Report finds slowdown in state tax revenue

Published 9:23 am Monday, September 15, 2014

WASHINGTON — Income inequality is taking a toll on state governments.

The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released today by Standard & Poor’s.

Even as income for the affluent has accelerated, it’s barely kept pace with inflation for most other people. That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others do.

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As the growth of tax revenue has slowed, states have faced tensions over whether to raise taxes or cut spending to balance their budgets as required by law.

“Rising income inequality is not just a social issue,” said Gabriel Petek, the S&P credit analyst who wrote the report. “It presents a very significant set of challenges for the policymakers.”