California Discovers $26 Billion Under the Sofa Cushions

Yes, we have earthquakes and wildfires and long lines for COVID-19 testing. But we also have lots of rich people.Ringo Chiu/ZUMA

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Like every state, California has been bracing for fiscal disaster thanks to plummeting tax revenue caused by COVID-19 lockdowns. But then a funny thing happened:

California’s state budget faces a dramatic boom-and-bust period over the next four years, analysts said Wednesday, a roller-coaster period that could begin with a $26-billion tax windfall and later plunge to a projected deficit of $17.5 billion by the middle of 2025…The large supply of extra cash — equal to almost 20% of all current-year spending out of California’s general fund — is a surprise, Legislative Analyst Gabriel Petek said.

….The state’s tax revenues have remained strong — in part, Petek said, because high-income residents have not suffered any notable setbacks and California’s budget relies heavily on those taxpayers. “The progressive nature of the personal income tax structure has actually worked to the state’s benefit in the current environment,” Petek said.

Shazam! An extra $26 billion that we didn’t expect. How often does that happen?

The weird part of this is that analysts across the board, including most Democrats, have long agreed that California’s heavy dependence on rich taxpayers is a problem. But apparently that isn’t always true. During the pandemic, the rich have actually done fairly well even as ordinary folks have gotten slammed. That’s a bad thing in a cosmic sense, but a good thing in a green-eyeshade tax revenue sense. I can hardly wait for the bloody battles that are about to begin over how we should spend all this manna from heaven.

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THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

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If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

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