The Franchise Tax Board (FTB) has released its May 2015 revenue estimating exhibits, which are important, often highly technical, data documents used principally by our office and the state's Department of Finance to understand past income tax collections and project those tax collections for future years. The May 2015 revenue estimating exhibits are here, while prior versions are linked here under the heading, "Revenue Estimating Exhibits."
Some highlights of the May 2015 FTB exhibits:
- 2013 Capital Gains Data Now In. For 2013, California resident personal income tax (PIT) returns reported a total of $78.864 billion of net capital gains, down substantially from $100.527 billion in 2012. As has been widely known for some time, high-income taxpayers accelerated receipt of billions of dollars of income, especially capital gains, from 2013 to 2012 to avoid higher federal tax rates that took effect in 2013. This sharp year-over-year drop illustrates the volatility of capital gains in the state's revenue structure. In 2013, more than half of the total capital gains reported were on returns with adjusted gross income (AGI) of $2 million or more. More than one-third of the total capital gains were on returns with AGI of $10 million or more. (See Exhibit A-6, Pages 3 and 4 in the exhibits.)
- Revenue Concentration Among High-Income Taxpayers. In 2013, the "top 1%" of California resident PIT filers (those with returns that have adjusted gross income [AGI] of $501,478 and above) reported 21.8% of all the state's AGI and paid 45.4% of total personal income taxes. Such concentrations are typical, given California's tax rate structure, in which higher-income filers pay personal income taxes at higher rates. Proposition 30, passed in 2012, has increased the tax payment concentration among the top 1% of filers to some extent. In 2012, the year before this, the top 1% of tax filers paid 50.6% of personal income taxes, with the higher level due to the large levels of accelerated income described above as well as Facebook's initial public offering. (See Exhibit A-10, Pages 3 and 4 in the exhibits.)
- Over Last 20 Years, "Top 20%" Group of Taxpayers Only Group With Real AGI Growth. Between 1994 and 2013, AGI per return has increased in real (inflation-adjusted) terms for only the group made up of the top 20% of taxpayers in any given year. The FTB exhibits show this in Exhibit A-10, page 2 of 4. For this top quintile of taxpayers, real AGI per return grew by 37.6% between 1994 and 2013. AGI per return fell in real terms for every other quintile of taxpayers. Within the top quintile, the growth in real AGI per return has been heavily concentrated in the group consisting of the top 1% of taxpayers in any given year. For the top 1% of filers, real AGI per return has grown by 88.0% since 1994. It is worth noting that taxpayers may move from one quintile group to a different quintile group over time as their earnings grow or contract.
- California Corporate Income Up in 2013. Corporations apportioned (attributed) $101.5 billion of net income to California in 2013, up from $96.8 billion in 2012. (See Exhibit B-2, Page 1 of 9 in the exhibits.)
- Corporate Use of Research and Development Credit Down in 2013. Corporations' use of the state's largest corporate tax credit program, the research and development credit, fell from $1.1 billion in 2012 to $911 million in 2013. Companies' use of such credits can rise or fall in any given year for a variety of reasons. (See Exhibit B-3, Page 1 of 4 in the exhibits.)