chart of the week - Year over Year California Tax Revenues
The Subway franchise managers in SF made the pricing decision as a group. They are the ones that stated the increased local minimum wage as their reason.
They did not state what their overall employer's cost per hour of paying $10.24 direct labor plus mandated benefit costs and other employee income related employer taxes and insurance premiums ( SSI, unemployment, disability etc. ) total up to. In terms of labor content of each sandwich, in simplest terms the hourly labor cost clock runs continuously from opening until closing while revenue generating sandwich sales typically occur in a sporadic manner with near continuous sales during the lunch hour but much lower sales per hour at other times. Also, there is additional labor content in preparing the various 'ingredients' from which sandwiches can later be 'assembled', in restocking, in cleaning, etc.
I won't argue that rents, utility costs, and other regionally variable 'input' costs are also higher in SF, in NY etc. But the franchise costs are the same. My point of course is that attempting to back-calculate profitability of a Subway franchise based solely on an observed 3 minute direct labor content per sandwich is oversimplistic and inaccurate.
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Re: chart of the week - Year over Year California Tax Revenues
Quote:
Originally Posted by
Melonie
The Subway franchise managers in SF made the pricing decision as a group. They are the ones that stated the increased local minimum wage as their reason.
That may be what they said, but I still call foul. Subways in my city pay more than $10.24/hour, and they still participate in $5.00 footlongs. So, either the Subway owners in SF are opposed to the city minimum wage for some other reason or they just want an excuse to get out of a loss leader.
Z