Many state governments were pulled out of the recession by a surge in tax revenue from their residents’ stock-market gains. But that money spigot has slowed, leaving budget holes and debates over the reliance on the wealthy just as many governors face re-election.
While a number of states had forecast lower growth this year in personal income-tax revenue—which is derived in part from capital gains on investments—they failed to project the degree of the decline.
Government figures show that state income tax collections nationwide slipped 0.4% in the first quarter, the first drop since the end of 2009, according to the Nelson A. Rockefeller Institute of Government. But the decline is magnified in some states.
I’d remind you that the middle of 2009 marked the beginning of the “recovery.” I’d also point out that January was when the Fed began to taper its massive bond-buying program, and as if on cue state income tax collections shrank for the first time in almost five years.
That’s one really bad indicator of what I’ve been afraid of ever since we got on the Keynesian treadmill — this economy is addicted to stimulus. Or as I’ve been describing Obamanomics for years now:
Take the economy when it’s on its back, put your heel firmly on its throat, then smack it repeatedly in the face with a big bag full of other people’s money and scream, “Why won’t you make any jobs?” When that fails, get a bigger bag.
Well, we’re out of bags.