State Budget:
'Fiscal Cliff' Bill KOs Some Expected State Revenue

As a result of the federal government's passage of the so-called "fiscal cliff" fix January 1, California's 2012-13 general fund budget will be short an additional $45 million. The "American Taxpayer Relief Act of 2012" permanently killed a subvention from the federal estate tax to the states that had been suspended since 2005. Last summer, state budget writers counted the additional revenue, on the faulty assumption that the subvention would be reinstated.

Other ramifications of the fiscal cliff bill for California:

• UI Extension Costly to State. Extension of unemployment insurance benefits will cost California millions to implement, according to Employment Development Department sources.
• Tax Increases Bad for Economy. The underpinning of the fiscal relief bill was the belief on both sides of the political aisle, and in the mainstream media, that letting the Bush tax cuts expire would be bad for the economy.
• Conformity Issues. California taxpayers must follow federal tax law as it read on January 1, 2009, and they have had to do this since the 2010 taxable year. Due to a lack of a California conformity bill, California taxpayers once again will have to look at old federal law when preparing their 2012 tax returns. This is despite the fact that hundreds of federal changes have been made since then, and that Californians have to start with federal numbers when preparing their state tax returns. The fiscal cliff bill will move the state further out of conformity with federal law.

January 11,, 2013
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