California Says Tax Revenue ‘at Risk’ From Facebook Drop | Hacker News Reader

California Says Tax Revenue ‘at Risk’ From Facebook Drop

businessweek.com

11 pointspatd11 comments

I can't quite believe any govt official with half a brain would forecast tax revenues based on the vagaries of company stock prices.

"hundreds of millions of dollars of income tax revenue assumed in the state budget plan are at risk.”

Who runs a government like that?

This is a common risk when you have an extremely progressive tax system, or rely heavily on taxing companies. Companies and high income people have volatile income, making tax revenues volatile.

If you want to avoid it, you'll need a more regressive tax system that leans heavily on the poor/middle class (e.g., the sort you find in Europe).

I could understand forecasting corporate taxes, but concretely relying on fluffy bunny overhyped IPOs in your budget seems irresponsible.

I agree wholeheartedly.

Then again, it seems that California is a horrible manager of money. So maybe we shouldn't be too surprised.

New York, for one. NY's tax revenues (both the state's and the city's, since NYC has its own income tax) are heavily dependent on year-end bonuses on Wall Street, so if Wall Street has a bad year, so does NY.

Welcome to Republic of California!

Hold on there. Even at the low end (i.e. "hundreds of millions" less than $1.9 billion), that's more than 1% of the state budget ($91.3 billion). They can't just ignore that. Besides overall revenue it will impact things like cash management, especially since the impact is irregular over the course of the year.

So, they made an estimate. It was off. That's life. Nevertheless, in making an estimate they're going to be substantially closer to reality than ignoring the impact altogether. That's what's supposed to happen.

California state and local municipalities make judgements off forecasts of tax revenues from the dot com boom and housing boom.

I'm interested at what the relationship is like at that level. Is there a Facebook staffer that communicates regularly with state congress staffers? Is there tit for tats going on?

It appears Facebook is in need of a bailout.

Too big to facepalm!

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