Jerry Brown faced one reality yesterday: The votes aren’t there for extension of the temporary tax increases passed two years ago. However, he and Democratic leaders of the California legislature will be passing a budget today that will on paper close a $10 billion deficit.
Thee are $4 billion of spending cuts (some will be challenged in court). There are some fee and tax increases (some of which will likely be challenged in court) to raise another $1 billion. And there’s a projected $4 billion increase in revenues…inserted because California had $1.2 billion in higher tax collections than projected in April. Finally, there’s the usual accounting gimmicks (moving certain payments to the following fiscal year) that will result in $1 billion of “savings”.
The budget includes the Amazon tax, forcing online retailers to collect California sales tax. Amazon vows that they will immediately drop all California affiliates, so that they will not have a physical presence in the state and, thus, will not have to collect California taxes.
If one is objective about the budget, it’s quite clear that this budget will leave about a $5 billion deficit for the new fiscal year…and that’s only if the economy doesn’t get worse. I’m not seeing many signs of an economic recovery.
Tags: 2011CalBudget