The recession has cost jobs and income, and thus tax revenue. Facing huge shortfalls, state governments are preparing to slash social programs and jobs, a response that will only deepen the downturn.
How bad is the problem? According to a study by the Nelson A. Rockefeller Institute of Government (highlighted in Mish’s Global Economic Trend Analysis):
Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion.
Oregon relies more heavily on personal income taxes (PIT) for revenue then any other state. Here are some comparison numbers to put Oregon’s problem in perspective:
- 68.5% of Oregon’s Tax Revenue comes from PIT. First quarter collections were off 27.0%
- 57.2% of Massachusetts’ Tax Revenue comes from PIT. Collections were off 28.5%
- 55.9% of New York’s Tax Revenue comes from PIT. Collections were off 31.8%
- 52.7% of Colorado’s Tax Revenue comes from PIT. Collections were off 25.4%
- 52.4% of Connecticut’s Tax Revenue comes from PIT. Collections were off 25.9%
- 47.5% of California’s’ Tax Revenue comes from PIT. Collections were off 33.8%
The Oregon legislature should be applauded for its recent approval of two bills, one increasing the minimum corporate tax and the other establishing a higher tax rate for individuals making over $125,000 a year or households reporting income over $250,000 a year. The combination is expected to generate more than $730 million in new revenue, a small but meaningful step in the defense of public services and jobs–and a fairer tax structure.