State & Local Taxes: 2017 Census of Governments Finance Data

In FY 1997, New York State’s state and local government tax revenues totaled $132.88 for each $1,000 of state residents personal income, far above the U.S. average of $102.80, and second in the country behind Alaska, where revenues were inflated by state taxes on oil and gas extraction.  And yet by FY 2017 New York State’s tax burden had increased further, to $138.22 per $1,000 of personal income, now first in the nation.  The District of Columbia and Vermont also had above average tax burdens in FY 1997, and saw those burdens increase further by FY 2017.  In FY 1997, Arizona, Colorado, Florida, Georgia, North Carolina, Oklahoma, Tennessee, Texas, and Virginia all had state and local government tax burdens that were below the U.S. average, though all but Tennessee were above $90.00 per $1,000 of personal income.  And yet by FY 2017 the tax burden in each of these states had fallen further, in some cases plunged, and now all are below $90 per $1,000 of state residents’ personal income, in some cases substantially.

Nationally, the overall state and local government tax burden increased from $102.80 per $1,000 of personal income in FY 1997 to $106.92 in FY 2007, but then fell sharply to just $97.77 per $1,000 FY 2017.  It has been in the vicinity of $100 per $1,000 of personal income for decades.  Almost all of that 2007 to 2017 decrease was at the state government level, with the overall state tax burden falling from $63.11 per $1,000 to just $55.89, and with nearly all types of tax revenues falling relative to income, but corporate income tax revenues falling (on a percentage basis) most of all. State aid to local governments also fell sharply from $37.95 per $1,000 of personal income in FY 2007 to $32.41 per $1,000 in FY 2017, due in large part to fewer children in school (relative to the number of adults with income) as the large Millennial generation exited.  On the other hand, federal aid to state governments increased from $33.90 per $1,000 in FY 2007 to $37.86 per $1,000 in FY 2017, due in large part to soaring Medicaid expenditures, which are substantially federally-funded, and go mostly to the old.

Posts on state and local revenues other than taxes and spending by category will come later.   A detailed discussion of state and local taxes follows.

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Background and Databases: 2017 Census of Governments Finance Data

The coronavirus has accelerated a reckoning for U.S. state and local governments that had been building up for 25 years, and the consequences, which would have gradually become terrible anyway, will be severe.  Those public officials who made, and benefitted from, the past decisions that will lead to a future of higher taxes, diminished services, and deteriorating infrastructure will eventually leave the scene, perhaps soon.  Their replacements, faced with a crisis and the need to inflict pain on their constituents, might wonder how their community ended up in this situation?  How does their state or locality’s tax burden, in total and by type of tax, and spending, by government function, compare with other places, and how has that changed over time?  Who, compared with other places and compared with the past, has been taking out too much, and/or putting in too little? And to what extent would, should, and could later-born and future residents, who got no related benefits, be sacrificed to pay for the self-dealing of the past?

I have been using data from the Governments Division of the U.S. Census Bureau, and other data sources, to answer questions like these for the past 30+ years.  Including the Census of Governments, which takes place every five years, with the latest data for FY 2017 released late in 2019.   While revised data will be released at some point in 2020, given the coronavirus crisis I have decided to compile and analyze the that which is now available.  This, the first of a series of posts, will describe where the data comes from and how I tabulated it.  It includes downloadable spreadsheets with data on state and local government revenues and expenditures, by category, per $1,000 of the personal income of everyone in each area, for all 50 states and the District of Columbia.  And data for all local governments combined in each county in New York and New Jersey, and many other selected counties around the country chosen for comparison.  Not only for FY 2017, but also – identically – for FY 2007 and FY 1997, for a 20-year trend.

Subsequent posts will include tables, charts and specific analyses of taxes, other revenues, local government education, state government colleges and universities, public safety, health and social services, infrastructure and amenities, and general government.  But as is my custom I’m making the data available up front, so anyone can download it, look at it, and make up their own mind before getting my take on it. My focus is New York and New Jersey, but there is far more in the spreadsheets linked from this post than I intend analyze on an avocational basis. And anyone could have this data to think about themselves, and have it right now.

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The Revised NYC Rent Stabilization Law, Preferential Rent, and the Coming Commercial Real Estate Foreclosure Surge

The surge of new apartment supply hitting the market this year and next, and a deep recession and commercial real estate financial crisis that were always in the cards…

https://larrylittlefield.wordpress.com/2020/02/14/the-commercial-real-estate-future-bankruptcy-foreclosure-workout-value-added-reinvention-and-redevelopment/

https://larrylittlefield.wordpress.com/2020/03/17/federal-reserve-z1-data-for-2019-the-debt-driven-party-had-to-end-eventually-coronavirus-or-no-coronavirus/

May combine with the coronavirus to do something few would have thought possible a year ago:  cause New York City’s market-rate apartment rents to plunge, and market-rate vacancies to soar.

How might this affect rent-regulated apartments?  I know from experience that during the early 1990s recession and fiscal crisis, far worse here than any since (until, perhaps, now), landlords of rent-regulated apartments were forced to cut rents to less than the law allowed, known as “preferential rent” in NYC, to attract tenants.  Lower rents filled units and kept the city’s apartment vacancy rate below 5.0%; the rents caught up to the legal limit later when the economy recovered, as was allowed at the time.    This time, however, may be different.

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Mass Bankruptcy and the Contracts Clause of the Constitution

A revision to the U.S. Constitution requires a two-thirds vote of each house of the Congress, the signature of the President, and the approval of three-quarters of the states. It is something that is virtually impossible to achieve.  And yet if we had a functioning government, it is something that would probably be attempted immediately.  Right now there are millions of contracts outstanding that require people, businesses, and property owners that suddenly have no revenues to pay someone else money.  Leases and mortgages, for example.  Money those who owe do not have, thanks to coronavirus-related shutdowns.

