Saturday, February 20, 2010

States In Big Trouble: Tax Refunds To Be Delayed!

Recently, the State of New York announced  that it is considering delaying state tax refunds in order to help it cope with growing budget problems.

Governor David Patterson, facing dismal approval ratings, has warned that the $8.2 billion budget gap may force the state to postpone the tax refunds in order to avoid going bankrupt, unless it passes a budget by its April 1 deadline.

“We can only do this to stop the state from going bankrupt, but there are procedures we will have to take if the legislature doesn’t act, and close this deficit with real and recurring deficit reductions, not made-up, phony revenue enhancers that don’t really exist,” he said, according to local radio station WRVO’s Web site.

Patterson told another radio station, WOR, that taxpayers should blame the legislature for the budget woes. He claimed the legislature refused to cut spending and resolve the budget deficit.

New York is one of many states facing budget shortfalls this year due to the recession and plummeting tax revenues.  Last year, California also announced it would be forced to delay income tax refunds, but the state eventually issued them.

New York is hardly alone.  Hawaii's Department of Taxation recently said it will begin issuing the checks in July, but it could be that some refunds won't get sent out until late summer.

The delaying of refund checks is allowed by state law and is being used this year as Gov. Linda Lingle looks for ways to ease an expected $721 million revenue shortfall in the year that ends June 30.

Lingle is pushing some costs into the next fiscal period, which begins in July.  Several states, including California, Missouri and Kansas, last year used the tactic of delaying refunds to help with their financial problems.

Also in trouble is North Carolina.  Its Department of Revenue is now in its second year of delaying refunds and blames the delay on slow collection of income taxes.

The trend is disturbing enough.  We ARE in a recovery after all, aren't we?  What on earth will happen when the economic downturn asserts itself with a vengenace?

Comments?  Disagree?  Agree?  TAKE ME ON!

Marko's Take

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