NYT: State tax revenues to hit 5-year highs

posted at 2:56 pm on June 12, 2012 by Ed Morrissey

Barack Obama and his supporters complained bitterly in the wake of last Friday’s pronouncement that “the private sector is doing fine,” accusing the media of taking the remark out of context.  The point of his remark, his backers claim, was that compared to the suffering public sector at the state level, the private sector was performing relatively well.  That’s not what Obama’s actual claim was, but we’ll let that pass for now.  Let’s focus on Obama’s argument for a moment.  Just how badly is the public sector performing?

According to that bastion of conservative thought — the New York Times — state tax revenues will hit a five-year high in 2013, the third straight year of improvement after the financial crisis.  In fact, revenues will exceed pre-recession levels:

 U.S. states expect to collect higher tax revenue in the coming budget year that combined would top pre-recession levels, according to a survey released Tuesday. The increase could reduce pressure on states to cut budgets and lay off workers. …

Total tax revenue is forecast to rise 4.1 percent to $690.3 billion in the 2013 budget year, according to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers. It’s the third straight year of revenue growth and $10 billion more than the budget year that ended June 2008. The recession began in December 2007.

Total state spending would increase only 2.2 percent and remain below pre-recession levels, the report said.

“The thing we’re definitely seeing is stability,” said Scott Pattison, executive director of the budget officers’ group. Only eight states were forced to close unexpected mid-year budget gaps this year, he said, compared to 39 states two years ago.

It’s not the only indication that Barack Obama has seriously misdiagnosed the economic malaise that has plagued his presidency.  According to the Rockefeller Institute, which tracks state budgets and revenues, states saw a 4.1% increase in revenues in the first quarter of this year, too:

U.S. states’ tax collections rose 4.1 percent during the first three months of 2012, a faster pace than during the previous three months, as economic growth helped ease financial pressure in the nation’s capitals.

The increase is the ninth straight quarterly gain for states following more than a yearlong slide after the 2007 recession, according to the Nelson A. Rockefeller Institute of Government in Albany, New York. The pace was faster than the 3.6 percent rise during the last three months of 2011.

Let’s not forget that in the same period, the overall GDP growth for the economy was a paltry 1.9%.  So which sector is doing worse?  Better yet, why has there been a reduction of public-sector workers at the state and local levels?  In my column for The Week, I look at the data — especially the costs:

Of course, state and local governments have shed jobs. According to federal data, local government employment is down 511,000 since the stimulus bill passed, and state government jobs have fallen by 125,000 in the same period. But that isn’t due to revenue issues. It’s all about the massive increase in costs for government workers. Bloomberg‘s Josh Barro analyzes why voters in San Jose voted last week to reform the pension plan for city workers, and discovers that while city revenues went up 19 percent over the last decade, the cost for a full-time worker increased 85 percent. No wonder local budgets are in crisis.

Wisconsin had similar problems prior to Gov. Scott Walker‘s public-employee reforms. He shaved more than $1 billion off the budget by getting tough with unions, and more importantly, he avoided having to lay off significant numbers of public-sector workers in the state. That’s why he got 125,000 more votes in the recall election than he did in 2010 — against the same opponent he faced last time around, too. In comparison, San Jose cut 28 percent of its workforce over the past decade, and now diverts 27 percent of its operating budget to pension-fund obligations. Much of that money could instead be used to employ people who actually deliver expected services.

Besides, BLS data shows that federal employment still looks pretty good, comparatively speaking.  As I noted in today’s OOTD, federal jobs — where Obama can have a direct impact — have risen by 29,000 since Obama took office.  That’s a 1% increase.  By comparison, private-sector jobs have grown by 55,000, which is a 0.005% increase.

Furthermore, Obama’s argument assumes that public-sector jobs are an end to themselves.  Most taxpayers, however, see public-sector jobs as a means to deliver specific and limited public services and regulation enforcement.  That means that government at all levels should be right-sized to balance costs and need, and not just presumed to grow through increasing seizure of private capital.   Jim Geraghty hits that point today as well:

Ten years ago, the total was 6,065,000. The peak was 6,505,000 in July 2009 — right after the worst of the recession, ironically. (Perhaps this was driven by the stimulus-bill spending.) So we’re only down about 250,000 local employees from the peak; the current total is 96 percent of the peak employment.

But from 2005 to 2007 — economic boom years, compared to what we’ve endured in recent years — the total number of local-government employees surpassed 6.4 million only three of the 36 months. So local governments have about the same number of employees as they did before the recession hit.

In other words, Obama seems to think that the recent peak of local employment is the “normal” level, and that any drop from that is an economic problem to be solved. The notion that the very modest reduction represents localities adjusting their number of employees to a level they can sustain with their post-housing-boom tax base never seems to enter the picture.

