COVID-19

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

Kristin Schwab Apr 15, 2020
HTML EMBED:
COPY
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:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.