California Economy and Taxes
 


Cannabis Tax Revenue Update: February 2024 February 27, 2024

Our new forecast for 2023-24 cannabis retail excise tax revenue is $675 million, very close to the January Governor’s Budget forecast of $660 million.


Evaluating Tax Policy Changes in the Governor's Budget February 22, 2024

The Governor’s budget includes several proposed tax policy changes. We recommend approving proposals to eliminate certain tax expenditures for fossil fuel companies and conform to federal law on tax deductions for open space and historical preservation. We also suggest, in light of the state’s fiscal situation, seriously considering the proposal to eliminate lenders’ ability to claim tax deductions or refunds for sales tax payments made with bad debt. Finally, we recommend rejecting the proposal to limit the use of net operating loss deductions. 


U.S. Retail Sales Update: January 2024 February 15, 2024

U.S. retail sales have dropped 0.5 percent over the last 3 months and grown 0.6 percent over the last 12 months.  The 12-month growth rate was well below the rate of inflation. 


Recent Revenues Coming in Below Governor's Budget Projections January 22, 2024

In the first few weeks of January, real-time personal income tax (PIT) revenue collections are running $3 billion to $4 billion short of the January target for current year revenue projections included in the 2024-25 Governor's Budget.


U.S. Retail Sales Update: December 2023 January 17, 2024

U.S. retail sales have grown 0.7 percent over the last 3 months and 5.6 percent over the last 12 months. Both of these growth rates outpaced inflation. 


Updated Unemployment Insurance Fund Forecast Shows Structural Deficit January 16, 2024

The administration's most recent Unemployment Insurance (UI) Trust Fund forecast shows that UI benefit payments will exceed state payroll tax receipts by $1.7 billion in 2024, after surpassing receipts by $1.3 billion in 2023. As a result, the state's outstanding UI loan from the federal government is set to increase over the next two years, despite automatic employer payroll tax increases to repay the loan. 


Holiday Hiring Sluggish January 3, 2024

October and November holiday season retail job growth remained relatively weak for the second year in a row. One plausible explanation for this weakness might be the continued transition to online holiday shopping, but transportation and warehousing jobs (where goods and packaged and delivered) has also been sluggish this holiday season.


U.S. Retail Sales Update: November 2023 December 14, 2023

U.S. retail sales have grown 0.9 percent over the last 3 months and 4.1 percent over the last 12 months. Both of these growth rates outpaced inflation. 


Cannabis Tax Revenue Update: November 2023 November 30, 2023

Our new forecast for 2023-24 cannabis retail excise tax revenue: $702 million. This is $206 million above the budget package assumption.


How Does Tech Company Equity Pay Affect Income Tax Withholding? November 16, 2023

California's technology companies, including giants like Apple, Google, Nvidia, and Meta, are some of the most valuable companies in the world and support thousands of high-paying jobs in the state. Many employees at these companies receive equity pay, such as stock options, as part of their compensation. State income tax withholding on this equity pay has grown notably, reaching 6 percent in the last few years. The recent jump in these companies' stock prices, which affects withholding on equity pay, has bolstered otherwise weak income tax withholding during 2023.


U.S. Retail Sales Update: October 2023 November 15, 2023

U.S. retail sales have grown 1.5 percent over the last 3 months and 2.5 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 3 months, but not over the last 12 months.


U.S. Retail Sales Update: September 2023 October 17, 2023

U.S. retail sales have grown 2.1 percent over the last 3 months and 3.8 percent over the last 12 months. Retail sales growth has well outpaced inflation over the last 3 months, but not over the last 12 months.


Uptick in Unemployment Rate Triggered a Recession Indicator October 3, 2023

The recent uptick in the unemployment rate, from 3.8 percent to 4.6 percent, has triggered a state version of the "Sahm Rule," a real-time indicator of the start of an economic downturn.


Did California Enter a Recession Last Fall? October 3, 2023

While recessions are not formally defined for state economies, economic data for the fourth quarter of 2022 and first quarter of 2023 appear consistent with California experiencing a mild recession. The apparent start of a recession in California last fall helps explain why the state faced a revenue shortfall in its most recent budget. How much the economy will continue to dampen the state's fiscal picture moving forward is unclear. However, the threat that the recent slowdown could persist will be a significant risk for the foreseeable future. 


U.S. Retail Sales Update: August 2023 September 14, 2023

U.S. retail sales have grown 1.2 percent over the last 3 months and 2.5 percent over the last 12 months. Retail sales growth has outpaced inflation over the last 3 months, but not over the last 12 months.