I commented earlier in the week on the financial problems facing the Federal Government. Well the states have problems too. Its particularly interesting to think about the states that have hamstrung themselves by not having a state personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire, and Tennessee (the last two do tax dividends and capital gains income).
These states without personal income taxes rely more heavily on sales taxes and property taxes. Well guess what's happened to property values in some of these states:
These states without personal income taxes rely more heavily on sales taxes and property taxes. Well guess what's happened to property values in some of these states:
The data come from the Case-Shiller series from the S&P (not all states have an index since these indicies are calculated from major MSAs only). The two states with large drops (and high peaks) are Nevada and Florida. Check out this graph of the percent deviation from the peak:
Nevada and Florida don't have a personal income tax and now their property values have have plummeted much further than the national average. I'm not sure how quickly the tax assessed values change (or how quickly they can change the property tax rates), but you have go to believe that these states are going to be in a world of pain sooner or later.
To pile it on further, these two states rely heavily on sales (and other) taxes that are in large part borne by tourists. What do you think will happen to that industry during the recession? Couple that with a stronger dollar and international tourism is really going to slow.
It'll be interesting to see how things play out. Will there be a push for a personal income tax or will state government spending have to be slashed in these states? How will property tax rates respond to the change in property values? Whatever happens, I'm glad we have these 50 states to experiment with.
To pile it on further, these two states rely heavily on sales (and other) taxes that are in large part borne by tourists. What do you think will happen to that industry during the recession? Couple that with a stronger dollar and international tourism is really going to slow.
It'll be interesting to see how things play out. Will there be a push for a personal income tax or will state government spending have to be slashed in these states? How will property tax rates respond to the change in property values? Whatever happens, I'm glad we have these 50 states to experiment with.
It looks like it is time to short industries in Nevada, Florida, and Washington that depend heavily on government spending.