COVID-19

Cities and states that lean on sales and income tax to operate have taken a hit

Kristin Schwab Apr 15, 2020
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With much of the economy shutdown and more and more people out of work, cities and states aren’t collecting as much in taxes. Matthew Hatcher/Getty Images
COVID-19

Cities and states that lean on sales and income tax to operate have taken a hit

Kristin Schwab Apr 15, 2020
With much of the economy shutdown and more and more people out of work, cities and states aren’t collecting as much in taxes. Matthew Hatcher/Getty Images
HTML EMBED:
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When you turn off large parts of the economy, cities and states can’t collect as much in sales or income taxes. In some places the effect is worse than in others.

That’s because some city and state budgets rely heavily on one type of tax.

“If you’re dependent on just one piece of that chain, and it dries up, where else can you go?” said Michael Pagano, director of the Government Finance Research Center at the University of Illinois, Chicago.

City and state governments that lean on sales tax have taken a hit, and it’s more immediate because people aren’t shopping or eating out. In some Oklahoma cities, sales tax is as high as 11%. And that’s a big source of revenue for those cities.

And as more people lose their jobs, income tax revenue dwindles. A place like Columbus, Ohio, relies on income tax for 75% of its revenue.

States like California that rely more on property taxes may not see the effects for a year or longer, if property values fall or foreclosures start to happen.

COVID-19 Economy FAQs

What’s going on with extra COVID-19 unemployment benefits?

The latest: President Donald Trump signed an executive action directing $400 extra a week in unemployment benefits. But will that aid actually reach people? It’s still unclear. Trump directed federal agencies to send $300 dollars in weekly aid, taken from the federal disaster relief fund, and called on states to provide an additional $100. But states’ budgets are stretched thin as it is.

What’s the latest on evictions?

For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.

Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?

Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.

You can find answers to more questions on unemployment benefits and COVID-19 here.

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