Forbes has published an article, “Why Businesses Should Keep An Eye On State Tax Policies Before And After Presidential Election,” which discusses the how states and localities facing budget deficit can impact tax policies during the presidential election period. The summary is as follows:
As a result of the COVID-19 crisis, many states and localities are facing significant budget shortfalls. California, for example, is looking at a $52B budget shortfall, while Chicago is facing a $1.2B shortfall. These deficits, like those of other jurisdictions, stem from a combination of COVID-19-related tax relief, an increase in unemployment benefit claims, declines in sales tax revenues and property values, and fewer parking and speeding tickets while remote work continues, among others.
Unlike the federal government, states and localities generally must balance their budgets and cannot use deficit spending to fix budgetary gaps. To address shortfalls, states can only (i) increase tax rates while maintaining the current tax base; (ii) increase the tax base while maintaining the rates; (iii) cut spending programs; or (iv) employ some combination of the three.
For businesses operating in states with budget deficits, tax increases appear likely. Depending on the severity of the shortfall, these increases could be enacted while businesses are still recovering from the pandemic’s effects.
Click here to see full article: “Why Businesses Should Keep An Eye On State Tax Policies Before And After Presidential Election.”
Posted by Bella Hoang, Associate Editor, Wealth Strategies Journal.