From health care for immigrants in California to universal controls in Tennessee, states are being forced to reconsider costly projects as tax revenues dwindle and federal pandemic aid ends.
State tax revenues fell 4% last year, according to a Stateline investigation of U. S. Census Bureau estimates. U. S. Census Paper, published this month. Revenues are still rising from 2019 at around 28%, which is higher than the inflation rate of around 18% at the time.
California and New York State bore a disproportionate percentage of the losses, even when their gigantic populations are taken into account. These states lost a total of $56 billion in tax revenue, most of the $66 billion in national losses.
Whitmer presents an $80. 7 billion budget plan for fiscal year 2025, smaller than this year’s budget.
California Gov. Gavin Newsom, a Democrat facing a budget deficit that has ballooned to $73 billion, has called on lawmakers to reopen the state budget to the changes, adding a proposal for a cumulative $1. 5 billion in taxes on fitness insurers to expand the state’s coverage. Cheap Fitness Insurance. -Wage earners regardless of immigration status.
Republican Rep. Bill Essayli called the expansion, which would come with $4 billion in public funds, “money we don’t have” for “illegal immigrants” at a March 14 Budget Committee meeting before an Assembly vote. Akilah Weber, a Democratic assemblyman and also a physician in San Diego, said the expansion would mean “we can continue to do our homework and do our jobs for patients without having to cut services. “
The top tax would need to be approved by March 21 for federal approval. The governor and lawmakers are negotiating other budget changes, which could include more taxes or billions of dollars in cuts to school construction, homeless housing, broadband or transportation funding. .
Conservative systems are also under scrutiny, as tax revenues fell in 32 states last year and failed to keep up with inflation in 40 states and the District of Columbia, according to Stateline’s analysis.
Tennessee Republicans Republican Gov. Bill Lee’s $140 million proposal for universal school vouchers. But a budget shortfall is causing some GOP insiders to question increased funding for public schools, which is aimed at melting the deal and melting opposition from Democrats and others. who fear the program will hurt public schools.
Republican state Rep. Charlie Baum noted that the current edition of Lee’s voucher plan includes another $320 million for investments in public schools in rural areas, subsidies for staff fitness insurance and structural pricing, expenses the state can’t afford given its $400 million budget deficit. He said.
Some states are raising taxes to locate more cash as surpluses shrink: In New Jersey, where the state’s tax revenue fell 4% last year but is still 32% higher than in 2019, Democratic Gov. Phil Murphy called on lawmakers to pass a tax on the behemoth. Companies are joining the public transportation formula by raising about $1 billion this year. The additional budget could simply help maintain a program to reduce estate taxes on seniors.
In Arizona, a projected $1. 7 billion budget deficit looms after a flat tax on the source of earnings signed into law by Republican Gov. Doug Ducey in 2021 went into effect last year. Incumbent Democratic Gov. Katie Hobbs has run to recoup cash from approved roads. projects and school vouchers under more positive forecasts. Stateline’s research shows that the state of Arizona’s tax revenue decreased 8%, or about $1. 9 billion, last year compared to 2022, but more than 26% compared to 2019.
Tax cuts can “come home” for states like Arizona that have particularly cut back on the pandemic, slowing states’ ability to improve things like schools and housing, said Wesley Tharpe, senior adviser for state fiscal policy at the left-wing party. budgetary and policy priorities.
“More than a portion of states have used the transitory surplus policy of the post-Covid-19 recovery to enact permanent rebates on their taxes on the source of earnings,” Tharpe said. “In a number of states, the cuts are really, in fact, historic, such as Arizona, North Carolina, and West Virginia. It’s not just that states may be forced to cut services, while they’re cutting taxes to that extent, but they’re also giving up profits that could be used to cover unmet needs. needs.
But conservatives insist the tax cuts will help states in the long run return more money to consumers and attract more high-income workers.
“Most states that have cut taxes have discovered tactics to offer sustainable and guilty tax breaks,” said Jared Walczak, vice president of state projects at the pro-business organization The Tax Foundation. “The tax festival is more vital than ever, and if we’re balancing a budget, we’d be dealing more with Mountain West, which is cutting taxes, than with some of the states that are raising taxes on the coasts right now. “
Utah and Iowa experienced double-digit declines in tax revenues.
Falling oil costs in 2023 have hurt some states. Alaska saw the largest percentage drop in state tax benefits last year — 50%, or $2. 1 billion — even though the state expects oil costs to rise this year, and the state’s tax benefit is still 32% higher than in 2019.
Maryland, which, like California, is unusually dependent on tax gains from high-income earners, faces political battles to cut spending or raise taxes, in light of persistent tax revenue disappointments that have created a $500 million shortfall in the proposed budget.
States have become accustomed to taking their revenue and also returning it, as most states have been able to cut taxes and increase spending at the same time thanks to stimulus funds, a booming economy, and customer spending that has boosted tax revenues. , decisions are becoming harder to make as customers tighten their wallets, tax cuts go into effect, stimulus spending ends, and some resources from high-income jobs, such as energy and technology, have fallen back to earth.
