Gyrations in the stock market have taken California’s fragile finances for a ride before — when the dot-com bubble burst, when the Wall Street crash sank the national economy less than a decade ago.
So as the market continued its drop Monday, officials began glancing around for their seat belts.
More than most states, California depends heavily on taxing the wealthy, pulling about half its income tax revenue from just 1% of residents in recent years. A sustained, significant fall in capital gains could mean a return to budget crises, and the turmoil on Wall Street is a reminder of that vulnerability.
Gov. Jerry Brown’s administration isn’t ready to sound the alarm, especially since the last few years have been good ones as investment gains translated into rising revenue.
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