Next step: state budget shortfalls leading to higher taxes

[c1ue]

Mish's comments have disappeared - presumably due to cross competitiveness issues?

But http://www.globaleconomicanalysis.blogspot.com has a nice summary on how states are being impacted by the real estate fiasco, and how they are reacting to it.

To summarize:

1) Sales tax collections are mostly falling across the board
2) States with heavy dependence on income from real estate taxes are feeling a major pinch
3) States are reacting in 1 of 2 ways: a) raise taxes, b) reduce taxes to 'stimulate the economy'. Mostly a).

I can foresee the 3)b) states achieving much lower bond ratings in the near future...

[FRED]

Re: Next step: state budget shortfalls leading to higher taxes

Mish's comments have disappeared - presumably due to cross competitiveness issues?

But http://www.itulip.com has a nice summary on how states are being impacted by the real estate fiasco, and how they are reacting to it.

To summarize:

1) Sales tax collections are mostly falling across the board
2) States with heavy dependence on income from real estate taxes are feeling a major pinch
3) States are reacting in 1 of 2 ways: a) raise taxes, b) reduce taxes to 'stimulate the economy'. Mostly a).

I can foresee the 3)b) states achieving much lower bond ratings in the near future...

globaleconomicanalysis.blogspot.con has a long-standing policy of not sending any traffic to itulip.com so unfortunately we have been forced to reciprocate.

[EJ]

Re: Next step: state budget shortfalls leading to higher taxes

Mish's comments have disappeared - presumably due to cross competitiveness issues?

But http://www.itulip.com has a nice summary on how states are being impacted by the real estate fiasco, and how they are reacting to it.

To summarize:

1) Sales tax collections are mostly falling across the board
2) States with heavy dependence on income from real estate taxes are feeling a major pinch
3) States are reacting in 1 of 2 ways: a) raise taxes, b) reduce taxes to 'stimulate the economy'. Mostly a).

I can foresee the 3)b) states achieving much lower bond ratings in the near future...

To Fred's point, we have been very open about allowing our members to refer to any other site, including direct competitors. Unlike iTulip's, their forums are heavily managed so that zero traffic is forwarded to iTulip. Many of these sites borrow heavily from iTulip.

After many years of this, it's gotten old. So, unfortunately, we've been forced to adopt similar policies.

To your question, as we've mentioned here before, Japan is the best model for understanding what will happen in the US. Much as prefectures started to run massive deficits to relieve some of the fiscal burden from the national government in the mid 1990s, US states will cut taxes and run deficits in a few years. This will require changes in law, but that legislation will be easy to pass when the economy is doing poorly.

[jk]

Re: Next step: state budget shortfalls leading to higher taxes

perhaps there is someone among us with more specific knowledge, but it is my impression that balanced budgets are mandated by many states' constitutions. not as easily changed as a mere law.

a quick google reveals:
State balanced budget requirements vary widely, however.

• Forty-three states require their governors to submit a balanced budget to their legislatures.
• The legislature is required to pass a balanced budget in 39 states.
• Thirty-one won't allow the governor to sign a budget with a deficit.
• Some of these rules are written in constitutions and others as statutes; enforcement rules also differ.

and
All the states except Vermont have a legal requirement of a balanced budget. Some are constitutional, some are statutory, and some have been derived by judicial decision from constitutional provisions about state indebtedness that do not, on their face, call for a balanced budget. The General Accounting Office has commented that "some balanced budget requirements are based on interpretations of state constitutions and statutes rather than on an explicit statement that the state must have a balanced budget."


but i haven't found a list of which states fall in which categories.

[c1ue]

Re: Next step: state budget shortfalls leading to higher taxes

JK,

I'm not an expert but am familiar with the rules you talked about.

The problem with all of the amendments is that they have loopholes the size of Interstates - most of the balanced budget amendments can be bypassed with 'bond' measures, for example.

Another major hole is the ability of some of the states to tap into their 'rainy day' accounts for certain types of spending - what inevitably will happen is that all types of spending will be either moved into the 'correct' category or some other type of accouting gim-crackery.

Finally there will be the political reaction stoking populist sentiment - let's spend our way out. This will probably allow at least a few of the states to completely abolish their balanced budget requirements.

I can see it now: pass Proposition 69, or (insert according to demographic group)

a) Your kid's education will suffer
b) Your elderly parents will lose benefits
c) Your property taxes will go up
d) Your income taxes will go up
e) Your roads will get even worse

The list goes on...

[jacobdcoates]

Re: Next step: state budget shortfalls leading to higher taxes

Hell I live in Ohio and we have all of those already.