Tax hikes contemplated to plug coronavirus-caused budget shortfalls
Number of states are looking at raising taxes as revenue collections plummet
Sources tell FOX Business’ Charlie Gasparino that state and local governments are facing budget deficits amid the coronavirus pandemic and hoping for federal money to fill holes.
The coronavirus pandemic has put a significant strain on state and local budgets, causing some local leaders to consider raising taxes as a means to ensure critical services can continue.
“State and local governments need, desperately need, financial support,” Moody’s Analytics chief economist Mark Zandi said during a recent Economic Policy Institute teleconference.
Zandi predicts the budget shortfall among state and local governments could approach $500 billion by mid-fiscal 2022.
SEATTLE CITY COUNCIL APPROVES PAYROLL TAX ON LARGEST, BEST-PAYING COMPANIES
One way some local governments are looking to begin plugging those holes is by raising additional tax revenue.
For example, the Nashville City Council approved a budget that contained what it acknowledged would be a “painful” property tax increase on its residents, as previously reported by FOX Business.
The measure would raise rates by 34 percent.
Two other states, Colorado and California, are eyeing property tax increases as lawmakers look to patch respective budget holes. However, both have to repeal measures that were previously put in place to limit sky-high tax rates, which is underway in each state.
NASHVILLE APPROVES ‘PAINFUL' PROPERTY TAX HIKE
Meanwhile, Seattle is looking to impose a payroll tax on the city’s highest-paid employees, working at its largest employers. The tax would range from 0.7 percent to 2.4 percent and would be applied to businesses with $7 million or more in annual payroll. An assessment would not be placed on salaries below $150,000.
San Francisco is considering potentially raising taxes on executive compensation.
In New York, Democratic lawmakers are looking to raise taxes on the wealthiest, billionaire residents. A proposal was introduced in May to tax unrealized billionaires’ unrealized capital gains.
New York City Mayor Bill de Blasio has indicated he is not opposed to raising taxes on the rich.
“The rich keep getting richer even in the midst of this crisis,” de Blasio said during a press conference. “So, I absolutely believe this is a fair time to talk about higher taxes on the wealthy.”
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Zandi said state and local governments have already laid off 1 million municipal employees – about 5 percent of their workforce – which he described as an “aggressive” pace. Without support, he predicts that over the next 12 to 18 months another 3 million jobs could be shed. Individuals affected by these cuts include teachers, police officers, firefighters, first responders and social workers.