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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:
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.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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