Last week, we looked at Trimtab’s erroneous read of Federal Withholding Taxes.
This week, let’s take a look at how the States and Local governments are doing with their tax base. Let’s start with a chart of non-Federal deficits, as highlighted this April 15th in The Gartman Letter:
STATE AND LOCAL BUDGET DEFICITS
Billions, 1965 – Present
Chart courtesy of Stephanie Pomboy, MacroMavens.
The chart above shows a steady deterioration in the balance sheets of the states and cities of the US since the late ’90’s. Dennis Gartman notes that "Cities and states cannot run budget deficits without issuing revenue anticipation notes and the like to try to balance their budgets, and for a time those stop-gap measures will work… with the operative words here being "for a time."
As consumers spend less, the decrease in economic activity is leading many individual states to have their own recessions:
"The finances of many states have deteriorated so badly that they appear to be in a recession, regardless of whether that’s true for the nation as a whole, a survey of all 50 state fiscal directors concludes.
The situation looks even worse for the fiscal year that begins July 1 in most states.
"Whether or not the national economy is in recession — a subject of ongoing debate — is almost beside the point for some states," said the report to be released Friday by the National Conference of State Legislatures.
The weakening economy is hitting tax revenue in a number of ways: People’s discretionary income is being gobbled up by higher food and fuel costs, while the tanking housing market means people are spending less on furniture and appliances associated with buying a house."
One last note: Preliminary Q1 GDP data gets released on Wednesday . . .
Graphic courtesy of AP
Trimtabs Continues to Abuse Withholding Data http://bigpicture.typepad.com/comments/2008/04/trimtabs-contin.html
U.S. States `Deteriorating’ Amid Slump, Lawmakers Say
Bloomberg, April 25 2008
Many states appear to be in recession as deficits grow
Associated Press Apr 25, 8:17 AM EDT