A report from the House Finance Committee in Colorado’s Legislature is estimating that the economic stimulus package signed by President Bush, and expected to put checks in taxpayers’ hands in May, will cost that state about $54 million alone.
“It is going to have a big impact, in particular on the capital development projects,” Rep. Joel Judd, D-Denver, chairman of the committee, told the Denver Post.
And Michael Bird, the federal affairs counsel for the National Conference of State Legislatures, said such impacts may be hitting many states, because a large number have similar taxing structures.
President Bush had promised when he signed the legislation allowing the tax rebate checks to be distributed that the program was “large enough to have an impact, amounting to more than $152 billion this year, or about 1 percent of the [gross domestic product].”
The goal of the government’s plan is to prevent a recession, or mitigate the impact of one. Taxpayers are to get checks, as will disabled veterans and some senior citizens.
The plan also includes tax breaks for businesses that purchase equipment.
It took less than four weeks for the plan to be moved through Congress, and its specifics include generally $600 to individual taxpayers, $1,200 to married taxpayers filing joint returns as long as they are below income caps of $75,000 for individuals and $150,000 for couples, and a $300 per child credit.
According to CNN, most economists agree the economy “should” see a boost, but they expect the impact will be less than the total value of the package, primarily because some people are expected to save the money or use it to pay down already existing bills instead of making additional purchases.
David Wyss, of Standard & Poor’s, told CNN his guess is that “about half will go to U.S. products and services.”
Bird was more modest in his expectations of an impact, especially for state economies that historically lag behind the federal economy when recovering from a recession. He told WND he expects only a fraction of the total would be put into the economy and be subject to sales taxes.
“The most the states are going to see is about $5 billion collectively,” he said. And some of what states otherwise might see could be offset if they don’t act quickly to disallow some of the credits the federal plan includes.
He said the impact on the states will come because many states simply align their income tax collection to the federal system, allowing only certain additions or deductions.
With billions being deducted from federal taxes by businesses purchasing equipment, that revenue also will be lost to individual states unless they come up with a way to deal with it, he said.
He said the additional money distributed to taxpayers in most state cases won’t be counted, or taxed, as income. And even the sales tax revenue will be limited because a number of recipients are expected to manage their rebates by saving it, or paying down previously acquired bills, which would mean whatever sales tax revenue trickles down would have already done so.
He said even if $5 billion comes to states, state budget officers have estimated the collective state budgets’ deficit for next year to be $35 billion already.
Thirdly, he said it is a problem that the United States did not have the money to give out. And he said an additional complication is that much of the money that will be used for consumer goods will end up in China, or Korea, or Japan.
“It will be good for their economies, not ours,” he said.
In Colorado, officials were worried about the federal tax breaks being allowed both businesses and individuals.
“What you owe Colorado is based on what you owe the federal government,” said the Post report, “so the less paid to Uncle Sam, the less paid to Colorado.”
The report said 35 other states also would see declines in revenue because of the package, according to the Center of Budget Policy and Priorities, of Washington, D.C.
The Colorado legislative staff said the package will cost Colorado $20.5 million in the current fiscal year, ending in June, and another $33.6 million in the year beginning in July.
The NCSL had suggested, instead of direct rebates, Congress authorize grants to states, state Medicaid assistance, child support enforcement payments, food stamp help, unemployment benefits, and capital projects, and if tax credits were used, to accelerate the scheduled increase in the child tax credit.
In Colorado, lawmakers said it was impossible to say exactly what projects may have to be deleted, but among the options is a science building on a Denver campus, building repairs at a community college and various projects at the University of Colorado.
Sen. John Morse, D-Colorado Springs, said the stimulus package might be good from a federal perspective, but not from the state’s.
On the newspaper’s forum, however, taxpayers were wasting no sympathy on the state’s situation.
“Better in our pockets than in the state government’s,” wrote claude long. “Oh, wait! Did they say $54 million short??? We’d better jack up car registrations by $300 and get the foolish voters to pass another Ref. C kind of tax increase. Never mind that the state government wastes TONS of money. They should hit up the taxpayers first.”
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