Jannah Theme License is not validated, Go to the theme options page to validate the license, You need a single license for each domain name.
California NewsUSA

Technology a growing source of tax revenue in California – good news and bad news

By Levi Sumagaysay | CalMatters

If you live in California, use the roads, schools, and other tax-funded services, you’re on the financial roller coaster of Silicon Valley, whether you know it or not.

The tech industry is increasingly contributing to the state budget, and even the way tech companies pay their employees has become a growing source of state income tax revenue, according to a new analysis.

Many technology companies pay their employees a base salary as well as stock options. Vested stock options – options that have expired and are wholly owned by employees, who can choose to sell them – are treated as ordinary income for tax purposes. Businesses must pay withholding taxes on a portion of this income to the state and federal governments. Last year, taxes paid by the state’s four largest technology companies – Apple, Google, Meta and Nvidia – reached at least $5 billion, or more than 6% of all taxes withheld from state revenue, according to the Legislative Analyst’s Office. estimated.

This figure increased from 4% to 5% before the pandemic, more than doubled since 2016 and quadrupled over the past decade. This increase has come as the market value of these companies has increased significantly – all four are now worth more than $7 trillion. Last year, the withholding taxes they paid helped offset the effects of fewer IPOs on state revenue.

Chas Alamo, the office’s senior tax and policy analyst, conducted the analysis. He said that if he had the resources to do more research and had counted the stock holdbacks of all the state’s big tech companies instead of just the four largest, they could account for as much as 10% of all income taxes. detention. That’s on top of the tech industry’s contribution to the state’s personal tax revenue, making it even more dependent on the ups and downs of technology.

Historically, “withholdings have been a stable barometer of developments in the state’s economy,” Alamo said. “It has not been subject to the volatility of the stock market. But that has changed in recent years.

All Californians have a stake in the health of the tech industry because the state relies heavily on the personal income tax for revenue. In light of a multi-trillion dollar budget deficit and mixed signals around technology – which on the one hand continues to lay off workers but on the other is experiencing an artificial intelligence boom that has resulted in gains on Wall Street – income tax withholding from tech employees’ salaries as well as withholding from their stock options matters more than ever.

It can be difficult to determine exactly how much tech industry employment contributes to state coffers because tech companies have many different types of employees, but consider this: software developers in the State earned about $48.9 billion, based on an average annual income of about $190,000, according to Employment Development Department data from the first quarter of last year. This total from a single industry segment was more than the state received in total income tax revenue from all sectors of the workforce through November: 47, $2 billion, according to state comptroller tracking.

As for the increase in stock withholdings, it’s the result of a great 2023 for big tech companies whose financial filings Alamo analyzed, including Meta and Nvidia. Shares of chip company Nvidia, whose graphics processing units dominate the artificial intelligence market, finished last year up about 239% from the year before. Facebook parent company Meta’s investments in artificial intelligence helped propel its stock up 198% year over year. Meanwhile, shares of Apple and Google finished 2023 up 49% and 59% year-over-year, respectively.

If artificial intelligence continues to generate stock market gains for technology companies, the state will continue to reap the rewards.

Some experts and economists are very optimistic about artificial intelligence.

California Daily Newspapers

Back to top button