Credit, Economy and Financial News
Consumer Spending Decline Slashes Tax Revenues
In what underscores the severity of the recession, a
recent report shows that state and local sales tax revenues
declined in the 4Q at the fastest pace in 50 years and early
2009 data shows further declines. The report by the Nelson
A. Rockefeller Institute of Government at the State
University in New York noted that state tax collections fell
by 4% in the 4Q, with 41 of the 50 states experiencing
declining revenues. Sales taxes, which are usually the
largest or second-largest source of state tax revenue,
suffered a 6.1% drop. "While income growth has slowed, the
big story so far is that consumption of goods, especially
durables, has been declining," said Donald J. Boyd, senior
fellow at the Rockefeller Institute and study co-author.
"This is a classic response of consumers to economic
uncertainty and fears of lower income: eliminating,
postponing, and scaling back purchases of items that are not
necessary or not needed immediately, such as new cars,
washing machines, and so on." In addition, personal income
tax collections fell 1.1% while corporate income tax revenue
fell 15.5%.
Preliminary data for the January-March quarter suggests
that fiscal conditions deteriorated even further. "With data
for January and February now available for 41 states, tax
revenue for the two months combined has declined by 12.8%
versus the same period last year," Boyd noted. The consumer
spending crisis has created such a tax revenue shortfall
that states are having trouble funding basic services. As a
result, states are battling over federal economic stimulus
funds needed to fill budget gaps.
Return to:
Factoring, Credit and
Economy News
Date Last Updated: 04/22/2009
News Feeds
-
Charter Capital Blog on MerchantCircle
-
Factor My
Invoices Blog
- Small Business and Invoice Factoring News Blog |
 |
