The Great State Shakedown Begins…Looking For Revenue In All The Wrong Places
March 1st, 2010 by Rodney Johnson
With March of 2010 upon us, many state legislatures are starting their sessions. Job one will be to figure out how to close the current budget gap. Job two will be to develop a semblence of a credible budget for 2010-2011 budget year, which begins for most on July 1st.
With traditional revenue sources dropping, state governments are in a quandry of their own making. For decades they have gone along the politically easy path of continuing to promise and secure employment contracts for all levels of state workers. Now that tax receipts ain’t what they used to be, these contracts (including pension benefits, healthcare, etc.) are crippling. So, what to do? Play hardball with the unions? Not so fast. There is another way.
States have raised fees at an extraordinary rate (in the state of FL the tax on cigarettes increased by $1 per pack last year), even though this approach is most difficult on the lowest income earners. Now states are beginning to take another look at taxing non-profits, pointing out that these organizations get the benefit if services (Fire, Police, Streetlights, etc.) without paying. While that is true, the point of a non-profit is to provide services in the community that otherwise would not be available or would only be available at an increased cost to users. Should non-profits pay some sort of tax? I can’t say that I know the answer, but a piecemeal approach doesn’t strike me as appropriate.
On another front, expect state legislatures to take another run at taxing internet transactions. The sales tax lost to internet transactions is staggering, and definitely impacts the bottom line of taxing authorities. The old argument of “It’s too hard to figure out who should pay what,” doesn’t hold water anymore either, as many retailers who have mulitple places of business in different states have already figured this out.
My point is that as these legislative seasons get underway, look closely at what gets passed in the name of a balanced budget. It will be much more about raising revenue than attacking the real problem - spending. And grab hold of your wallet. If you don’t, they will.
