By Fester:
The Rockefeller Institute is tracking state and local tax revenue. The picture is ugly and looks like it will get worse. Here is the New York Times overview:
The anemic economy decimated state tax collections during the first three months of the year, according to a report released Friday by the Rockefeller Institute of Government. The drop in revenues was the steepest in the 46 years that quarterly data has been available...
the report found that state tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year...
personal income tax collections fell 17.5 percent in the quarter. Weak retail sales sent sales tax collections down 8.3 percent. Corporate income tax collections, which are often highly variable, declined 18.8 percent.
California is on the verge of 'solving' its current budget deficit, but if trends continue, revenue shortfalls will force another deficit slashing and procyclical contraction in the near future. Pennsylvania is engaged in a knock-out drag out fight between three factions; Governor Rendell, House Democrats who hold the majority rhere and the Republican Senate majority. No one is really ready to give ground as the House Democrats passed a farce of a budget while the Republicans in the Senate are insisting on an all-cuts solution. Right now state employees will be working without any pay and most/all (I am not sure) state vendors and service providers are not getting paid. There is some speculation that a deal will be reached soon as more and more state employees start to not see their paychecks and service providers fold, but I am not reading the political map like that. Instead, both sides are entrenching in a nasty negative sum game where the winner is the one who is only bloody and broken but not dead.
However the most interesting item from the report is the confirmation of the stickiness of muncipal real estate property tax assessments:
The local tax slowdown has been less pronounced than the state tax slowdown. In the first quarter of 2009, local tax collections rose by 3.9 percent, driven by 7.4 percent growth in property taxes. Most local governments rely heavily on property taxes....
Everywhere else people are paying far lower taxes because there is far less economic activity to tax. People who are underwater on their house and are stuck will be looking for relief on their carrying costs. This means demands to reassess and lock in their local minima values as the basis of taxation.
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