Windfalls for some states
In his survey, Peter DeGroot, director of community research and strategy at JP Morgan, found a handful of states, including Idaho, South Dakota and New Mexico, that made even more money last year than they did in 2019. The survey also found several states where tax revenues have not yet declined because they depend heavily on tourism, oil and gas, or coal mining – including Hawaii, Nevada, Florida, Texas, and West Virginia.
Ms. Sheiner’s analysis found that Idaho had the largest revenue recovery of any state. She did research with Byron Lutz, a Federal Reserve economist.
Idaho financial management director Alex J. Adams said in an interview that the boom took officials by surprise, and they thought one reason was the influx of new California residents trying to cope with the state’s high cost of living escape – a trend that started before the pandemic but accelerated over the past year. Mr Adams also said Idaho did not stop construction when the lockdowns were in place, which benefited economic activity.
Brad Little, the Republican governor of Idaho, said in his State of the state address As of January 2020, the revenue collections were strong enough to send $ 295 million back to taxpayers, and they still have enough to invest in better highways, bridges, and broadband access. He also wrote to the Idaho Congressional delegation last year calling on them to oppose the use of non-binding federal dollars to rescue badly governed states.
With some states now “enjoying gusts of wind” and others still struggling, Mr. White said that a smaller amount of money, more carefully targeted to the states that need it most, would be the most efficient approach for Congress. But “getting help to those governments who really need it, without sending unnecessary aid to those who don’t, requires” exceptional creativity “,” he said.
To some extent, the surprising rallies in states reflect the timing of events over the past year. The pandemic began when many state lawmakers were reviewing initial budget proposals for the coming fiscal year. The proposals worked out weeks before the shock forecast a year of heavy tax rises.
Then, within a few weeks, millions of people lost their jobs. State officials view unemployment as a major driver of their tax affairs; Research from past recessions suggests that a single percentage point increase in the unemployment rate could create budget problems of $ 45 billion.