Clearly, the public sector isn’t hurting for revenues or workers.  The public sector is hurting for disciplined and informed management, starting at the very top.

Update: Fixed the link to my column at The Week.


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“Count it!” /crr6
/Bishop

Khun Joe on June 12, 2012 at 3:00 PM

“Let me be clear, I have no clue about what’s going on”, -Obozo

Flange on June 12, 2012 at 3:06 PM

…maybe JugEars drinks way too much pop?

KOOLAID2 on June 12, 2012 at 3:08 PM

..SCOAMF hit amidships; hulled below the waterline and sinking fast.

(one laments Romney not releasing more vids/political ads on this but — hey! — if reality serves the same purpose then conserve your ammo/funds and let this pantload stew in the broth he made.)

The War Planner on June 12, 2012 at 3:08 PM

Ever pass a state road crew repairing our highways? Three supervisors, two crew chiefs, four laborers, two flagmen, and all these people just to fill one pot-hole.

A microcosm of the efficiency of the public sector.

fogw on June 12, 2012 at 3:10 PM

All this time and now we find out that the New York Times is flat-out racist

CycloneCDB on June 12, 2012 at 3:10 PM

Dear leader to take credit in 5….4…..3

cmsinaz on June 12, 2012 at 3:11 PM

bayam!

Del Dolemonte on June 12, 2012 at 3:12 PM

According to the state Controller’s office, income tax revenue is down in California in the latest available figures:

http://www.sco.ca.gov/april_2012_personal_income_tax_tracker.html

As of May 8 they issued this in a press release:

State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in April, showing monthly revenues came in $2.44 billion below (-20.2 percent) the latest projections contained in the Governor’s proposed 2012-13 Budget.

crosspatch on June 12, 2012 at 3:15 PM

if reality serves the same purpose then conserve your ammo/funds and let this pantload stew in the broth he made.)

The War Planner on June 12, 2012 at 3:08 PM

<—– This is my wicked grin :}

SWalker on June 12, 2012 at 3:16 PM

state tax revenues will hit a five-year high in 2013, the third straight year of improvement after the financial crisis. In fact, revenues will exceed pre-recession levels:

but….but…..we need revenues…….balanced approach……..compromise.

And Boner has no backbone…..get in their faces ya RNC tool! The Republican Establishment just sucks.

Tim_CA on June 12, 2012 at 3:17 PM

It’s not the only indication that Barack Obama has seriously misdiagnosed the economic malaise that has plagued his presidency.

But…. but…. but…..

OFFICE OF THE PRESIDENT-ELECT or something!

UltimateBob on June 12, 2012 at 3:18 PM

According to that bastion of conservative thought — the New York Times — state tax revenues will hit a five-year high in 2013, the third straight year of improvement after the financial crisis.

Mr. Morrissey’s post is (unfortunately) making a case for Jerry Brown’s request for a tax increase in California—because “we really need the revenue”—since spending went thru the roof over the last decade.

Rovin on June 12, 2012 at 3:20 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?

libfreeordie on June 12, 2012 at 3:20 PM

OT dems block special counsel

Special prosecutors for thee but not for me

cmsinaz on June 12, 2012 at 3:20 PM

It’s not the only indication that Barack Obama has seriously misdiagnosed the economic malaise that has plagued his presidency.


Well, what else did you expect from Dr. Julius Greenbaum???

ted c on June 12, 2012 at 3:22 PM

No mention of commerce growing because of the great job that drug addled “hit and run Bryson” is doing?

acyl72 on June 12, 2012 at 3:37 PM

Ever pass a state road crew repairing our highways? Three supervisors, two crew chiefs, four laborers, two flagmen, and all these people just to fill one pot-hole.

A microcosm of the efficiency of the public sector.

fogw on June 12, 2012 at 3:10 PM

You forgot the one (or two) leaning on a shovel.

Old Country Boy on June 12, 2012 at 3:38 PM

o/t, but pretty stunning…

A new poll out today from the Democratic-leaning Public Policy Polling shows that Mitt Romney would get 20 percent of the African-American vote if the election were held today, compared with 76 percent for Obama.

Obama received 95 percent of the support from African-Americans in North Carolina in the 2008 election, compared with just 5 percent for Republican nominee John McCain.

Read more: http://www.businessinsider.com/barack-obama-african-american-vote-black-north-carolina-2012-6#ixzz1xbm1fncx

Of course, Romney is never going to win the African-American vote, but because the white middle class vote is likely to go to Romney in even greater numbers than it did for McCain, Obama needs to make up the numbers with even greater turnout in the black community and among young voters (as an aside, voters under 25 in Wisconsin, flocked to Scott Walker). That’s going to be hard to do with his record.

