Which is the Most Likely Way That a Governor Will Increase Revenue For a New State Budget?
One of the questions that we have all been asking is what is the most likely way that a governor would increase revenue for a new state budget. The quick answer to that question would be raising taxes, but that is not necessarily the best answer. Of course, if you are a conservative you will say that raising taxes is absolutely the last thing you would do and you would support any measure to increase taxes on the rich and corporations. However, a lot of the Tea Party agrees with them and they want lower taxes for the poor and middle class. In fact, it is probably much more palatable to them to have higher taxes on the wealthy and corporate America than it is to have higher taxes on the poor and middle class.
Probably the most likely scenario would be an increase in income taxes: If you are very wealthy and your income has been static for the past few years, you may not see a lot of movement on this issue. However, if you are earning a bit more each year and you are saving for retirement, and you are paying a hefty amount of money into Social Security, you are probably going to see increases in your taxes. The wealthy also tend to donate more to charity so there is a good chance that they would also see an increase in their tax deductions.
There is one other way: That a governor could increase revenue for a new state budget. That is by increasing personal and corporate taxes. This is something that I have not seen many people do in my lifetime, and it makes sense. However, it is important to realize that if you raise personal income taxes, you may well raise sales taxes as well. This means that you will either have to raise all taxes or do a combination of both.
Some have said that they have heard: That a formula is being used by some governorates to calculate which is the most likely way that a governor would increase revenue for a new state budget. For instance, if the governorate’s revenue is two percent less than its expenses, then it is more likely to increase revenue by one percent. That is still pretty good by historical standards but it is worth noting that no formula is foolproof. There are just too many factors. But when you consider that a higher growth rate means that there are more income for the residents and less for the government, this can work in your favor.
A second possibility would be to increase personal income tax rates: This could generate a bit more money for the government as well because of the additional credits granted to the people who earn more. However, this also means that there is less disposable income for the government, which makes it harder for them to cut other programs. You might see some revenue growth but it won’t be as large as it was for a traditional two-percent increase in revenue for a new state budget. One of the reasons that this works is that the amount of people who would be affected by a given tax increase will be much smaller than if the tax rate increase was totally steep.
A third possibility is to raise personal income tax rates across the board: This would certainly create a lot of revenue growth but the amount will be much lower than it was for a traditional two-percent increase in revenue for a new state budget. You will also have to deal with the hit to the economy from this particular type of revenue increase since it will hurt businesses. If personal income tax rates increase across the board and this hits the business sector hard, then we are looking at a real recession.
The last thing a state needs is to take a hit in the economy because it was not planning to.