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Are States Really Hurting for Money? April 28, 2009

Posted by Daniel Downs in news, politics, research, taxes.

Stateline.org recently reported that the severe recession is producing budget shortfalls in most states. In January, the National Conference of State Legislatures (NCSL) projected overall budget deficits of state would be around $85 billion for 2010. Since then, NCSL has increased its estimates to $121 billion. The National Governors Association estimates budget gaps could grow to $230 billion by 2010, according to Stateline staff writer Pamela Prah.

States officials are proposing all sorts of tax hikes and service fee supposedly to balance their respective state budgets.

The multi-billion dollar question is whether state governments are really hurting for budget balancing cash.

According to chief economist for Small Business & Entrepreneurship Council Raymond Keating, the short answer is no. States are not actually hurting for money, and here’s why.

In a April 2 SBEC article, Keating wrote:

The U.S. Census Bureau just released data for state tax collections in fiscal year 2008. For the U.S. overall, state government tax collections increased by 3.2 percent versus the prior year. That was ahead of the inflation rate.

Even more important is to look at these numbers over a longer period of time.

Let’s take a look at the 2000 to 2008 period, for example. During that timeframe, inflation rose by 22.4 percent, based on the GDP price deflator.

At the same time, state government tax collections jumped by 45 percent.

So, state government tax collections raced ahead at twice the rate of inflation.

Factor in population growth, and per capita state tax collections still grew by 35 percent. Again, that was well ahead of inflation – in fact, 56 percent faster than inflation.

Consider one glaring example. New York state lawmakers just agreed to a package of enormous tax increases that will do some real damage to the state’s economy. The reason put forth was that the state faced a big budget deficit. From 2000 to 2008, however, New York’s per capita state tax collections increased by 53 percent. By the way, while lawmakers were hiking taxes, they also were still increasing spending.

In the end, the budget woes confronting many states are not just about the current recession. They’re more about politicians refusing to plan properly. They are about elected officials who take a shortsighted view of their jobs, by spending more and more with little regard to what might happen in a tough economy.

What I take away from the above is this: Let the spend thrifts in our state capitals cut their spending to balance their budgets or resign.
Taxpayers should stop believing the bull of their elected and unelected tyrants and start forcing them to serve the citizen-taxpayers rather than special interests that pad their pockets or swell their egoistical status. If they don’t like it, tax-paying and voting citizens should fire them and their administrative personnel who actual provide them with their special-interest-laden plans.

Taxpaying citizens can always find better managers of their collective affairs.



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