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Saturday, February 16, 2013

Rockefeller

Oh, yeah, it's that time in the business cycle again when I start paying a lot of attention to the Rockefeller Institute's reports on state and local tax receipts. 

Take a look at their latest report for Q3 2012:
 Total receipts were clearly in the danger zone. The acceleration effect (shouldn't that be deceleration?) was at work.

Oh, we all know why the Fed's doing what it is doing. 

There's a ton of data and analysis in their reports, but the bottom line is that we were not seeing much traction and the friction is of course building.

That's why the 2% payroll tax freaks me out. I know we needed to hike it, but I'm not sure that the economy can withstand it. Because here is where we were last year:
Durables consumption is mostly MVs. So unfortunately that part is dependent on some iffy lending. It will continue long past the point of sanity, of course, but it's been clear for over a year that the lending would have to get ever more "generous" in order to keep it going. These things reach their natural end.

I read all this stuff about the stronger economy with a feeling of great puzzlement. Really? Really? REALLY?

Mark is back to seregraphanade us through this adventure in interesting times. In honor of Mark's particular style of economic commentary, this post needs a soundtrack. What else could it be but the Stones' "Gimme Shelter"?

Comments:
there was some confusion about taxes early this year so its possible alot of businesses are filing later than usual.


 
California was a vibrant economy with a 3% sales tax. 9%? Not so much.
 
Rob - I was just going through recent CA sales and use tax collections (from August through Jan). In Jan the rate goes up again 25 bps, but it shouldn't be reflected yet in collections. So the period should be comparable because the last change was 7/11.

Anyway, the total was 9,382,601 for the last six months vs 9,623,992 for 2011 through Jan 2012.

Overall, I would say it's not the brightest picture. There is an odd effect of high/low month collections which may be due to a quarterly online sales collections schedule, I don't know. In Dec for some reason about a billion in receipts was put into a special account and then transferred to January's receipts. Weird.

The total for Dec-Jan 12/13 was 2,048,008 vs 2,416,828 for Dec-Jan 11/12.

The best case you can make is that the deficit will be made up when receipts from online sales come in. I would not describe this as an incredibly encouraging trend, though. Even if the total is made up from Amazon, this has to be hurting CA's economy.
 
Jerry Brown and the boys think that high taxes aren't going to hurt California tax revenue. In the short term no, but I think it will surprise them in 12 months. I am sitting a a stoplight in Dallas Texas, and the three license plates in front of me are from Tenn, Maryland, and Illinois (this is partly why Texas won't stay a very red state for long).

Check this quote out from a CA business relo specialist below. I love the fact that the article states that Texas Gov. Rick Perry said "You fish where the fish are".

Such tales don't surprise Joseph Vranich, a business relocation specialist from Irvine. Vranich scoffs at economists who insist that few companies are exiting California, and points out the extreme difficulty of tracking all businesses that flow in and out of the state. He said the number of local firms seeking his advice for relocation has doubled since November.

"The number of calls is literally unprecedented," Vranich said.

http://articles.latimes.com/2013/feb/12/business/la-fi-perry-jobs-20130213

On another note, a LA friend who is a tax preparer said there has been a significant increase in the number of people wanting to file 6 years worth of tax returns in order to prove residence.

Learner2
 

I was in LA recently at a client site. The engineers are mostly first-generation immigrants and have always expressed to me a love for California. Well, last week they were all griping and asking me about tax policies in other states.

It has, just perhaps, begun to sink in.

 
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