George S. May Business Blog

WSJ reports state income tax down 26%

An article in the WSJ pointed out the unfortunate fact that California isn’t the only state going broke:

“State income-tax revenue fell 26% in the first four months of 2009 compared to the same period last year, according to a survey of states by the nonprofit Nelson A. Rockefeller Institute of Government.

The report, conducted by the public-policy research arm of the State University of New York, is one of the most up-to-date measures of how deep the recession is digging into Americans’ wallets and, consequently, state coffers.

States are required by law to balance the budget, so lower tax revenues will translate in service cuts, rather than red ink. Already states such as Kansas are slowing the payment of income-tax refunds and delaying payments to local school districts, according to the report.”

One can’t be too surprised at the news of such as, well, it’s common sense really:

More people unemployed = less income tax = a cut in state services.

What these states need to do is go by the business model the Federal government uses.

Step 1: Buy a printing press

Step 2: Use it.

Now we begin to see how generosity on behalf of the United States government doesn’t necessarily translate into the success of local government. Handing out checks or giving money back on car and home purchases absolutely helps the consumer on an individual level. You can’t deny the amiability of a few extra bucks in your mailbox or paycheck. The question is, does it have an affect on your neighborhood as a whole? Is your community feeling a lift from the stimulus package? These next six months will be very telling.

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