California’s Tax Collections in May Far Exceeded Expectations

With California facing a significant budget deficit due to corporate and personal income tax collections failing to meet expectations over the past year, a report released June 5 by the nonpartisan Legislative Analyst’s Office found that revenues collected in May were higher than anticipated. Personal income tax withholding came in at $1.2 billion, about 17 percent above projections announced in Gov. Gavin Newsom’s budget revision released in May and a 6 percent increase over last year. Overall, collections surpassed forecasts by about $1.5 billion, including a $752 million increase in corporate tax revenues—about 124 percent higher than expected. Analysts note that such “unambiguously strong” receipts follow steep declines in personal income tax collections during the second half of 2022 and first part of 2023. Improvements in withholding are attributed to stock price increases that began in mid-2023, according to the analysts....