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How does California's 2023 tax revenue compare to 2022?
Executive summary
California’s total state tax revenue fell sharply from 2022 to 2023 by roughly one-fifth, with one widely cited estimate putting 2023 tax receipts at about $220 billion versus a 2022 level that implies a ~22% decline year‑over‑year [1]. Analysts and state fiscal offices trace the drop to delayed 2022 tax filings (deadline pushed into November 2023), a cooling in capital gains and IPO activity that hit high‑income PIT receipts, and weakness in corporate and sales taxes [2] [3] [4].
1. What the headline numbers show: a big decline
Multiple summaries in the reporting period identify a steep decline in California’s tax haul from 2022 to 2023: an oft‑cited figure is $220 billion in state tax revenue for 2023 and a 22% fall from 2022 to 2023 [1]. Independent analysts at the Legislative Analyst’s Office (LAO) estimated “big three” revenues (personal, sales, corporation) declined about 11% in 2022‑23 and flagged that collections were likely below Governor’s Budget assumptions for that fiscal year [3] [4].
2. Why the drop was so large: delayed filings and volatile income tax
A material part of the apparent decline stems from the seven‑month deferral of the 2022 personal income tax filing deadline to November 2023 after winter storms, which distorted timing of receipts across fiscal years and masked underlying declines until late in 2023 [5] [6]. Beyond timing, California’s revenue system is heavily dependent on high‑income taxpayers and capital gains; a slowdown in IPOs and asset gains cut withholding and estimated payments, contributing to weaker PIT collections [2] [7].
3. The role of the “big three” taxes (PIT, sales, corporation)
The LAO and related analyses emphasize the “big three” taxes as the main drivers: personal income tax weakness shifted to sales and corporation taxes in 2023‑24 forecasts, and LAO forecasts showed big three revenues declining 11% in 2022‑23, with risks concentrated in sales and corporate receipts after the PIT weakness [3] [4]. The LAO also warned that revenues that surged during pandemic highs were reverting toward historical norms, magnifying percentage declines [8] [3].
4. How timing and forecasts changed the narrative
Governor’s Budget projections were repeatedly revised downward as delayed filings and weaker collections emerged; analysis by CalMatters and others documents large downward revisions in expected income tax receipts from initial 2022 estimates to later closings [9]. The timing difference — where large 2022 tax liabilities were filed late in 2023 — complicated year‑over‑year comparisons and budget forecasting [5] [6].
5. Independent trend analysis: below long‑run trajectory
Pew’s state revenue analysis found California’s tax collections undershot a 15‑year trend estimate more than any other state, collecting about 16.2% less than that trend projection as of mid‑2023, signaling the drop wasn’t just timing noise but a substantive swing relative to long‑run expectations [2]. This frames California’s decline as larger-than‑typical cyclical variation, not merely a one‑time reporting quirk.
6. Contrasting framings and caveats
Some outlets present the fall as a technicality tied chiefly to the filing delay; others treat it as a material weakening driven by the economy and asset markets [5] [2] [3]. Available sources do not mention a single universally agreed final dollar‑for‑dollar reconciliation of every line item across 2022 v. 2023 in one consolidated state release, so precise comparisons depend on whether one looks at fiscal‑year totals, calendar‑year tax receipts, or adjusted forecasts (not found in current reporting).
7. What this means for policy and budgets
Analysts warn volatility limits new spending capacity: revenue shortfalls tend to translate into smaller functions for reserves or program cuts rather than sustainable new programs because California’s revenues are concentrated and volatile [10] [7]. The LAO and other analysts caution that forecasts could still change and that revenues might return toward historical norms over several years [8] [3].
Bottom line: most reporting and expert analysis agree California experienced a large drop in tax revenue from 2022 to 2023 — on the order of the low‑tens of percent to around 22% depending on the series — driven by filing delays and real declines in capital‑gains‑sensitive PIT, corporate, and sales receipts. That decline disrupted budgeting and prompted multiple downward revisions in official forecasts [1] [5] [2] [3].