California’s wealthy elite have been doing very well during the coronavirus pandemic, despite economic shutdowns that have devastated small businesses and caused widespread job losses and disruption. The Associated Press recently reported: At the end of 2020, California had lost a record 1.6 million jobs during the pandemic. Nearly a half-million people stopped even trying to look for work. Business properties saw their value plummet more than 30%. With the pandemic forcing the closure of bars, restaurants, theme parks, sporting events and small businesses, lower-wage workers bore the brunt of the losses while the wealthier worked from home.
But the economic losses started at the bottom of the income ladder and so far they haven’t made their way up to the top. With the rich doing well, thanks to the growing dominance of Silicon Valley, the rising stock market, and the health of Hollywood’s streaming entertainment industry for a stay-at-home nation, state revenues have soared far beyond expectations.
According to an Associated Press report: California’s bank account is overflowing. As of January, the state’s tax collections were $10.5 billion ahead of projections. By the end of the fiscal year on July 1, Gov. Gavin Newsom and the state Legislature could have a $19 billion surplus to spend.
It’s so much money that, for just the second time ever, the state is projected to trigger a state law requiring the government to send refunds to taxpayers.
According to the AP, the state’s tax revenues went up because California’s tax code relies heavily on the rich. In addition, billions of dollars from the federal government, which paid for things like hotel rooms for the homeless and home-delivered meals for seniors, also softened the blow.
More from the AP:
Unlike most states, California taxes capital gains — mostly money made from investments and stocks — the same as money made from wages and salaries. The result is 1 percent of the population accounts for nearly half of the state’s income tax collections.
That one percent had a pretty good year in 2020, financially speaking. The stock market is 16 percent above its pre-pandemic high in February 2020. A slew of California tech companies, led by Airbnb and DoorDash, debuted on the stock market last year, adding to the state’s population of millionaires and billionaires.
The Newsom administration projects Californians will earn $185 billion from capital gains — the most ever — resulting in $18.5 billion in tax revenue for the state.
Given this, it seems totally unnecessary for California to get $42.3 billion, more than any other state, in aid under the latest COVID spending bill. According to an analysis by USA Today, California, Texas and New York would receive 29 percent of the $350 billion in direct aid that President Joe Biden has proposed for states and cities in his COVID-19 bill.
Americans for Limited Government Vice President of Public Policy Robert Romano said it makes no sense for Congress to give California a massive bailout given the state’s projected $19 billion surplus for 2021.
“The Biden-Pelosi-Schumer state bailout will give $350 billion to bail out state and local governments, plus $128 billion K-12 schools for school reopening and $39.6 billion to colleges and universities, all of which is coming atop the $150 billion for state and local governments already got from the 2020 CARES Act and the $82 billion for schools that just passed in December,” Romano explained.
“After Biden is done, total COVID pandemic spending for 2020 and 2021 will have topped $5 trillion, more than the New Deal adjusted for inflation, the 2008 Troubled Asset Relief Program and 2009 Obama stimulus combined.”
According to the USA Today analysis, three out of every five dollars (60.4 percent) of the direct aid in Biden’s bill would go to states that Biden won in the November election. It seems the COVID spending bill may be targeted more at a Democrat vote-getting campaign for the 2024 election, than in actually targeting areas of need.
Catherine Mortensen is vice president of Communications at Americans for Limited Government.