States collect more taxes than expected
Kai Ryssdal: Here’s one I’m betting you didn’t see coming, and neither, honestly, did we.
A number of states — including California, New Jersey, and West Virginia — are reporting a spike in tax revenues. For that, they can thank the rich. A lot of the money’s coming from wealthier taxpayers whose incomes have been rising along with the stock market. While the windfalls aren’t going to zero out any budget deficits, they might help ease some of the financial pressures that states have been under since the Great Recession. Now all legislators and governors have to do is agree on how to spend the extra money.
Marketplace’s Janet Babin has that story.
Janet Babin: Some of the tax revenue spurts were dramatic: California revenues were up $6.6 billion over a two-year period.
H.D. Palmer: That’s certainly good news, beats the heck out of the alternative.
That’s H.D. Palmer from California’s Finance Department. Other states are pulling it in too. New Jersey is expecting revenues to increase by about $1.4 billion. The state’s legislative budget director David Rosen says the added revenue comes almost entirely from the rich — those earning over $1 million a year.
David Rosen: While the rest of our economy not doing especially well — unemployment is still very high — this group, whose incomes are tied to Wall Street, have had a good year.
The income tax gains mirror those seen in the stock market. John Graham is a finance professor at Duke University.
John Graham: The stock market has increased by about 25 percent over the last year, and so people who own stocks need to pay capital gains tax on that.
But stock gains could just as easily evaporate next year. That volatility makes it difficult to forecast state budgets. And, states now have to agree on how to spend the money. New Jersey might restore deep cuts made to education. Governor Jerry Brown wants to use the surplus to pay down California’s Wall of Debt. Again, here’s California’s H.D. Palmer.
Palmer: The governor wants to take some of these new revenues we’ve gotten in this revised budget, and start tearing down this wall, as a former president once said.
States that want to save the cash, may have the toughest sell of all. It’s hard to put money away in a rainy day fund when it’s been pouring for so many months.
I’m Janet Babin for Marketplace.
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