What's in Your Wallet? 2005
I was at the bagel store getting my usual this week (sprouted wheat bagel with a little peanut butter — this is California, people). I noticed a woman next to me opening up a voluminous wallet. I'm not one to stare, much, but I was nearly blinded by the plastic. After refocusing, I noticed she had a lot of Visa cards.
I counted to six and stopped as she closed her pocketbook.
I thought, "What's in your wallet? 2005."
California is like the rest of the country...on 'roids. Tech bubble. Housing. Deficits. You know the story. They say everything's bigger in Texas. Not really. In good times or bad, California goes big.
But things can't stay bad forever, right?
There are signs of hope.
California is still grappling with a $9 billion budget deficit — Democrats want to renew or extend temporary tax hikes, even though the Governor says he won't do that without voter approval. Republicans just say 'no'. A budget is supposed to be passed within two weeks. As usual, it ain't gonna happen.
To help boost revenues, the Assembly passed a bill this week to tax online sales for internet retailers which have a physical presence in the state. Proponents believe this could bring in $1 billion in extra taxes. Opponents say it will only lead to lost jobs, as Amazon.comwill sever ties with 10,000 associates inside California to exempt sales from any potential tax.
However, maybe we don't need to tax online sales. Maybe we are already getting back to 2005, revenue-wise.
I've reported that state income taxes in California are coming in above expectations. Capital gains taxes alone are expected to hit $6 billion this year , 30 percent higher than earlier estimates and nearly 50 percent higher than a year ago.
If income taxes rise, sales taxes should follow. People are earning more (which is why they're paying the government more), therefore they have more to spend.
The state Board of Equalization reports that sales taxes rose in the first quarter of 2011 for the first time since 2007. Tax revenue for the quarter reached $109 billion, up 1.3 percent from a year ago. The bad news, a lot of that is due to high gas prices. California has the highest gas taxes in the country, and taxes collected on $4.50/gallon gas jumped 30 percent from a year ago to $10.3 billion. Actual gallons of gas purchased FELL one percent.
Some good news: clothing and clothing accessory stores saw sales taxes jump nearly 8 percent. Taxes on new car sales only rose 0.4 percent in the first quarter, but taxes on used cars jumped 10.4 percent.
The third indicator of a recovery, after income and sales taxes, should be a rise in property taxes as housing improves. We're not there yet. Sales taxes fell for companies selling building materials, gardening supplies, home furnishings, electronics and appliances. Still, this week's Case-Shiller Index shows that home price drops in Los Angeles were smaller than the rest of the country on a percentage basis, and they narrowed from the previous quarter.
That may be another hopeful sign, though it's not enough to convince me to load down my wallet with plastic like it's 2005. ?
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