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While
Bush2 has a tax cut of disputable impact coming on its way to you, the states
will be raising taxes. Yin and
Yang? Links are Live. - KWC State
Tax Revenue Fell Sharply In Fiscal 2002 After posting
significant gains from 1995 through 2001, state tax revenue fell sharply in
fiscal year 2002, declining 5.6 percent across all states, according to a new
report from the Rockefeller Institute of Government. The Rockefeller report
– A
Bad Year: Fiscal Year 2002 Tax Revenue Summary – notes that the decline is even steeper,
coming in at 7.7 percent, when changes to the tax code and inflation are
factored in. "It was the worst
revenue performance we've seen," Rockefeller fiscal analyst Nick Jenny
told STATELINE.ORG. Rockefeller,
a nonpartisan public policy research center based at the State University of New York –
Albany, started tracking state tax revenue in 1991. The worst performing
state taxes were the personal income tax, which declined 10.8 percent, and the
corporate income tax, which declined 18.8 percent. The sales tax, meantime,
increased 0.6 percent, making it the strongest performing major state tax
during fiscal year 2002, which ran from July 1, 2001, through June 30, 2002,
for all but four states. Rockefeller attributes
the overall revenue decline to the national recession that started around March
2001. Two years later, the economy is still sputtering and state coffers have
yet to recover. Jenny said his research indicates that overall state tax
revenue has been flat so far during fiscal year 2003, although it will be some
time before final numbers are available. The revenue hit from the recession was
most significant in high-income states such as California, Massachusetts and
Oregon, which draw a significant percentage of their tax revenues from personal
investment income.
>From fiscal year 2001 to 2002, California's revenues fell 17.6 percent,
Massachusetts' revenues fell 14.6 percent and Oregon's fell 20.3 percent,
according to the report. Rockefeller notes,
however, that these states were more flush than most at the beginning of the
downturn because they had reaped significant gains during the boom times of the
1990's. So while their fall was steep, it was from a higher-than-average level.
"It's a down year equivalent
to one of the better up years in the 1990's, so it doesn't unravel all of that,
but of course it puts state budget planning in a pretty bad situation,"
Jenny said. Jenny added that many
states are predicting a slight increase in their revenue during fiscal year
2004, basing their optimism on a hoped-for recovery of the national economy. Congress
Approves Money For States In Tax Bill Congress threw the states a $20 billion lifeline Friday (5/23) as part
of a $350 billion tax cut plan supporters said would stimulate the economy.
President Bush is expected to sign the bill into law within the next week. The $20 billion of
fiscal relief is a huge victory for states, many of which are beset by budget
problems of historic proportions that are forcing them to raise taxes and cut
programs. Total state deficits for this fiscal year are $21.5 billion; next
year's deficits total more than $50 billion, according to the National
Conference of State Legislatures (NCSL). Governors expressed
their appreciation for the fiscal relief part of the tax bill. "These monies will help governors
continue to provide essential and critical services to our citizens," said
Idaho Gov. Dirk Kempthorne (R) in a press release issued by the National
Governors Association (NGA). As NGA vice chairman, Kempthorne had been lobbying
Congress for relief on behalf of his fellow governors. The $330 billion tax
cut passed by Congress was far smaller than Bush's original $726 billion
proposal, although critics said the true cost of the final bill is upwards of
$1 trillion over the next ten years. The majority of the tax cuts are devoted
to reducing the tax on dividends and speeding up income tax cuts for working
individuals, married couples and families. The income tax cuts were scheduled
to have occurred in 2006 under the tax bill Congress passed two years ago. The state aid portion is divided in two
parts. Half of it – $10
billion – will be channeled directly through Medicaid, the state-federal
program that provides health care to more than 40 million of the nation's poor.
The program's costs have been growing by double-digit percentages over the past
five years, leading many state lawmakers to complain that the program could
bankrupt state governments in the not-so-distant future. The Medicaid money
will be retroactively disbursed over 15 months beginning April 1, 2003,
according to NCSL. The remaining $10 billion will be given to
states in population-based grants that can be used to fund a wide variety of programs, from
education to homeland security to road building and maintenance. The grants will be distributed over fiscal
years 2003 and 2004,
according to NCSL. The amount of money
flowing to each state varies greatly depending on population size. California
and New York, for example, will receive $2.4 billion and $2.2 billion,
respectively, according to the Federal Funds Information for the States (FFIS).
Wyoming, on the other hand, will receive only $66 million. For a table that describes the monies
each state will receive, please visit the FFIS
web site.
Congressional approval
of fiscal relief was nearly two years in the making. Governors first started
lobbying Congress for help with the Medicaid program in the fall of 2001 as
state revenues fell flat and the program's cost spiraled upward. Their call for
help found some traction in the Senate, but the Bush administration and the
House were unmoved. As state fiscal
problems worsened over 2002 and early 2003, governors' cries for aid grew
sharper. They found an audience in a group of moderate Republican senators,
including Maine Sen. Olympia Snowe (R) and Oregon Sen. Gordon Smith (R), who
conditioned their support for Bush's 2003 tax cut plan on the inclusion of
fiscal relief for states. Despite the tax bill's state aid, Snowe voted against
the final package because she said its true cost was obscured by accounting
gimmicks. The key role these
senators played in securing state relief was not lost on the governors. "The nation's governors are
particularly grateful to those individual members of Congress who have worked
so hard with us over the past two years to secure this much-needed
relief," Kentucky Gov. Paul Patton (D), NGA chairman, said in a press
release. |
