California’s Tax Collections Break Out of 7-Month Slump

California tax collections broke out of a seven-month slump in August, with income from the state’s three major taxes up over the same month last year, state Controller Gray Davis reported Thursday.

The revenue jump came despite the fact that receipts from the recent 1.25-cent sales tax increase were far below expectations. That could spell problems for state spending if the trend continues.

In all, revenues from the personal income, bank and corporation and sales tax rose by $72 million, or 2.8%, over August, 1990.

“August revenues offer the first glimmer of hope that California is starting to crawl out of the recession,” Davis said, although he warned that there were still signs of weakness in the economy.

Davis, chairman of the Franchise Tax Board, said sales tax revenues were soft, even though they were up by $27 million, or 1.8%, over the same month last year. Davis called sales tax collections “very disappointing,” noting that the tax increase was expected to push receipts up 10% in August. The controller said receipts would have been “substantially below” August, 1990, levels had it not been for the sales tax increase, which took effect July 15.

Until August, tax collections had declined, month to month over prior-year periods, for seven consecutive months. The weak tax collections, resulting from the recession, contributed heavily to the record $14.3-billion budget deficit that plagued Gov. Pete Wilson and the Legislature for most of the year.

The figures released by Davis are based on preliminary estimates by the Franchise Tax Board. Final figures, along with an assessment of how they stack up against Wilson Administration budget estimates, will be made public in the middle of the month.