Seven states are exacerbating their budget crises by enacting major new tax breaks for corporations. Florida will lose $459 million in funding by cutting its corporate tax rate nearly in half, to 3.5 percent, if it adopts Governor Rick Scott’s budget proposal. New Jersey Governor Chris Christie’s move to reduce the estate tax on millionaires and slash the corporate tax rate will cost the state $700 million by 2016. Reductions in the estate and corporate tax rates in Maine will reduce revenues by $203 million and widen the two-year budget deficit by 25 percent, if Governor Paul LePage’s budget is enacted in full. In January, Wisconsin Governor Scott Walker put in place business and individual tax cuts of $117 million. Michigan’s Governor Rick Snyder has proposed abolishing the state business tax. He intends to pay for this by taxing workers’ pensions and doing away with the state’s Earned Income Tax Credit for low-income working families. The measure will nonetheless increase Michigan’s deficit by $254 million in 2012.
Like the unemployment rate, economists view the fiscal health of states and cities as a “lagging indicator,” as tax revenues remain low even after recoveries in the business cycle. Tax receipts have fallen because of high unemployment and wage cutting, driving down revenues earned through income and sales taxes, the two primary sources of funding for states. At least 31 states have less revenue in 2012 than they had in 2008, by an average of 8 percent. Meanwhile, joblessness and growing poverty place greater demands on state services.
The situation has been exacerbated by the decision of Congress and the Obama administration to cut off even the miserly amount of funding the government had afforded to the states in 2009 and 2010. The CBPP estimates that only about $6 billion in emergency relief will be extended to the states in 2011, a tiny proportion of their combined budget deficit of $125 billion.
via www.wsws.org
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