Government Needs More Money You Don’t Have

The big story today is that retail sales fell in April…

WASHINGTON — Retail sales fell for a second straight month in April, a disappointing performance that raised doubts about whether consumers were regaining their desire to shop. A rebound in consumer demand is a necessary ingredient for ending the recession.

The Commerce Department said Wednesday that retail sales fell 0.4 percent last month, much worse than the flat reading economists expected. The April weakness followed a 1.3 percent drop in March that was worse than first estimated. – FOX News

This is the big story for a number of reasons. First, people are buying less and that does not help bring the manufacturing sector back up (few sales = lower labor needs) or help the unemployment numbers. However, perhaps the biggest impact is that most States depend on retail sales as their primary source of revenue.

ALBANY, N.Y. (AP) — Tax collections continued to drop in almost every state during the first quarter of 2009, off an average 13 percent from a year earlier as the recession and wary consumers cut into income and sales tax revenue.

The Rockefeller Institute of Government’s latest report shows a nearly 16 percent average decline in personal income taxes. That’s the steepest drop since 2002.

Now anyone who actually believes that the States (or Federal government) are going to cut back on spending in any significant way is living in dreamland. Most likely, the States will seek additional revenue sources (new taxes for example) or divert stimulus funds from programs designed to create jobs.  The story for Tennessee….

Tennessee’s revenue continued its downward slide last month, with April collections coming in at $1.2 billion, nearly $200 million less than budgeted.

Sales tax collections were $74.5 million less than budgeted, and franchise and excise taxes were under budget by $56.6 million.

Hall income tax collections for April were $32.2 million less than estimated, and inheritance and estate tax collections were $3.8 million less than expected. Also, tobacco tax collections were $11.6 million under the budgeted estimate.

Only gasoline and fuel collections for April went up, by a mere 0.77 percent.

The state has had negative growth in sales tax and corporate income tax collections for 14 of the past 16 months since January 2008, Finance and Administration Commissioner Dave Goetz says.

So far this year, tax collections are $887.6 million less than the budgeted estimate, causing a further shortfall in the general fund of $807.9 million.

State revenue budget estimates were adopted last May. The 2009-2010 budget assumes total taxes will be under collected by $1.1 billion. – Memphis Business Journal

I would point out to my friend TN Rep. Jim Coley, as I predicted when you voted for the increased cigarette tax, you would see a decline in tax revenue from cigarettes. Although a ‘captive’ market, the tax increase created a boom in the fine old Tennessee tradition of ‘boot-legging’. The latest Federal tax increase has only served to expand the ‘boot-leg’ market even further. You can pass all the laws you want, but ‘boot-legging’ to avoid taxes is as old as America itself. See that big name on the Declaration of Independence, John Hancock? He made his fortune ‘boot-legging’ to avoid the British tariff’s.

So hold onto your wallets Tennesseans, the politicians will be grabbing for them again this year.

I told you so!

This just in from Drudge….

If you make big bucks – or enjoy alcohol, cigarettes and Coke – the government might hit you up to pay for fixing the nation’s health care system.

On Tuesday, the Senate Finance Committee peeked into vending machines and liquor stores, company payrolls and health savings accounts, looking for a mix of tax increases and spending cuts as a way to pay for a health overhaul – which could cost more than $1.5 trillion over 10 years. – Politico

Yep, the ‘boot-leg’ business is going to be booming!