State's struggle as income tax plummets

ALBANY, N.Y., June 19 (UPI) -- Income -- and tax on it -- keeps shrinking, a new report shows, and states are struggling to put together spending plans for the budget year beginning July 1.

From January to April, personal income taxes paid to 37 states tumbled a combined 26 percent, or $28.8 billion, compared with the same period last year, the Nelson A. Rockefeller Institute of Government reported.

Arizona had by far the biggest decline, 54.9 percent, while the taxes paid to New York, New Jersey, South Carolina, Michigan, California and Vermont each plummeted more than 30 percent.

Given expected shortfalls, Stateline.org reported that states are considering tax increases and spending cutbacks:

Arizona is considering a temporary 1 percent state sales tax increase and a cut in services. Illinois Gov. Pat Quinn, a Democrat, wants a 50 percent increase in the income tax. Pennsylvania Gov. Ed Rendell (D) ordered deep spending cuts and proposed a 16.5 percent personal income tax increase.

In California, Republican Gov. Arnold Schwarzenegger wants to close the gap by selling off the Los Angeles Memorial Coliseum, San Quentin State Prison and other state property, eliminating welfare for 500,000 families, terminating health coverage for nearly a million low-income children and closing 220 state parks.