If Romney gets even 10% of the black vote and turnout is lower for both blacks and young voters, November is going to be an absolute bloodbath for Obama. There is no other way the math adds up.

Resist We Much on June 12, 2012 at 3:40 PM

Resist We Much on June 12, 2012 at 3:40 PM

That is a stunner!

a capella on June 12, 2012 at 3:43 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?

libfreeordie on June 12, 2012 at 3:20 PM

For one thing some states have shed public sector jobs or forced their public sector employees to actually contribute for their own benefits (see Wisconsin for the latter). Some state economies are actually doing fairly well despite federal intrusion into industry operation – see Texas.

As for trickle down – why don’t you ask a business owner (particularly a small business owner) what they are likely to do when the federal government passes 2000+ page legislation that will impose costs on them but it’s unclear when or how much. Ask them how they make decisions on future spending and expansion when you have liberals running around the country demonizing them (or demonizing those who would fund them) or declaring that their industry is in the cross-hairs of a federal agency.

Look at what fracking has done to North Dakota (we’ll see if the feds shut them down) for an example of trickle down.

gwelf on June 12, 2012 at 3:44 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?
libfreeordie on June 12, 2012 at 3:20 PM

For one thing some states have shed public sector jobs or forced their public sector employees to actually contribute for their own benefits (see Wisconsin for the latter). Some state economies are actually doing fairly well despite federal intrusion into industry operation – see Texas.

As for trickle down – why don’t you ask a business owner (particularly a small business owner) what they are likely to do when the federal government passes 2000+ page legislation that will impose costs on them but it’s unclear when or how much. Ask them how they make decisions on future spending and expansion when you have liberals running around the country demonizing them (or demonizing those who would fund them) or declaring that their industry is in the cross-hairs of a federal agency.

Look at what fracking has done to North Dakota (we’ll see if the feds shut them down) for an example of trickle down.

gwelf on June 12, 2012 at 3:45 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?

libfreeordie on June 12, 2012 at 3:20 PM

No.
The question is; with revenues up STRONGLY, why are states and local govt hurting. Per Obama, that is.
At least the private sector contributes something other than headaches.

Jabberwock on June 12, 2012 at 3:47 PM

The question becomes why isn’t the “trickle down” helping poorer state residents?
libfreeordie on June 12, 2012 at 3:20 PM

Obama spent trillions of dollars in 4 years – 5 trillion of it borrowed. When will we see the trickle down effects of government spending help the economy and the poor and middle class who need jobs?

gwelf on June 12, 2012 at 3:50 PM

It’s not the only indication that Barack Obama has seriously misdiagnosed the economic malaise that has plagued his presidency.

“Uhhh… Uhhh… Ummm… What’s your point again?” – Obowma

Seven Percent Solution on June 12, 2012 at 3:50 PM

Just wait. This year and next year are the 5 year anniversaries for real estate appraisals, from the high point of the housing bubble.

Of COURSE the tax rolls have been going GREAT – the real estate “values” have all been set (and therefore taxed) at a fictitious (some would say immoral) “value”, well above where they are now (and not yet where they will be).

This ain’t rocket science folks. The real problem is how we’re all getting fleeced by our state/local governments, and how they’re going to react when the Grand Lists all start coming back 40% lower than they were – then we’re going to have a real fight on our hands as they try to ratchet up the mill rates to make up the losses.

Because even with “great” tax revenues coming in, they still haven’t managed to balance anything, and will just keep putting their hands deeper in our pockets – if we let them.

KMC1 on June 12, 2012 at 3:52 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?
libfreeordie on June 12, 2012 at 3:20 PM

1. We don’t know from this post that poorer residents aren’t being helped.
2. Money that goes to pay taxes can’t be spent on other things that would stimulate private sector growth.
3. Uncertainty (regarding future employee costs like taxes or health insurance benefits) makes it difficult for any business to hire, so business may be keeping their expenses down by not hiring. Keeping expenses down by not hiring due to future uncertainty may be increasing their profits as well which would lead to increased tax revenue, but not benefit poorer residents most of whom would prefer jobs.

talkingpoints on June 12, 2012 at 3:54 PM

State and local government budgets have improved since last year, and as a result the number of public sector layoffs has declined. It is still a drag, but not the overall reason for the weakness in job growth. The improving budget situation for local governments also calls into question the suggestion that we can grow the economy with more government spending. Clearly the private sector stalled this Spring; the question is where will it go this Summer? We’ll be watching the results of the Greek elections this weekend very closely … like everyone else.

