BabyBoomer50s
Capitalist
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- Nov 27, 2018
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Withering piece in this morning’s Journal…
The Blue State Budget Blues
The fiscal crash arrives following years of profligate spending.
Highlights:We hope progressive states enjoyed their Covid spending party while it lasted. Now arrives the hangover as federal largesse ebbs and tax revenue falls from unsustainable heights.
New York State Comptroller Thomas DiNapoli said Friday that state tax collections in the past two months are running 32.2% lower than a year ago, with personal income tax revenue lagging 45%. His report follows Gov. Kathy Hochul’s revised budget forecast this month projecting a $36.4 billion shortfall over the next three years.
Democrats in Albany exacerbated the state’s fiscal reliance on the rich in 2021 when they raised the combined state and New York City top rate to 14.8% from 12.7%. Millionaires now pay as much state income tax as the bottom 98.9% of tax filers.
Next door in New Jersey, officials reported Monday that tax revenue last month declined 20% from the previous May, driven by a 55% plunge in income-tax, and 44% drop in corporate-tax, collections. Income-tax revenue in the current fiscal year that began last July is running 9.2% lower than in the previous year while corporate-tax revenue is down 5.7%. For the first time in nearly three years, sales tax revenue in May also dropped.
Recall that Democrats in Trenton raised income taxes and extended a 2.5 percentage point corporate surtax in autumn 2020. New Jersey’s 11.5% top corporate tax rate is now the highest in the country.
Time and again, progressives use putative budget emergencies to impose supposedly temporary tax increases that invariably become permanent as the revenue is baked into spending baselines. This is what happened in California in 2012 when Democrats raised the top rate to 13.3%.
California’s budget has since become even more dependent on the affluent. The top 0.5% of taxpayers pay 40% of state income tax, and their capital gains have plunged. Income-tax collections in the fiscal year that started last July are 34.6% below a year earlier and corporate-tax revenue is down 33.7%. Gov. Gavin Newsom last month increased the state’s projected budget deficit to $32 billion, but revenue is already trailing his revised forecast.
By contrast, tax revenue in Florida is exceeding forecasts. Florida’s corporate-tax revenue—at a 5.5% rate—during the first 10 months of this fiscal year is up 57.7% year-over-year. States tax corporate income based on the share of business done in their borders. So while corporate earnings generally are shrinking, Florida appears to be grabbing a larger share of profits as businesses expand in the state. The opposite may be happening in California, New York and New Jersey.
Florida’s $117 billion budget this year is half as large as New York’s, though it has 2.5 million more people. The Sunshine State lacks an income tax and mandatory government collective-bargaining, which together create a tax-and-spend ratchet. An iron law in progressive states is that when revenue falls, taxes go up. Look out below.
https://www.wsj.com/articles/tax-re...mas-dinapoli-kathy-hochul-california-948562e5
