US wealth gap putting the squeeze on state revenue

[dmcowen674]

9-15-2014

http://news.yahoo.com/us-wealth-gap-putting-squeeze-state-revenue-042337218--finance.html

US wealth gap putting the squeeze on state revenue



The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue.


Even as income for the affluent has accelerated, it's barely kept pace with inflation for most other people.



That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others do, thereby limiting sales tax revenue.

S&P's analysis builds on a previous report this year in which it said the widening gap between the wealthiest Americans and everyone else has slowed the U.S. economy's recovery from the Great Recession. Because consumer spending fuels about 70 percent of the economy, weak pay growth typically slows economic growth.

Some states are scrambling for new revenue sources. Pennsylvania has raised fees for vanity license plates and other auto expenses. Colorado and Washington legalized recreational marijuana, in part on the promise that the proceeds would be taxed.

Adjusted for inflation, government data show that median household income rose by a few thousand dollars since 1979 to $51,017 in 2012 and remains below its level before the recession began in late 2007.

By contrast, the top 1 percent has thrived. Their incomes averaged $1.26 million in 2012, up from $466,302 in 1979, according IRS data.

The combination of an increasingly global economy, greater productivity from technology and outsize investment returns has shifted a rising share of money to the wealthy. Of all the dollars earned in 2012, more than 22 percent went to the top 1 percent. That share has more than doubled since 1979.

 

[dmcowen674]

The house of cards the rich built is starting to come down.

 

[rudder]

I don't suppose it could be like in California... which is a state whose budget relies very heavily on it's wealthiest citizens. So when there is a dip in the economy... there is a huge dip is State tax revenues. Or there is a Facebook IPO which brings in extra revenue and everyone gets all giddy and spends... then the following year not so much.

 

[Cozarkian]

I don't suppose it could be like in California... which is a state whose budget relies very heavily on it's wealthiest citizens. So when there is a dip in the economy... there is a huge dip is State tax revenues. Or there is a Facebook IPO which brings in extra revenue and everyone gets all giddy and spends... then the following year not so much.

California hits you for 8% at 40K and 9.3% at 50k. The next increase in rate isn't until over 250K. I would say that shows a state relying heavily on its middle class.

 

[Anarchist420]

The OP will look smarter when he starts to understand that value is subjective, that most wealthy people are not necessarily happier, and that the State decreases uncertainty for those who already wealth by enforcing uniform signals (uniformity must come from the top down) by LEGAL TENDER (which requires revenues to enforce and deficits/surpluses to make everything unstable), licensure, and patents. The u.s. citizenry (although not the rest of the world because of their central govts' decisions to wage war on their own property and their enemies' property and then the victor then causes central deflation so they're just as bad off as the enemy they had just destroyed) were happier in the roaring twenties and income inequality was higher than they are today.

CEOs of big corporations like nvidia and intel would be guaranteed less if the U.S.G. even planned to quit enforcing patents and copyrights; more government and uniformity guarantees steady income for most CEOs of big pharma and companies like nvidia and intel.

Did Dave know that John Carmack's estimated net worth is $4mn but he is happy with ferraris, diet coke, and pizza while my psychiatrist (and my dad and ron paul who are both m.d.s) is often miserable? Does Dave realize how miserable and angry bill gates has been and how much he benefited from the presence of patents, copyrights, and trademarks? Does Dave know how rich jefferson was and how low the latter's net worth became became because he had banksters and legislation preventing him from getting rid of most of his slaves? End legal tender, replace it with nothing then most billionaires' worst fears will actually come true and they will never recover. Most rich people fear becoming poor and currency legislation motivates them to get more of it instead of putting their wealth towards making things with intrinsic value that people can use and buy.

The gifts and talent from the smartest members of society has every natural right to trickle down instead of the central tyranny created by the second highest caste of intelligence.

 

[rudder]

California hits you for 8% at 40K and 9.3% at 50k. The next increase in rate isn't until over 250K. I would say that shows a state relying heavily on its middle class.

The top 1% of earners pay ~51% of all income taxes in California. If you lived in California and you earned over $206,000 you belong to part of the group that paid ~70% off all state income tax.

The rest of the population of California pay the remainder. California's tax coffers rely very heavily on the wealthy.

 

[Anarchist420]

The top 1% of earners pay ~51% of all income taxes in California. If you lived in California and you earned over $206,000 you belong to part of the group that paid ~70% off all state income tax. The rest of the population of California pay the remainder. California's tax coffers rely very heavily on the wealthy.

Public spending hurts the middle class most though. CA also has high sales tax rate too and that can hurt the middle class. And I heard that in France the VAT once was about 50% of all revenues.

i mean if hillary clinton becomes president, then Neo-Republicans may have their wishes granted because the govt revenue burden would definitely be shifted onto the middle class while everyone gets shittier medical care unless they pay even more than they do now. she might enact the draft.

i have to commend obama for not being willing to raise revenues a whole lot more than his predecessor whose admin collected revenue through the roof. obama has been willing to raise marginal rates quite a bit, but revenues haven't skyrocketed under him like they did under bush. neo-republicans and "New Democrats" love govt revenue about as much as left wing populists do. even some members of the LP love govt revenue like Sarvis who seemed to think governors could enforce a single uniform tax long term.

 

[Matt1970]

And yet Federal revenue is higher than ever.

 

[Anarchist420]

And yet Federal revenue is higher than ever.

the obama admin hasn't increased it at the same rate the bush admin increased it though. and obama refused to enact the VAT. and bush could've prevented the unaffordable care act, but he and his party chose even more State intervention.

romney wanted to replace the unaffordable care act with some other interventionist measure.

sarvis was a typical Neo-Republican on taxes/spending, too moderate on drugs when he didn't have to be, and he could've legally restored gold as money in va if he had been elected, but he didn't even want to do that.

if we continue to have the presidency, then we need a true right wing populist president like andrew jackson. obama is a self-made man like jackson was and unlike most presidents, but the former is a left-wing populist. and he is using the govt to experiment with all of his (mostly original but mostly flawed) ideas at the expense of liberty. i bet he is one day going to write a book which explains that left wing populism isn't possible and that the State is almost always anti-populist. Andrew Jackson even had extremely competent opponents like calhoun, adams, and clay yet ~55% of all those who voted chose jackson both times. if his proposals to abolish the electoral college had been realized in his day and if they legally required a majority ,then the War to preserve govt revenue could not have happened unless the GOP engineered a coup like the "Federalist Party" did.

 

[Exterous]

And yet Federal revenue is higher than ever.

I was a bit curious about this as well but the squeeze seems to be from lower state sales tax income although the article mentions a couple of states still doing well: California, New York, New Jersey and Connecticut. The article draws a correlation between their success and increases in taxes by using California as an example but there is another correlation not mentioned: Those four states push very heavily to have their sales tax levied on internet purchases. For example - Amazon collects sales tax for all 4 of those states. I'm willing to bet unreported purchases are still a huge problem for most states and getting worse. Estimates put the lost sales tax revenue in excess of $20 billion dollars.

Regardless this is not the root cause:

Republican challenger Neal Kashkari, a former U.S. Treasury official and Goldman Sachs investment banker, has said that school reform is the ultimate key for closing the wealth gap.

"The root cause of income inequality is a failure of our education system," Kashkari said.