U.S. states are getting desperate for cash in the face of soaring budget deficits. And they’re becoming more creative with ways to continue their out-of-control spending habits.
Sure, states could go old-school and up their income taxes or enact them to begin with, like Alaska and Wyoming are considering.
But the rubber is really hitting the road as some states in search of funds are looking to pump-up user-based taxes, such as gas taxes, sales taxes and use taxes.
Here are a few of the latest examples:
- Alabama taking advantage of law to collect taxes on Internet use.
- Tennessee, Oklahoma and Indiana angling to raise gasoline taxes to fund road and bridge repairs.
- Utah lawmakers consider food tax hike.
How’d We Get Here?
Fiscal analyst Chris Edwards at the Cato Institute noted that state general fund spending soared 32 percent since 2010.
In the meantime, the situation is made worse by …
- A decline in tax receipts and slower economic growth.
- Lower oil revenues in key producing states like Alaska, Kansas, Wyoming, Oklahoma and North Dakota.
- Payback time after years of playing kick-the-can with liabilities.
But what about the pink elephant in the room … the Affordable Care Act.
Talk of repealing and replacing Obamacare has states on pins and needles. That’s because the Federal government currently picks up most of the tab.
But a larger portion of the funding becomes the state’s problem in the coming years.
And that’s why a growing number of state governors – on both sides of the isle – balk at repealing Obamacare without a good substitute.
In addition to dropped insurance coverage for millions, an insufficient alternative to Obamacare would destroy state budgets and hurt hospitals.
This point was made clear at the National Governors Association’s winter meeting in Washington last week. A presentation by media company Axios described a sample state that expanded Medicaid would lose $635 million in federal funding, a 65 percent decrease.
You read that right: A whopping 65 percent hit to the states. Awful!
No wonder the long faces after the meeting!
Tax Hikes a Temporary Fix
Connecticut and Illinois have already pursued record tax hikes to boost their coffers. But the result was a falling tax base as top earners fled the state to avoid higher tax bills.
Now, Connecticut faces a $300 million deficit for the 2017–2018 year. That number for Illinois is an eye-popping $8 billion.
Talk about desperation!
I could go on, but you get the point: State spending habits are out of control and the federal purse strings are closing.
This should come as no surprise to my members: I’ve talked frequently about how governments facing revenue shortfalls become desperate and ultimately turn against the people, stripping away civil liberties and their pocketbooks in the process.
But in difficult times like these, there will always be opportunities. I’ve already advised members to begin protecting their wealth with specific investments. Don’t be left behind in these dynamic times: Join the Real Wealth Report now.
Best wishes,
Larry
Gary February 13, 2018
What happened to Larry? He writes a normal article one day and he is gone the next. No goodbye article. This is worrisome.
Dawn P at Weiss Ratings February 15, 2018
Hi Gary. Larry passed away last year at this time. We invited Sean Brodrick — who worked with Larry for many years — to come in and share his insights on gold, oil, silver, gas and other commodities. Plus, Sean is skilled at identifying, following and finding profit opportunities in cycles and mega-trends. We publish updates from Sean here every Tuesday, Thursday and Saturday. I hope you’ll agree that he provides insights and timely, actionable ideas that are as valuable as Larry used to provide.
Jerry March 20, 2017
There is an alternative … let’s return to the family farm and raise our own beef, chickens,
vegeys and make compost out of their waste … it’s been tried before … we can do it again.
Jose Muniz March 11, 2017
As long as polititians have the power to handle your money, they will use it to buy votes either through welfare entitlement programs and/or unnecessary constructions; and of course they will borrow all they can to meet their purpose. In Puerto Rico we are already broke and our Governor can’t borrow any more
Proud vett March 10, 2017
Any Democrat run state always winds up this way and in the end they wind up looking like Detroit, as it takes much money in for corrupt communist a.k.a. Democrats, to keep buying people off to lead them to their own demise. Would any dictatorial or communist country they all wind up like broke and only 1% have anything while the rest of the people star just like what’s going on in Venezuela! Until the people of those countries purchase those evil scumbags in government it will never change, as there is no hope for the 99% as long as you let these 1% take your freedom and control you.
Sherri March 8, 2017
Sincerest condolences to your whole team.
Andrew March 8, 2017
Did I read that right has Larry died. Sorry to hear that what happened so sad a great loss.
nick March 7, 2017
Thank You Larry.You are Great!I′ll miss You! It reminded us health is more a priority than anything!?
James McMurtrie March 6, 2017
Thank you for a great 15 years mate… I have enjoyed the journey.. See you in heaven my friend..
Edward Prigge March 6, 2017
I am sorry to learn of Larry’s death. I am praying that God will comfort his family during their time of sorrow.