As it stands the result will be a wave of bankruptcies and foreclosures that leave everyone — those who owe, those who are owed, and third parties — worse off.  Or renegotiations, in bankruptcy or out, that take time, lawyers and money to complete, and may not succeed.  Or mass bailouts that benefit existing interests — and benefit them more the better off they already are — at the expense of less well off later-born generations and the future of the United States.

I propose a fourth option.  Allowing the government to, in effect, suspend contracts en masse for people and organizations that have lost their income due to government-mandated shutdowns during a pandemic.  The contracts would remain in place, but would be frozen.  No money would be owed during the shutdown or for a month thereafter, and the contracts would be extended for that length of time.   It would be as if the time of the shutdown and the month after had not occurred.  Financial asset holders would, in effect, be forced to provide zero interest loans during the shutdown.  Frankly, right now that’s a pretty good rate of return compared with the alternatives.  The problem with this proposal is that it is unconstitutional.

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Imported Oil: American Gutlessness Means Perpetual Slavery

Did you hear about the United States finally becoming energy independent again thanks to our great President Donald Trump, the guy who has essentially declared war on mass transit and alternative energy?  Actually, he didn’t just promise energy independence. He promised energy “dominance.”

https://www.cnbc.com/2017/06/28/trump-america-energy-dominant-policy.html

Here’s how Energy Secretary Rick Perry explained energy dominance to the White House press corps on Tuesday: “An energy dominant America means self-reliant. It means a secure nation, free from the geopolitical turmoil of other nations who seek to use energy as an economic weapon.”  “An energy dominant America will export to markets around the world, increasing our global leadership and our influence.”

You might have missed it, but the Saudis didn’t.  So OPEC has done it again. Jacked up production and sold below cost so the price of oil and gasoline plunge to $20 per barrel. They can count on the neediness, whining and shortsightedness of the generation that is still in control of the United States, the Baby Boomers, and the gutlessness of U.S. politicians, to stand aside yet again as the domestic fossil fuel industry, alternative energy companies, and conservation are wiped out and replaced by cheap foreign oil. And then, when our dependence and vulnerability have been fully re-established, OPEC will again slash production and jack up the price of oil to $100 a barrel, causing another recession and another avalanche of U.S. dollars out of the country.  As they did in 1973, and 1981, and 1990, and 2008, and 2011-14.   Ah, but that’s the future, and we can’t think about that now!  What about my need for cheap gasoline!  I want for me now, and now, and now, and again now!

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Annual Average CES Employment Data for 2019: Before the Coronavirus New York Had A Growing Budget Crisis Despite A Massive Boom

The Bureau of Labor Statistics released rebenchmarked Current Employment Survey data, with 2019 annual average data (the average of all 12 months), last week.  While it seems as if it were ancient history, it is worth looking at this data now, because it shows how New York State benefitted from a massive employment boom from the peak of the prior economic upturn in 2008 to what seems certain to be the peak of the expansion that just ended in 2019.  An employment boom that dwarfed the increase from 2000 to 2008, and exceeded the U.S. average in percent gains, even though New York is a slow population growth state.  A boom that was concentrated in New York City.

And yet by the end of 2019 the City of New York, the State of New York, and the MTA were already facing budget crises.  Service cuts, tax increases, fee increases and deferred maintenance to the point of a future drastic infrastructure decline were already on the table.  And now, no doubt our elected officials and the special interests they represent will use the coronavirus and an excuse for all of the above.  They should not be allowed to get away with it.  Just as the business crisis was caused not by the virus, but rather by all the debts businesses piled up to pump up stock prices and executive pay, as everyone across the ideological spectrum seems to be saying (the subject of my prior post).  So the fiscal crisis was coming one way or the other, due to similar heists over the past 25 years.

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Federal Reserve Z1 Data for 2019: The Debt-Driven Party Had to End Eventually, Coronavirus or No Coronavirus

“If something cannot go on forever, it will stop,” Herbert Stein

“Markets can stay irrational longer than you can stay solvent,” John Maynard Keynes

Federal Reserve Z1 data for 2019 was released on March 12, and it shows a continuation of the post-1980 trend.

https://www.federalreserve.gov/releases/z1/default.htm

For the past four decades businesses have paid most Americans less and less, working its way up the income and education scale.  With progressively lower pay and benefits by generation, and Millennials paid 25 percent less, on average, than Baby Boomers had been at the same point in life.  But for most of that period Americans still spent more and more, with the difference between lower labor costs and higher sales showing up as higher profits, converted to higher executive and financial sector pay, and inflated asset values.  That difference was bridged by more household members in the labor force, then by reduced retirement savings, then by soaring personal debt, then by soaring government debt. The result has been a global crisis of demand, and an unsustainable debt-driven economy.

It would have collapsed in 2008 without massive government intervention. That intervention meant the fundamental problems were never solved. Instead, asset prices were re-inflated, to the benefit of older asset holders and the rich, and to the detriment of younger people saving for retirement or seeking to buy a home. Even as most people became worse off, and U.S. life expectancy began to fall.  The global economy has been poised at a precipice ever since, with only interest rates near zero and soaring public debts deferring collapse, even as aging populations seemed sure to cause the whole thing to deteriorate eventually.  In 2019, total non-financial U.S debt increased 4.8%, and federal debt soared 6.7%, but nominal GDP increased just 4.1%, and inflation-adjusted GDP increased just 2.3%.  Not the 3.0% to 8.0% real growth The Donald has claimed yet another tax cut for the rich and corporations would produce.  The question for 2020 is whether the coronavirus will change eventually to immediately.

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