A worrisome new result at the end of 2023 continues this year: declining sales tax profits as consumers spend less on retail items, said Lucy Dadayan, a senior associate at the Urban-Brookings Center on Fiscal Policy.
“It’s alarming,” Dadayan said. In the two months, November and December, there was a drop in sales tax, indicating that consumers are tightening their wallets. “
Texas reported a 2% decline in sales tax revenue distributed to local governments in March based on January sales, and Arizona’s retail sales tax revenue rose just 1% in January, the slowest expansion in a decade. Maryland is contemplating expanding its sales tax to more in light of the retail crisis.
The puzzling drop in sales tax is especially minor in cities that rely on it to pay for basic expenses like police and firefighters. Sales tax revenue accounts for more than 43% of the budget in Greenwood, Arkansas, a town of about 9,600 people near the Oklahoma border. Sales taxes have been flat year-to-date, rather than rising 4. 5% as expected, Chief Financial Officer Thomas Marsh said.
Greenwood’s sales tax earnings soared 50% during the pandemic as large retail establishments and restaurants near Fort Smith closed and citizens shopped and dined at restaurants closer to their homes or online; an Arkansas state law required a local sales tax for online purchases. Officials had expected a slowdown in the expansion but were caught off guard when the expansion stalled in January and February, which could force hiring freezes and structural projects to be postponed if the scenario persists, Marsh said.
David Thurman, director of the Tennessee Budget Analyst Agency and president-elect of the National Association of State Budget Officers, said Tennessee and other states want to step back from ambitious systems for a “reset year” as taxes return to pre-pandemic levels. levels. levels of growth.
“We’ve structured the 2025 [fiscal] budget to allow for the overall costs of government, but we’re not doing much else,” Thurman said. “I think we’re all going to be more cautious until we have a broader concept of what the new general will do. “it seems. “
Stateline is owned by States Newsroom, a grant-funded nonprofit news network and donor coalition as a 501c public charity(3). Stateline maintains its editorial independence. Please contact Editor-in-Chief Scott S. Greenberger if you have questions: [email protected]. Follow Stateline on Facebook and Twitter.
by Tim Henderson, Michigan Preview March 25, 2024
From health care for immigrants in California to universal controls in Tennessee, states are being forced to reconsider costly projects as tax revenues dwindle and federal pandemic aid ends.
State tax revenues fell 4% last year, according to a Stateline investigation of U. S. Census Bureau estimates. U. S. Census Paper, published this month. Revenues are still rising from 2019 at around 28%, which is higher than the inflation rate of around 18% at the time.
California and New York State bore a disproportionate percentage of the losses, even when their gigantic populations are taken into account. These states lost a total of $56 billion in tax revenue, most of the $66 billion in national losses.
Whitmer presents an $80. 7 billion budget plan for fiscal year 2025, smaller than this year’s budget.
California Gov. Gavin Newsom, a Democrat facing a budget deficit that has ballooned to $73 billion, has called on lawmakers to reopen the state budget to the changes, adding a proposal for a cumulative $1. 5 billion in taxes on fitness insurers to expand the state’s coverage. Affordable Fitness Insurance. -Wage earners regardless of immigration status.
Republican Rep. Bill Essayli called the expansion, which would come with $4 billion in public funds, “money we don’t have” for “illegal immigrants” at a March 14 Budget Committee meeting before an Assembly vote. Akilah Weber, a Democratic assemblyman and also a physician in San Diego, said the expansion would mean “we can continue to do our homework and do our jobs for patients without having to cut services. “
The top tax would need to be approved by March 21 for federal approval. The governor and lawmakers are negotiating other budget changes, which could include more taxes or billions of dollars in cuts to school construction, homeless housing, broadband or transportation funding. .
Conservative systems are also under scrutiny, as tax revenues fell in 32 states last year and failed to keep up with inflation in 40 states and the District of Columbia, according to Stateline’s analysis.
Tennessee Republicans Republican Gov. Bill Lee’s $140 million proposal for universal school vouchers. But a budget shortfall is causing some GOP insiders to question increased funding for public schools, which is aimed at melting the deal and melting opposition from Democrats and others. who fear the program will hurt public schools.
Republican state Rep. Charlie Baum noted that the current edition of Lee’s voucher plan includes another $320 million for investments in public schools in rural areas, subsidies for staff fitness insurance and structural pricing, expenses the state can’t afford given its $400 million budget deficit. He said.
Some states are raising taxes to locate more cash as surpluses shrink: In New Jersey, where the state’s tax revenue fell 4% last year but is still 32% higher than in 2019, Democratic Gov. Phil Murphy called on lawmakers to pass a tax on the behemoth. Companies are joining the public transportation formula by raising about $1 billion this year. The additional budget could simply help maintain a program to reduce estate taxes on seniors.
In Arizona, a projected $1. 7 billion budget deficit looms after a flat tax on the source of earnings signed into law by Republican Gov. Doug Ducey in 2021 went into effect last year. Incumbent Democratic Gov. Katie Hobbs has run to recoup cash from approved roads. projects and school vouchers under more positive forecasts. Stateline’s research shows that the state of Arizona’s tax revenue decreased 8%, or about $1. 9 billion, last year compared to 2022, but more than 26% compared to 2019.
