Chart of the Day: California’s Volatile Revenue Base

The following chart is from the California Legislative Analyst’s Office (LAO) and is indicative of the state government’s unstable revenue base.   The government receives a higher proportion of its revenue from personal income taxes than most states, which is also greatly affected by capital gains taxes during boom-bust cycles.   The lesson is not to program expenditures based on these bubble revenues.  The Clinton Administration clearly understood this.  Governor Gray Davis did not and paid dearly.

(click here if chart is not observable)

This entry was posted in Bonds, Budget Deficit, Chart of the Day, Fiscal Policy, Muni Bonds, Muni Market, State and Local Government and tagged , . Bookmark the permalink.

6 Responses to Chart of the Day: California’s Volatile Revenue Base

  1. Pingback: Chart of the Day: California’s Volatile Revenue Base | Wordwide News Exposed

  2. Pingback: Wednesday 7atSeven: California dreaming | Abnormal Returns

  3. David Merkel says:

    Governments should behave more like endowments, and spend a fixed amount (conservatively calculated) of their cyclical revenues. Excess goes into a rainy day fund.

    • macromon says:

      David, You are spot on! In our earlier life as economists at the World Bank, we help Chile set-up their copper stabilization fund in early mid-1980’s. Thanks for your comments.

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