US wealth gap putting the squeeze on state revenue

[Omaha Steve]

Source: AP-Excite

By JOSH BOAK

WASHINGTON (AP) — Income inequality is taking a toll on state governments.

The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released Monday by Standard & Poor's.

Even as income for the affluent has accelerated, it's barely kept pace with inflation for most other people. That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others do, thereby limiting sales tax revenue.

As the growth of tax revenue has slowed, states have faced tensions over whether to raise taxes or cut spending to balance their budgets as required by law.

FULL story at link.



FILE - In this April 16, 2012 file photo, an Illinois Department of Revenue employee offers assistance to income tax payers at the Illinois Department of Revenue in Springfield, Ill. The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released Monday, Sept. 15, 2014 by Standard & Poor{2019}s. (AP Photo/Seth Perlman, File)


Read more: http://apnews.excite.com/article/20140915/us-wealth-gap-state-revenue-0c13125e5f.html

[LiberalElite]

1. Well, it's obvious -

gotta cut spending! Can't afford anything! Can't have all those takers taking! They feel ENTITLED!

[LuvNewcastle]

3. Maybe the rich will suddenly start

opening factories if we cut their taxes. That 15% rate they've been paying is what's been holding them back all along.

[DBoon]

19. Maybe human sacrifice

will make next year's harvest better

[Brigid]

21. You and LuvNewcastle together win the thread.

[LuvNewcastle]

2. Here is yet another reason why it's bad to

have all the money in a small number of hands. It's bad for the economy, it starves the government, and it's just plain wrong. I understand why the wealthy don't care, but poor and middle class people who defend this system astonish me with their stupidity. I know they think they're going to be rich one day, but this system makes that less and less of a possibility every day.

[Enthusiast]

4. Those poor and middle class people you speak of are bombarded with propaganda continuously.

They are victims of the greatest propaganda effort in all of history. They often subscribe to the supply side theory that cutting taxes increases revenue. Until very recently you could hear that claim by TV Republicans every single day.

[Amonester]

14. That RW propaganda has not stopped...

neither "recently" nor "as we speak" ...

They now use the intertubes...

[The Wizard]

5. We have the largest wealth

disparity since the Gilded Age.

[daleo]

6. It may in fact be worse than the Gilded Age

[toby jo]

7. Great connection, OS, thanks.

It's been falling down a long time into the cracks and now it's solidifying in state govts. Governors are a little more real than WDC people, maybe they'll begin the kickback. Into our hands, where else can they go? We've been here all along.

[progree]

8. There has been a big shift too from progressive income taxes to regressive sales taxes and

regressive property taxes (yes, most economists agree that ultimately it's the renters that pay most of the property taxes on rental property). The shift from progressive taxes to regressive taxes has been especially big in red states.

I thought the article did a fairly good job to highlight how helpful raising the marginal rates on income taxes for higher earners is (to increasing state revenues). But then the next to the last paragraph had this crap:

Research by Lucy Dadayan, a senior policy analyst at the Nelson A. Rockefeller Institute of Government, notes that income tax collections have become more volatile from year to year, making it harder for states to plan budgets, provide services and launch programs. She endorses an overhaul of state tax codes to produce a more balanced revenue flow.

Yes, it is true that income taxes, especially on higher earners, swing much more with the economic cycle than do sales and property taxes. But a better solution to the volatility issue are rainy day funds, NOT raising regressive sales taxes and property taxes to achieve "balance". The "balance" argument is the big blathering canard many right-wingers use to screw the non-wealthy.

That and the "its only pennies on the dollar" argument to raising sales taxes -- the most regressive of the major taxes, that many goobers buy into.

[wordpix]

9. people like Hank Paulson who deregulated & oversaw the 2008 financial crash

made off like bandits with their hundreds of million$. They should be held accountable and made to pay: grr:

Ditto for corporate raiders who hide their $ in tax havens, like Mitt Rmoney

[Enthusiast]

15. +1

[mwooldri]

10. Something states won't do: Reform "Use Tax".

I know not all states have this, but NC has this "use tax" which is intended to capture out of state sales tax.

As it stands, one can document their out of state purchases, pay a flat rate based on income, or declare no out of state purchases.

A simple reform is to make the use tax more progressive. A higher rate of use tax for higher income people, coupled with some kind of way to audit out of state spending, could net more revenue that way. Also residency rules could be changed by assuming an individual is in-state all year if they own residential property that's very highly valued.

Put it all in a nice legislative package, call it something like "contributing to the community act" and put some other measures in that reward volunteerism (some kind of tax break) or stuff like that.

[freebrew]

13. We have a sales/use tax as well...

here in MO. The same license and fees, because it's supposed to capture items bought with a sales tax deduction that the owner uses personally. So the items in question are still generating revenue.

I'll give you one guess how often that happens.......Never.

Since the state doesn't keep records of what items are bought with a tax discount, it's impossible to tell whether or not tax was paid on any item.

So, another break for the richer folk that can afford a sales tax license.

[valerief]

11. If only the wealthy had more tax breaks and the angry had more guns.

Only in a perfect world.

[Trillo]

12. Sales taxes, regressive.

User fees, even more regressive, but seemingly defined as "not a tax".

What will the state governments do? There are lots more poor people than there are wealthy. Will states raise already regressive taxes further?

[Enthusiast]

16. Will states raise already regressive taxes further?

That appears to be the trend.

[TBF]

17. Excellent -

I didn't do a search before posting his article in Soc Prog. Glad to see the comments here!

[blkmusclmachine]

18. Seems like everything is going according to plan, yes? I think the 1% intends to weed the herd.

[Uncle Joe]

20. Kicked and recommended.

Thanks for the thread, Omaha Steve.