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January 27, 2006 - In recent years, the prevalence of illegal or “abusive” tax shelters (ATS) has increased dramatically. These ATS transactions have resulted in very substantial revenue losses in California. Despite the success of an amnesty program (known as the voluntary compliance initiative program), the problems posed by ATSs have not been fully resolved. In fact, it is likely that ATSs will continue to pose tax-related policy issues for the state. Given this, it will be important that the Legislature stay on top of the ATS situation. As one approach to accomplishing this, it may want to periodically review FTB’s ATS-related activities, including how well it is allocating its budgeted resources to get the best return on ATS activities and informing the Legislature about programmatic changes that will help address the ATS problem. (Prepared in accordance with Chapter 654, Statutes of 2003 (AB 1601, Frommer), and Chapter 656, Statutes of 2003 (SB 614, Cedillo).)
January 25, 2006 - In October 2003, the Legislature approved and the Governor signed Chapter 867, Statutes of 2003 (AB 1666, Cogdill, which allows alternatives for the payment of cigarette tax stamps by cigarette distributors. Prior law allows cigarette distributors (which are responsible for affixing the stamps to cigarette packages prior to their sale) to defer the payment for such stamps under certain conditions, including the posting of a surety bond or other form of security. The 2003 statute reduced-on a temporary basis until January 2007-the minimum amount of the required security posted by distributors while increasing the frequency of their required tax remittances to the state from monthly to bimonthly. The measure requires the Legislative Analyst’s Office (LAO) to report on the impact of the statute.
December 6, 2005 - Presented to Assembly Committee on Jobs, Economic Development, and the Economy and the Assembly Revenue and Taxation Committee
November 16, 2005 - The state's budget outlook for 2006-07 and beyond has improved considerably as a result of a major increase in revenues and significant savings adopted in the 2005-06 budget plan. The state, however, still faces major operating deficits in the next several years.
March 3, 2005 - Presented to the Assembly Budget Process Committee on March 2, 2005.
February 22, 2005 - The current strength in the economy is translating into solid growth in receipts from the state's taxes—particularly the corporate tax and personal income tax. Recent cash receipts trends have been even stronger than anticipated in the Governor's budget, mainly because of strong 2004 year-end collections from the personal income tax and corporation tax. Based largely on these positive trends, we project that General Fund revenues will exceed the budget forecast by $1.4 billion in the current year and $765 million in the budget year.
February 22, 2005 - The California economy is expanding at a healthy pace in early 2005, as evidenced by real estate construction, exports, company reports of sales and profits, and business-related tax receipts. The one area of concern remains jobs, which are lagging due to intense focus on cost cutting and efficiencies. We project the California economic expansion to continue at a moderate pace, with personal income expanding by roughly 5.6 percent and jobs growing 1.5 percent annually during the next two years.
February 22, 2005 - The Legislature has an important budget opportunity. We project that revenues are $2.2 billion higher (for the current and budget years combined) than reflected in the Governor's budget. This, combined with the magnitude of ongoing solutions proposed in the budget plan, would result in a balanced 2005-06 budget with a solid reserve. However, the price of inaction is significant. Without the adoption of ongoing solutions of the magnitude offered by the budget plan, the 2005-06 budget would be precariously balanced and the state would experience major budget shortfalls in 2006-07 and beyond. These shortfalls would be close to $10 billion.
February 22, 2005 - The Legislature has an important budget opportunity. We project that revenues are $2.2 billion higher (for the current and budget years combined) than reflected in the Governor's budget. This, combined with the magnitude of ongoing solutions proposed in the budget plan, would result in a balanced 2005-06 budget with a solid reserve. However, the price of inaction is significant. Without the adoption of ongoing solutions of the magnitude offered by the budget plan, the 2005-06 budget would be precariously balanced and the state would experience major budget shortfalls in 2006-07 and beyond. These shortfalls would be close to $10 billion.
February 22, 2005 - The Governor has proposed constitutional reforms involving several areas of the budget—including Proposition 98 K-14 education funding, the budget process, and transportation. The Governor has indicated that the main purpose of the reforms is to deal with "autopilot spending" and instill discipline in future budgets. We believe, however, that the administration's specific proposals work in exactly the opposite direction. That is, they would put more spending on autopilot and make it more difficult to balance future budgets in a rational way. The changes would also result in a diminution of legislative authority.
February 2, 2005 - Presented to the Senate Committee on Revenue and Taxation
January 20, 2005 - Following the boom-bust revenue cycle in recent years, concerns have developed about volatility in California's General Fund revenues. This brief quantifies the amount of revenue volatility experienced in California during the past quarter century, identifies the main causes of the volatility, and discusses the outlook for volatility in the future. We also highlight some options for reducing future impacts of volatility—both those involving changes to the tax system and budgetary changes—and discuss the trade-offs inherent in each of the alternatives.
January 10, 2005 - The physical consolidation of remittance and return processing activities of the Franchise Tax Board, the Board of Equalization, and the Employment Development Department would likely result in some savings in the medium and long term. It would also require a significant investment of funds in the near term in order to make such a consolidation feasible. Expanding the opportunities for electronic processing at all three agencies provides an alternative means of achieving savings in the long term while improving tax agency performance at the same time.
February 18, 2004 - In this piece, we present options for the Legislature's consideration. We have identified expenditures that may be considered of lower priority in tough budget times. It is not that these activities are without merit or not desirable. In better fiscal times we would not necessarily put such options on the table. However, we offer them in the context of a need to solve a massive budget shortfall. We have also identified selected revenue options for the Legislature's consideration. These options generally involve tax expenditure programs which are either inefficient at achieving their objectives or are not the most efficient means of doing so.