Windfall in some countries
Peter DeGroot, head of municipal research and strategy at JP Morgan, found in an investigation that a few states, including Idaho, South Dakota, and New Mexico, managed to obtain the More revenue in 2019. The survey also determined that due to taxes heavily dependent on tourism, oil and gas or coal mining, tax revenues in some states have not rebounded, including Hawaii, Nevada, Florida, Texas and West Virginia.
Ms. Sheiner’s analysis shows that Idaho’s income recovery rate is the highest of any state. She conducted research with Byron Lutz, an economist at the Federal Reserve (Fed).
The Republican Governor of Idaho, Brad Little, stated in a state government speech in January that the 2020 tax revenue is sufficient to return $295 million to taxpayers, and there is still enough investment to build Better highways, bridges and broadband networks. Last year he also wrote to a congressional delegation in Idaho, urging Idaho to oppose the use of unconditional federal dollars to bail out poorly managed states.
White said that because some states are now “enjoying windfalls,” while others are still struggling, it will be the most effective way for Congress to target a small amount of money more cautiously to the states that need it the most. He said, but to provide help to the governments that really need it without providing unnecessary help to the governments that don’t need it, some “special creativity” is needed.
Timing played a role
To some extent, the surprising recovery in the states reflects the timing of last year’s events. As many state legislators are reviewing initial budget proposals for the next fiscal year, this pandemic has begun. These proposals were drafted a few weeks before the shock, and heralded a year of strong tax growth.
Then, in just a few weeks, millions of people were unemployed. State officials believe that unemployment is a powerful driving force for their fiscal affairs. Past economic recession studies have shown that for every one percentage point increase in the unemployment rate, it may bring about $45 billion in trouble to the national budget.