California has been in the grips of a freeze. It’s estimated that the cold weather will cost California growers billions of dollars. You and I will feel the pain when we go to buy citrus in coming weeks — expect prices to skyrocket.
But there’s another impact, one that the media hasn’t picked up on (yet). Taxes.
Businesses pay taxes based on their net income. The freeze of 2007 will drastically impact the agriculture industry in California, and will cause profits to melt away. No profits, no tax due.
Estimated tax receipts will fall through the year as the impact becomes known. Individuals will be laid off (no crops to pick). California’s Central Valley will be devastated, and government support programs will be necessary. So expenses will rise, while receipts fall.
Meanwhile, the Governator proposes a new health program. Who is going to pay for this? With what money?
In 2007 and 2008, money won’t grow on trees, and neither will tax revenues.