COVID Taxes Local Economies

COVID Taxes Local Economies

(UnitedVoice.com) – State and local governments across the country may become the next victims of COVID-19. Many are running out of money as revenue from sales and property taxes dry up. A myriad of other business taxes are also disappearing during state-induced shutdowns to limit the spread of the highly contagious virus.

Over the last four weeks, more than 17 million Americans have filed for unemployment — with many more unemployment forms likely to come. Federal Reserve Chairman Jerome Powell said Thursday that the US economy is in an “emergency and is deteriorating with alarming speed” as the nation’s economy is in lockdown.

States and local governments are becoming more vulnerable because they don’t have the means to print money. Because of the pandemic, local authorities only have a limited amount of means at their disposal to raise enough funds to meet their needs. The federal government is trying to help states with broken budgets due to drastic reductions in tax revenues and massive increases in unemployment and Medicaid payments. That’s on top of expensive pension plans many states were struggling with before COVID-19. The CARES Act phase 3 stimulus bill signed into law by President Trump a few weeks ago is providing the states with approximately $200 billion, but it’s not even close to what’s needed.

State and Local Governments Feeling the Brunt

In the wake of COVID-19, state governments are laying off employees and reducing unnecessary expenses as much as possible. In Pennsylvania, one of the hardest-hit states, Gov. Tom Wolf laid off 2,500 part-time and seasonal workers and announced another 9,000 state employees would not get paid while the state’s economy is battered. Tax revenues in Pennsylvania fell 6% in March, creating a $295 million shortfall as of the end of March. However, a billion-dollar total deficit or more is looming over the state’s head before the end of the state’s fiscal year on June 30th.

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Not to be outdone, Arizona is facing a $1.1 billion deficit. States that rely on tourism, like Nevada, Florida, and Louisiana, are in dire trouble as people stay home. Michigan is in almost total lockdown and is banning people from visiting family and friends. Every single state is struggling — some more than others. The questions states are starting to grapple with surround what programs need to be cut and how to raise more money to pay for what’s needed

States are not alone in their struggle. County, municipal governments, and school districts are also seeing their tax revenues dry up as people lose their jobs and states begin delaying tax payment deadlines to help struggling taxpayers. While states have it within their powers to help local governments, they may not have the means due to the enormity and cost of the problems created by COVID-19.

States Most Vulnerable to Bankruptcy

Bankruptcies at the state and local level are a very real possibility. A new study conducted by Oxford Economics, it says that the following 10 states are most vulnerable to bankruptcy: Maine, Nevada, Vermont, Florida, Oregon, South Carolina, Louisiana, Idaho, Montana, and Hawaii.

Today, states are fighting for ventilators to keep people with COVID-19 alive. Tomorrow, they will be fighting for taxpayer dollars and federal bailouts. While businesses and individuals were the first to feel economic pain, they may be the tip of the iceberg.

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By Don Purdum, Freelance Contributor

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