US wealth gap putting the squeeze on state revenue

Income has barely kept pace with inflation for most people other than the affluent and for states

Photo Courtesy: MGNonline

WASHINGTON (AP) — Experts say income inequality is more than just a social issue and it’s hitting state governments where it hurts most, the balance sheet.

A report being released Monday by Standard & Poor’s finds that a slowdown in state revenue is connected to the widening gap between the wealthiest Americans and everyone else.

Income has barely kept pace with inflation for most people other than the affluent and for states, that’s not good news. The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others, thereby limiting sales tax revenue.

The dilemma for states is whether to raise taxes or cut spending.

Income inequality isn’t the only factor. Online retailers account for a rising chunk of consumer spending while mostly managing to avoid sales taxes. Consumers are spending more on untaxed services, too.

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