TouchdownBuddha on June 12, 2012 at 3:55 PM

Also libfreeordie:

Let’s not forget that in the same period, the overall GDP growth for the economy was a paltry 1.9%.

Increased tax revenue is not coming in because of private sector expansion.

gwelf on June 12, 2012 at 3:57 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up.

libfreeordie on June 12, 2012 at 3:20 PM

“The data does provide the latest indication, however, that the recession reduced income inequality in the United States, at least temporarily. The average income of the wealthiest families fell much more sharply than the median, indicating that some of those at the very top of the ladder slipped down at least a few rungs.”

http://www.nytimes.com/2012/06/12/business/economy/family-net-worth-drops-to-level-of-early-90s-fed-says.html?_r=2&hp

Q1 profits dropped by 4.1%…the first decrease since 2008…and Q2 profits are expected to be negative.

Resist We Much on June 12, 2012 at 4:00 PM

That is a stunner!

a capella on June 12, 2012 at 3:43 PM

Indeed. :-)

Resist We Much on June 12, 2012 at 4:02 PM

what chaps my *** about the dems and their point, is that they always talk about teachers, police, firefighters about how we need more and if the truth be know we probably do…..but here is what they don’t tell you, all the bureaucrats that get hired along with the above…..those are the people that probably scream the loudest about rights and pensions.

barry is being showned the fool that he is……

DiabloAzure on June 12, 2012 at 4:25 PM

Resist We Much on June 12, 2012 at 3:40 PM

Delicious!

Tim_CA on June 12, 2012 at 4:28 PM

Taxes are patriotic.

Philly on June 12, 2012 at 4:40 PM

If tax revenues are increasing without any increase in tax rates that means that profits and income are also up. (HINT to conservatives, that is YOUR supply side argument). It would suggest that those with incomes large enough to pay state income taxes are doing better. The question becomes why isn’t the “trickle down” helping poorer state residents?
libfreeordie on June 12, 2012 at 3:20 PM

I don’t see from the post that no state taxes have increased during the time frames in question and state taxes don’t all come from state income taxes – some come from a combination of sales/income and some come from only sales taxes.

And, from the article:

About a quarter of the expected gain in revenue comes from proposed tax hikes in 10 states.

I would be interested in seeing a more thorough analysis of why the revenues have increased – as it does seem counter-intuitive that state tax revenues have increased while the economy is mostly stagnant. However, increased revenue does not automatically indicate that “profits” are up or that the “fat cats” are doing great.

Instead, for example, as prices go up, sales tax goes up (i.e., sales tax is a percentage of price, not a fixed amount). Thus, inflation can cause increased revenue for state/local govts. I doubt that would explain a 4% increase, but none of the other economic indicators suggest a growing economy, so I don’t think one can point to this and say “see, the economy is doing just fine”.

Monkeytoe on June 12, 2012 at 5:14 PM

As I noted in today’s OOTD, federal jobs — where Obama can have a direct impact — have risen by 29,000 since Obama took office. That’s a 1% increase. By comparison, private-sector jobs have grown by 55,000, which is a 0.005% increase.

Pathetic and yet the trolls still think he is doing a good job.Just pathetic.

CW on June 12, 2012 at 5:45 PM

That’s a great increase, shouldn’t be any problem for them to balance their budget now…

right2bright on June 12, 2012 at 5:58 PM

This is Zero’s reasoning for wanting state and local governments to hire more public-sector workers. Not working.

Philly on June 12, 2012 at 6:07 PM

For those that think this is a result of higher tax rates, allow me to present Table II.B4 from the 2012 Medicare Trustees’ Report. In case you have forgotten, 2.9% of every single penny paid out in wages (1.45% from the employee, 1.45% from the employer even if they’re the same person) goes to the Hospital Insurance “Trust Fund”. More importantly, it has been that way since 1994, though there’s going to be a 0.9% surcharge on Obama’s definition of the “rich” hitting in 2013 to help pay for PlaceboCa…er, further facilitate the robbing of the near-rich.

In 2007, HI took in $191.9 billion in FICA/SECA taxes. In 2008, it hit its high of $198.7 billion. In 2010, it hit the floor of $182.0 billion. In 2011, with no change in the tax rate since 1994, it bounced back to $195.6 billoin. In 2012, it’s expected to hit $207.6 billion, again with no change in the tax rate.

Once again, the Laffer Curve works.

Steve Eggleston on June 12, 2012 at 7:27 PM

State tax revenues to hit 5-year highs

Uh, guess they left out Kalifornia and our ‘balanced and realistic budget’……….that has a $16 BILLION hole in it.

GarandFan on June 12, 2012 at 10:51 PM