The tax cuts could “come home” for states like Arizona, which have particularly cut back on the pandemic, slowing states’ ability to improve things like schools and housing, said Wesley Tharpe, senior adviser for state fiscal policy at the left-wing party. budgetary and policy priorities.
“More than a portion of states have used the transitory surplus policy of the post-Covid-19 recovery to enact permanent rebates on their taxes on the source of earnings,” Tharpe said. “In a number of states, the cuts are really, in fact, historic, such as Arizona, North Carolina, and West Virginia. It’s not just that states may be forced to cut services, while they’re cutting taxes to that extent, but they’re also giving up profits that could be used to cover unmet needs. needs.
But conservatives insist the tax cuts will help states in the long run return more money to consumers and attract more high-income workers.
“Most states that have cut taxes have discovered tactics to offer sustainable and guilty tax breaks,” said Jared Walczak, vice president of state projects at the pro-business organization The Tax Foundation. “The tax festival is more vital than ever, and if we’re balancing a budget, we’d be dealing more with Mountain West, which is cutting taxes, than with some of the states that are raising taxes on the coasts right now. “
Utah and Iowa experienced double-digit declines in tax revenues.
Falling oil costs in 2023 have hurt some states. Alaska saw the largest percentage drop in state tax benefits last year — 50%, or $2. 1 billion — even though the state expects oil costs to rise this year, and the state’s tax benefit is still 32% higher than in 2019.
Maryland, which, like California, is unusually dependent on tax gains from high-income earners, faces political battles to cut spending or raise taxes, in light of persistent tax revenue disappointments that have created a $500 million shortfall in the proposed budget.
States have become accustomed to taking their revenue and also returning it, as most states have been able to cut taxes and increase spending at the same time thanks to stimulus funds, a booming economy, and customer spending that has boosted tax revenues. , decisions are becoming harder to make as customers tighten their wallets, tax cuts go into effect, stimulus spending ends, and some resources from high-income jobs, such as energy and technology, have fallen back to earth.
A worrisome new result at the end of 2023 continues this year: declining sales tax profits as consumers spend less on retail items, said Lucy Dadayan, a senior associate at the Urban-Brookings Center on Fiscal Policy.
“It’s alarming,” Dadayan said. In the two months, November and December, there was a drop in sales tax, indicating that consumers are tightening their wallets. “
– David Thurman, director of the Tennessee Budget Analysis Agency and president-elect of the National Association of State Budget Officers
Texas reported a 2% decline in sales tax revenue distributed to local governments in March based on January sales, and Arizona’s retail sales tax revenue rose just 1% in January, the slowest expansion in a decade. Maryland is contemplating expanding its sales tax to more in light of the retail crisis.
The puzzling drop in sales tax is especially minor in cities that rely on it to pay for basic expenses like police and firefighters. Sales tax revenue accounts for more than 43% of the budget in Greenwood, Arkansas, a town of about 9,600 people near the Oklahoma border. Sales taxes have been flat year-to-date, rather than rising 4. 5% as expected, Chief Financial Officer Thomas Marsh said.
Greenwood’s sales tax earnings soared 50% during the pandemic as large retail establishments and restaurants near Fort Smith closed and citizens shopped and dined at restaurants closer to their homes or online; an Arkansas state law required a local sales tax for online purchases. Officials had expected a slowdown in the expansion but were caught off guard when the expansion stalled in January and February, which could force hiring freezes and structural projects to be postponed if the scenario persists, Marsh said.
David Thurman, director of the Tennessee Budget Analyst Agency and president-elect of the National Association of State Budget Officers, said Tennessee and other states want to step back from ambitious systems for a “reset year” as taxes return to pre-pandemic levels. levels. levels of growth.
“We’ve structured the 2025 [fiscal] budget to allow for the overall costs of government, but we’re not doing much else,” Thurman said. “I think we’re all going to be more cautious until we have a broader concept of what the new general will do. “it seems. “
Stateline is owned by States Newsroom, a grant-funded nonprofit news network and donor coalition as a 501c public charity(3). Stateline maintains its editorial independence. Contact Editor Scott S. Greenberger if you have questions: info@stateline. org. Follow Stateline on Facebook and Twitter.
Michigan Advance is owned by States Newsroom, a grant-funded, not-for-profit news network and donor coalition as a 501c public charity(3). Michigan Advance maintains its editorial independence. Contact Editor Susan J. If you have any questions, please visit: info@michiganadvance. com. Follow Michigan Advance on Facebook and Twitter.
Tim Henderson has been a reporter for the Miami Herald, the Cincinnati Enquirer, and the Journal News in the suburbs of New York City. He has published articles on demographic trends in South Florida, adding research on housing affordability included in the 2007 report. The Pulitzer Prize-winning “House of Lies” series for the Miami Herald and an award-winning investigation into pension irregularities for the Journal News.
TOOLKIT FOR DEMOCRACY
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