CA's gets much of its taxes from taxing the rich on things like investments.
So, during a year when most small businesses were closed, which then forced people to shop at larger publicly traded companies and caused the stock market to artificially increase in value, it makes sense CA has a surplus. Although this may have help CA out this year, it is simply not a healthy way for a state to collect its tax revenue because it is an inconsistent way to generate money and produces incentives for wealthy people to move out of state.
The money that rich people make on investments is volatile and will increase/decrease based on the market. This means that the tax revenue CA collects will be unpredictable, change rather drastically from year to year, and make it impossible for the state to plan long term with any amount of accuracy. Not to mention if the market suddenly crashes and we enter a new natural recession, their budget will be screwed.
On top of that, taxing wealthy people at high rates causes them to move out of state and/or change their strategy. Of course, there needs to be other conditions as well such as can your business operate in another state or can you? Up until recently, the idea that a tech company could exist outside of CA was suspect, since the only support economy for tech was in CA. That is now different, which is why Tesla could so easily move out of the state, along with Oracle and HP. On top of that, working from home is now much more feasible with faster Internet. Then you through in the homeless issues, failing schools, highways, etc., and you have a perfect storm encouraging people to move out of state, which is what we are seeing. I predict that this summer with have more rolling blackouts, and since many will still be working from home on Zoom, this will greatly effect productivity. You cant run a tech industry without consistent power, so that will another nail in the coffin.
Hey, but they still have the best weather in the country, if you dont count forest fires.
All of this is reflected in the fact that for the last 3 decades, every time there is a recession, it takes longer for CA to recover then the country. The length of additional time it takes for CA to recover compared to the rest of country has been increasing too with each new recession.
(I also cant help but think that the best use of this money would be to pay off part of their $362B of debt. Sure, $75M is a drop in the bucket compared to that figure, but you have to start somewhere. Instead they are just going to pay more people not to work.)
It is a much better idea for a state to make its money from things that are consistent, like property taxes or a flat income tax. The revenue collected is fairly consistent, allowing for long term planning, and it does not produce incentives for people to leave the state.
But anyway, let them have their fun. As a commercial photographer, I wont be visiting anytime soon. I know too many that had all their gear stolen within 15 minutes of driving out of the airport.
