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Politicians in Sacramento Don't Understand Economics!

Many people moved their money around and took the gains at the end of last year to avoid higher rates after the first of the year.

Feb 11, 2013

Did you see how California is $4.3 billion ahead of their January revenue forecast. According to State Controller John Chiang "last month's revenues were by far the highest that California has seen in any January for the past decade. Along with increased auto sales, rising home values, and more construction, it signals that California may be entering an era where we can govern outside of crisis."


Not so fast. Remember the fiscal cliff? We do. As the end of the year approached and the politicians in Washington D.C. were kicking the can down the road until the last possible minute about tax increases and capital gains, out here in the real world we were also making decisions. With no clear idea how high some of these rates might go, many people moved their money around and took the gains at the end of last year to avoid higher rates after the first of the year. It was easy to predict a windfall for government revenue because of this money strategy. This is money that government will get now at lower tax rates instead of later at higher rates. When they change tax rates, we do what we have to do. For every action there is an equal and opposite reaction. Simple stuff. In Sacramento, this windfall is being viewed as a sign that the economy has turned around and they're already trying to find ways to spend the money. They're actually going to get less than they thought, it's just coming in earlier. Do they really think we sit here and do nothing while they play with our money? Isn't it amazing that people dictating economic policy in Sacramento and Washington D.C. have exactly zero idea how economics really works.

California sees strong revenue in January

By Chris Megerian

California raked in far more tax money than expected last month, according to a report from the state controller, who tracks the state's cash flow.

Total revenue was $4.3 billion higher than the latest projections from Gov. Jerry Brown's administration, giving the state its best numbers for any January in the last decade, the report said.

"It signals that California may be entering an era where we can govern outside of crisis," Controller John Chiang said in a statement. He also cited other positive economic news, such as increased sales of cars and higher home values.

He cautioned, however, that the state may not see a windfall in the end.

"Given our state's troubled history with boom-or-bust revenue cycles, this good news must be tempered with increased fiscal discipline," he said.

The Department of Finance, which plans state spending, will release its own report on January tax revenue this month.

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