Sincerely,
Benjamin M Blumberg March 6, 2017
The obvious way to gratify the electorate AND to raise unprecedented new revenues by both sales and savings, would be to legalize Marijuana, and TAX the hell out of it. A lot of people would be willing to pay a reasonable price for legal pot, and it won’t be long before the ingenuity of Americans results in the growth of true Gourmet Grass, which would revitalize the US tobacco industry and become our next Great Export Industry. In addition, prisoners in jail for no reason other than an occasional toke could be released; even their dealers would no longer present a threat, the ATF and the DEA could be greatly reduced in numbers, and millions will rejoice. Only Mothers Against Drunk Driving will be upset, and even they will eventually be appeased if they try some of the new Gourmet Grass. The ball is rolling. It is high time we finally learned something from Prohibition.
Jas March 4, 2017
Could this lead to a fundamental disequilibrium in world economics, large and persistent balance of payments deficits or surpluses. How’s this all gonna effect the free trade areas.
Micaiah2004 March 4, 2017
States having a tough time and looking for ways to reduce their deficits and burgeoning debt??? TRY downsizing government, both states and Federal govts. Like a 20% haircut. Live with the deflationary economy and the reduced income taxes from the nobumba 8 years disaster + more kicking the can down the road. PUT THE BLAME WHERE IT SUPPOSED TO GO…CONNECT THE DOTS. Corruption and criminal activities by politicians nobumba and clunktons, and the fricken dumbasses DNC (demon-Rats)….THE STENCH RISES TO HIGH HEAVEN. ADD the crooked high finance Wall St. and the corporations that got bailed out by the citizenry. All these criminals got essentially NO jail time…no remuneration to the Treasury via Fines. Instead govt/big business bailed themselves out by passing on the Losses to Taxpayers. There should be a REVOLUTIONARY WAR II. And wipeout all the Corruption and Manipulation and Bribery and Lies/Deception and Self-Enrichment by these elected officials and their crony corps.
J. P. Lynch March 4, 2017
I also do not like taxes but this is one I agree with. “Tennessee, Oklahoma and Indiana angling to raise gasoline taxes to fund road and bridge repairs.” I due have a problem with most of them in that they rob these taxes for other junk.
J.P. Lynch
Mark V. Ziegler March 3, 2017
“States Desperate for Revenue”: LARRY, you missed the most insane method to raise taxes. The California Franchise Tax Board raided my Social Security deposit bank account in 2016 to collect taxes on “IMAGINARY INCOME”. I left California in 2010 and established a domicile in Nevada. I also retired in 2010 and started collecting Social Security. I am maintaining an active Professional Engineer’s License in California in case I have to go back to work during the coming depression. Because I have an active license, California taxed me on the average income of a Professional Engineer. I have not practiced engineering for over six years and California can not produce any evidence that I earned even one penny in income during that period. But facts, the Constitution, and Federal Law do not matter. If I try to challenge them in court, their computers will file an enormous amount of pleadings that will cost me at least $200,000 to respond. I will still not be any closer to having my case heard by a judge. Now in 2017, they have raided my investment accounts and frozen access to my safe deposit boxes. They have not frozen access to my storage lockers yet. I use to feel safe in this country, but now I feel helpless to protect my assets from an out of control state government. I forgot to mention, California stated, if seizure of my life savings causes me a hardship, I can apply for welfare.
Dan Williams March 3, 2017
I am a Michigan retiree,and I can tell you,ever since Gov.Snyder started taxing pensions,a flood of retirees have left the state,never to return–Michigan has NEVER even come close to the amount of money they thought they would get from this dirty little scheme,and they have lied through their teeth about this to the people ever since!
leonardo E Scarpati March 3, 2017
Tell P Trump that we have more weapons that anyone else,why spend more money in new weapons and make those fat cats of Generals richer than they are right now ? our biggest spending is for the Armed Forces ,and the last war we fought was last century ,but I believe that you got your mandate to be President for exchange to increase the spending in the “Military Industrial Complex” ,like paying $400 dollars for a toilet seat and hammers for $600 dollars ,and that is the way to be the America Of the future?
Mike March 3, 2017
One of the largest sources of income for States is the Federal Government. The top seven moochers are: Mississippi, Louisiana, Tennessee, South Dakota, Missouri, Montana and Georgia. These are all glowing Red States run by Republicans (Montana has a Democratic Governor with a Republican Legislature). Often bashed California is number 42.
paul March 3, 2017
Delaware is $350 mil
Robert March 2, 2017
What is California going to do when the Feds cut off all their moneys for having Sanctuary Cities, that harbor Criminals and Illeagles. ??? California is in Dept many Billions of Dollars.
BOBBY
Mike March 4, 2017
California is projecting a 2.8 billion dollar surplus this year with an economy that is growing while conservative Kansas is facing a 350 million dollar deficit with an economy that is contracting.
