Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy.
How? By denying them Build America bonds.
The most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”
No surprise since the public pension fund is one of the last hold outs for any sort of retirement, so of course it is a target. On the other hand, California, as well as Illinois refuse to deal with major costs, including their illegal immigration budget busting problems.
Last year California delayed their tax refunds because they simply ran out of money to pay them. This year problem is going to be much more widespread.
As New York weighs a potential delay, two other cash-strapped states, North Carolina and Hawaii, have already announced they will put a hold on refunds until June and July, respectively, allowing them to retain funds longer and cover their budget shortfalls with hundreds of millions of dollars owed to individuals and businesses.
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Remember how the nation's GDP was supposed to have grown by 2.2% in Q3 2009? Well then how come state tax revenue fell of a cliff in Q3 2009?
(Bloomberg) -- U.S. state tax collections fell the most in 46 years in the first three quarters of 2009 as the recession shrank revenue from sources including personal income, the Nelson A. Rockefeller Institute of Government said.
Revenue dropped 13.3 percent, or $80 billion, compared with the same nine months of 2008, to $523 billion, the institute said. Collections in the third quarter alone sank 10.9 percent to about $162 billion, according to the report released today by the Albany-based body.
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The first three quarters of 2009 were the worst on record for states in terms of the decline in overall state tax collections, as well as the change in personal income and sales tax collections.
State tax collections for the firstcquarter of 2009 showed a drop of 11.7 percent, the sharpest decline in the 46 years for which quarterly data are available. Combining the Census Bureau’s quarterly data with its annual statistical series, which extends back to 1952, the most recent decline in state tax revenues was the worst on record.
After adjusting for inflation, legislative changes, and known anomalies, tax revenue declined in 47 states.
A new report by the Center on Budget & Policy Priorities has released a new study stating 23 states have raised taxes of all types, regressive "item" taxes such as cigarettes, automobile licensing fees, business taxes, property and personal income. States have also slashed social services.
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