A report released in December by Californian’s nonpartisan Legislative Analysts Office confirmed what news reports have been saying all year: The Golden State’s $2.2 trillion-a-year economy is humming.
It’s long been true that California’s economy, the world’s eighth-largest, dwarfs that of other states, even during the recent Great Recession. But dig deeper into the report and you learn that the state’s median household income was $60,000 in 2013, compared with $52,000 nationally. That’s significant as personal income tax is now the greatest source of tax revenue for the state, having long surpassed sales tax and property taxes.
Corporate taxes as a percentage of all general fund revenue, meanwhile, are near historic lows, falling under 10 percent (by comparison, sales tax is a little over 20 percent while personal income tax is about 65 percent).
Corporate tax liability as a percent of profits has also declined, a drop attributed by the LAO to “various major changes in corporate tax law in recent decades” including some tax credits. The changes have resulted in corporate taxes paid as a percent of profits a little over 4 percent, compared to a peak of almost 10 percent in the late 1980s.
The new balance appears to be working well for California, at least for now. Earlier in December, the state Controller reported that state revenue is now $1 billion ahead of projections for the fiscal year.
And the state’s new technology companies are basking in a wealth of venture capital, which fills the gap where conventional bank loans fall short. In the last year, according to the LAO report, California firms have received $8 billion in VC funding, compared to about $5 billion for the rest of the U.S.
“Overwhelmingly, this funding goes to firms in the Bay Area,” the LAO reports.
Exports are also riding high, with California on track to set a record in 2014.
Merchandise export trade through October totaled $144.51 billion, 4.5 percent ahead of last year at this time, according to Beacon Economics’ California Trade Report.
That compares to less than 3 percent in year-to-date growth (through October) for the U.S. overall.
According the Beacon report, California’s export trade “is highly diversified, with 11 different major categories of goods each accounting for at least $1 billion exports during the latest three months.”
For perspective, consider that the projected annual growth rate of 3 percent for the U.S. in 2015 would be the highest since 2007, according to Chapman University’s Anderson Center for Economic Research.
In other economic highlights for December:
* Advanced energy jobs grew 5 percent in the past year, giving California the largest advanced energy industry in the country, according to the first-ever industry-wide survey released by the Advanced Energy Economy Institute.
– The almond industry contributes about $11 billion a year to the state’s gross domestic product, according to a report released by the Almond Board of California.
To see some of the companies driving the California economy and the news they generated in recent weeks, visit CalPossible.com.