Why Taxing the Wealthy Can Be Trouble for States

Stateline: As the gap between the rich and the poor widens, states are finding that taxing the incomes of the rich means living with unstable budgets.

That’s because wealthy Americans are more likely to have investments in the stock market. When the market falls, so do their tax payments. Stock market turmoil can hurt state pension funds, too. But while it takes years for states to feel that impact, a dip in the markets — or a lackluster Wall Street bonus season — can create an immediate fiscal crisis.

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