Larry Blue July 4, 2017
Says who? Based on what?
ron goddard March 1, 2017
gosh larry our state budget deficit is A$34bn and rising fast. (western australia) and the incumbent government wants a further term to further our ‘progress’.!! they reckon that they have done wonders(with our money..or lack of) ha ha..yeah they wanna sell off the power station and all sorts of other dreamtime stuff. build more roads to nowhere. the premier has lost the plot and is facing a massive loss. our oz deficit is also rising fast (A$500bn.) the prime minister says that the economy is in ‘good shape’. i don’t know where he gets his info from lol. all appears to be ok whilst interest rates are down to 4.5% for housing purchase, that being the most active industry in oz right now: house swapping!! manufacturing? whats that?? oh yes we have mining(in a trough) and agriculture : wheat etc. for export. but that is not ongoing in a sense that we are forever taking from the soil and not replacing anything. our farmers need enormous amounts of fertiliser. and that costs lots of money. all in all we have dumb government here forever with the main discussion being around retired politicians pensions and other benefits.(all those in favour say’aye’ yes we have a 100% yes vote, yippee!!) democracy? alice in wonderland i think. and soon the stuff will hit the fan and people(mushrooms) will utter..why didn’t they tell us? just like in your country. and they will bleat on and on and get angry. the best jobs will be in the police force and military. we must protect the politicians.
Sonny March 1, 2017
How long for the President Trump Rally , before the correction and when is the time for gold and silver Larry?
Robert Kimble March 1, 2017
Pennsylvania is a train wreck. It still remains a rust belt state where I’m sure 50% live below the national poverty level. I believe the state government needs to cut at least by 50% and all public schools could really cut by 25%. It will have to or they face bankruptcy and there goes all municipal bonds to junk bond status.
Bob Schubring March 1, 2017
Vanity-driven spending is the last line-item to be cut, but usually makes the difference when budgets get reformed. West Germany, for example, grew it’s economy substantially from 1945-1991. They achieved it, by getting rid of every last shred of their previous history of currency manipulation and the propaganda that had been used, either to conceal the manipulation, or failing that, to make the manipulation seem absolutely necessary. Instead, the Bundesrepublik gratefuly accepted their share of the Marshall Plan, and focused on producing products that could sustain their economy.
Now it’s our turn to learn the same lesson.
US states maintain an unsustainable Drug War, that has failed to save a single American life from any known threat. States keep a larger portion of their population in jails and prisons, than did the Soviet Union under Stalin…most of whom are convicted of drug offenses. In the latest incarnation, injured workers are being forced onto SSDI disability or driven to suicide, because medicines for pain relief that have worked well for generations, are being prohibited out of fear that their use constitutes an “opioid epidemic”. (Stupidest of the entire range of stupidities, the CDC is cooking the books on how suidices are counted, so that each time the pain drives someone to kill himself, his suicide is blamed not on their taking-away of his pain medicine, but instead, is blamed on his previous safe use of the medicine. The CDC official in charge of this disinformation project, formerly headed an effort by the Obama Administration that sought to prove that guns were too dangerous for city and state police officers to carry, thereby putting police forces under federal control. Well…maybe that’s more crooked than stupid.). The point is, none of these Drug War efforts save lives. It takes imaginative book-cooking to hide the fact that the Drug War kills people while protecting nobody. The Drug War is a prime example, of a program whose shutdown would improve the economy while saving states money.
But shutting it down, requires proving that the money and lives wasted on it, should never have been wasted. The people in power, will never admit that fact willingly. So instead, they will waste more lives and money, keeping their lies from being discovered.
F151 March 1, 2017
Government always looks to pile on more taxes. Illinois, Connecticut and California are financial basket cases. Their infrastructure has been neglected for years now. How about this for a change: cut government salaries, cut the number of govt employees and cut the number of govt programs. Balance budgets THAT way for a change.
And the free ride the states have had on Obamacare? Would it not be interesting to see some govt entity actually pay for that fiasco (instead of relying on the feds…who paid for it like everything else….by charging up $10 Trillion in debt over the last 8 years)?
Dale St Clair March 1, 2017
the American Dream is dead…people should understand this fact…stop thinking america has a bright future will be sadly mistaken.
Mike Kramer March 1, 2017
I live in Pennsylvania which we call Taxylvania. . Except for California, we have the highest turnpike tolls, and we must be in the top five in gasoline tax. I do not know if is just us, but they make these budgets based on “presumptuous” revenue i.e. we are going to generate x number of dollars from the lottery, liquor sales, etc. We are losing personal income tax revenue because with stores that are closing, jobs age gone. All I wish people like you would do is make up your mind. One day the market is going to crash, the next day it is headed for 50000. We cannot have it both ways. Personally, I feel like a termite in a yoyo.
Chuck Burton March 1, 2017
Pollsters say the military has the highest approval rating of any branch of government among the populace. Mr. Trump plans to spend even more money to make the military even more powerful. What does a powerful military do when people lose faith in the politicians – especially after a major economic crisis? In many countries, the generals stage a coup and take control, usually promising “free” elections after they get the crisis stabilized. ‘Can’t happen here? Don’t bet on it.