Jun 3, 2002
Numerous state governments are claiming that they are facing a “budget crisis.” Governors across the country are calling for cutbacks in state programs, as well as for layoffs of state workers and cutbacks in their pay, pensions and health programs. The governors usually cite the decline in the economy for the “budget shortfall.”
There is no doubt that the states are taking in less money than in previous years, but much of this has to do with tax breaks voted by the politicians for the wealthy and corporations. In 1997, Clinton signed a law reducing the federal estate tax, which was further reduced under Bush. This is a tax paid by only the richest two% of the population. State governments are expected to take in 1.8 billion dollars less in estate taxes next year alone as a result.
Corporate profits tax revenues going to the states are also sharply down. One major reason for this was the Economic Stimulus Package passed by the Congress following the September 11 attack and voted for by almost all Democrats and Republicans. It reduced the taxes corporations will pay to the U.S. government by 35 billion dollars a year, letting them charge off rapid “depreciation” of their new investments. Most states with a corporate profits tax tie the amount to that on the corporation’s federal tax form. The government of Illinois estimated that the state will lose 240 million dollars in corporate profits tax next year due to this change in the U.S. law. Other big states will have similar losses.
In recent years politicians have been working overtime cutting corporate taxes and reducing taxes on the wealthy. This is what has created “budget crises” in states around the country.
These crises are totally of the politicians’ making. No state worker need be laid off or have their pay or benefits cut. No social program serving the poor and workers’ families has to be cut. No public services should be scuttled. These fake “budget crises” can easily be overcome by ending corporate welfare and putting back taxes on the wealthy.