New Data: State Tax Revenue High, While State Govs Have Only Spent 24% of COVID Relief

September 4, 2020 — Blog    — Coronavirus Bulletin   

Democrats continue to hold up additional coronavirus relief, while demanding a $1 trillion bailout for state and local governments that claim they have lost massive revenue. This is simple fear mongering and not based on actual data. Aid should be targeted to relieve damage actually caused by the coronavirus pandemic, rather than bail out poorly run state and local governments.

State and Local Tax Revenue Beats Estimates

New data shows state, local tax collections significantly beat dire estimates from Spring 2020.

The Cato Institute finds that when accounting for a massive influx of federal dollars, state revenue has already substantially increased:

“While tax revenues have dipped slightly, federal aid to state‐​local governments has soared. Total tax revenues fell $13 billion from the first to the second quarter. But federal aid rose $192 billion as cash from federal relief bills filled state‐​local coffers. Total state‐​local revenues (from federal aid, taxes, and other sources) rose from $716 billion in the first quarter to $893 billion in the second quarter.”

The Wall Street Journal considered similar data and came to the same conclusion:

“We examined recent monthly revenue reports for various states and, not surprisingly, Democratic states that maintained stricter and longer lockdowns appear to be recovering more slowly. But even they are raking in more cash than they let on.”

State and local financial crises have not materialized and Congress can respond accordingly should one develop. But dumping an additional nearly $1 trillion into state and local governments without more data would be both reckless and irresponsible.

State Governments Still Control $84 Billion in Unspent Federal Aid

States and localities haven’t even spent the aid they’ve received.

States Admit They Haven’t Spent Their Aid: State governments have reported to the Treasury Inspector General that they have only spent 24% of money directly received and still control $84 billion in unspent funds. Yet Democrats are demanding more aid.

Congress Has Also Provided Other Types of Federal Aid:  States have only reported to the Treasury Inspector General their use of aid that includes Coronavirus Relief Funds and not the other types of aid Congress provided to states and localities (i.e., education relief, housing relief, unemployment insurance relief, etc.).

The Most Effective Aid is Aid That’s Spent: State and local governments may have “committed” funds to relief efforts, but the economic impact will only be felt once that money has been spent. Once that happens, Congress can assess that impact and review the latest progress on revenue collection to determine the necessity of additional aid.

Republicans believe in common-sense solutions, not bailouts. Republicans believe in basing federal aid on actual data and real-world conditions, not political favoritism and bad management. Congress should not consider additional aid to state and local governments unless and until existing funds are spent and data shows that more aid should be considered.

Want to read more on the fight against Coronavirus? Read our Coronavirus Bulletin here which contains our extensive FAQ about recent federal actions.

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