State Revenues Collapse

From the WSJ, States’ Quarterly Tax Revenue Plunge 17%

State tax revenue in the second quarter plunged 17% from a year earlier as rising unemployment and falling consumption dragged down sales- and income-tax collections, according to Census figures released Tuesday.

It was the sharpest decline since at least the 1960s. The biggest drop was in state income taxes, which were down 28% in the second quarter from a year earlier. Corporate income taxes, which tend be volatile, increased 3%.

What a bind states find themselves in. With the non-stop bailouts of big business, and rising taxes on the rich (aka small business owners), the government is really disincentivizing private job growth. While a trend towards bigger government has veiled the widespread loss of jobs in the private sector, the current budget crises in states will make it abundantly clear where all our job growth was coming from. Get ready for stagnant economic growth.

“This brings really bad news for almost every single state and leaves them with an unprecedented budget crisis,” said Lucy Dadayan, a senior policy analyst with the Nelson A. Rockefeller Institute of Government at the State University of New York.

States — which, unlike the federal government, are generally required to balance their budgets — have already responded to revenue declines with employee furloughs and higher taxes and fees. But with tax collections continuing to decline, many have been forced to reopen budgets midsession to push through even more drastic cuts to staffing and services. In Michigan, stalled budget negotiations between the governor and the legislature could force the state to shut down if a deal isn’t reached by Wednesday at midnight local time.