COVID-19

When businesses aren’t making money, local governments aren’t making money.

Kristin Schwab Apr 14, 2020
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In some places in Ohio, income tax makes up almost 75% of the revenue. Above, a closed bar in Columbus, Ohio, on March 15. Matthew Hatcher/Getty Images
COVID-19

When businesses aren’t making money, local governments aren’t making money.

Kristin Schwab Apr 14, 2020
In some places in Ohio, income tax makes up almost 75% of the revenue. Above, a closed bar in Columbus, Ohio, on March 15. Matthew Hatcher/Getty Images
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With much of the economy shut down, it’s hard for companies and people to make money. Local governments need companies and people to make money of its own, through taxes.

For Russell Easley, who owns New Orleans Airboat Tours, spring is moneymaking season. His team usually takes more than 200 visitors out to the swamps every day.

“We go out there and we check out the alligators. There’s a lot of shorebirds. There’s racoons, bald eagles,” Easley said.

But with COVID-19, no one is coming to see the animals anymore. Easley had to close down and lay off 25 people. That means no money for his business, no money for his employees and no money for Louisiana, which relies on taxes from tourism.

“The economy overall has been shook,” said Christiana McFarland, research director at the National League of Cities and co-author of a Brookings Institution report on cities and the fiscal impact of COVID-19. “The economy is what drives local revenues, and this is putting a lot of stress on their budgets.”

Those budgets rely on sales, property and income taxes. The governments that get the bulk of their money from one tax stream could have a harder time recovering. In some places in Ohio, income tax makes up almost 75% of the revenue, according to the Brookings report. In Oklahoma City, sales tax makes up almost 60%.

“They’re going to have that revenue stream dry up overnight,” said Michael Pagano, director of the Government Finance Research Center at the University of Illinois, Chicago, and co-author of the Brookings report. He said for local governments, a big loss in tax revenue means reevaluating budgets.

“This requires that local governments identify what they consider to be their core services,” Pagano said. He added that infrastructure projects like railways, roads and dams could see budget cuts as well as parks and recreation. And other city services, like garbage pickup, could be reduced.

Even so, some budget areas could get a boost after COVID-19 — like public health and safety.

COVID-19 Economy FAQs

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

Are people still waiting for unemployment payments?

Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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