It’s no big secret that the economy here in California has been booming ever since coming out of the decline of the Great Recession. And like any great economic boom, there are certain forces at work that have been driving the Golden State’s economy to continue pushing higher year after year.
With potential negatives like high taxes, wildfires and other natural disasters, bumper-to-bumper traffic, and a ridiculously high cost of living, California has more than a few things working against it. However, the state’s economy has continued to grow despite all of those issues.
In order to help understand exactly what is going on with the state of California, let’s dive in and take a closer look at four of the key things pushing the economy higher.
Increasing Income Tax Income
While many people will argue that California’s high state income tax rate should have a negative impact on the economy, the state is actually finding that those higher tax rates are bringing in more and more money for the government to spend on various infrastructure investments.
The increase in tax revenue over the past few years has the Golden State in place to potentially record a budget surplus here in 2019, which is something the federal government may never achieve again.
Jobs Growth
Those higher taxes are also supposed to be slowing jobs growth, but we are seeing the exact opposite happening here in California. There has been an astounding number of jobs added since the Great Recession, and many of them are high-paying jobs in the tech industry.
This increase in jobs growth has led to one of the lowest unemployment rates the state has ever seen, which is another huge factor in the growth of the economy.
Fully Funded Rainy Day Fund
Another way that those tax revenues are helping the state is that a portion goes directly into the “Rainy Day Fund,” which is required to be at least 10% of the state’s budget.
This rainy day fund is currently the largest of any state, and it is likely going to keep growing the way the money is pouring in right now.
Silicon Valley IPOs
One of the biggest drivers behind the booming California economy is all of the success that technology startups are having in and around Silicon Valley. Many of that area’s biggest companies are scheduled to start trading publicly in the coming year, and the influx of cash from those IPOs is likely going to create even more growth for the area.
In addition to being able to grow their companies, many executives at these companies are going to be cashing out some of their stock options and paying capital gains taxes on those transactions, which will bring even more money into the system.
With these four factors pushing the economy higher and higher, the future is definitely bright here in California. Of course, things could also change on a dime, and we have to be cautious to avoid a wide range of pitfalls, but all signs right now point to a booming economy in California for years to come.
