Budget crunch may get worse, study says

April 02--The Kentucky General Assembly is planning a special session later this year on tax reform.

If it helps working folks, I'll believe it when I see it.

And in January, the legislature will start working on a budget for the next two years.

But a study by The Hill, a publication that covers Congress and politics, says that budget analysts expect tax revenues to "grow at a slower clip than in the decades before the Great Recession, threatening renewed budget squeezes just as the economy begins to gain momentum."

It says, "Many budget officials cited a host of unknowns, including a shaky global economy, political instability in Europe and Asia, and stagnant wage growth -- as well as uncertainty created by the Trump administration's proposals on taxes, trade and the federal government's contributions to state budgets."

The report says that the average state expects income tax revenue to grow 3.6 percent in fiscal 2017 -- down from 4 percent this year.

And sales tax growth is projected at 3.1 percent -- down from 4.2 percent.

Those rates, the report said, "are well below yearly averages before the Great Recession."

But needs are rising, it said, because of an aging population, escalating healthcare costs and federal mandates.

Ah, federal mandates.

What will the folks in Washington shift back to the states and local governments this year?

Stagnant wages mean people don't have money to buy a lot of things, which holds down sales tax revenue.

In Owensboro, the city is talking about several tax increases.

And every utility is raising its rates.

The more money taxes and rate increases take from the economy, the less there is to spend.

It's a vicious circle.

And the only way to boost the economy and get more money in circulation is for wages to start rising again.

But I'm not holding my breath.

Keith Lawrence, 270-691-7301, [email protected]

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