CBPP: Southern states at risk on budgets

A report issued last week by the Center for Budget and Policy Priorities found that most Southern states face future budget problems because of structural weaknesses in their tax systems.

Most at-risk states included Arkansas, Florida, South Carolina and Tennessee, all of which scored 9 or 10 on a 10-point scale (with 10 being most at risk). Other scores: Alabama (8), Georgia (8), Kentucky (8), Mississippi (7), Virginia (7), North Carolina (6) and Louisiana (5). Full report.

"A prime cause of structural deficits is that most states have failed to respond to the economy’s shift from goods to services, which make up a growing share of all economic activity. That shift has cut into state sales tax revenues, since most states do not tax services. The rapid growth in Internet purchases is also hurting sales tax revenues, since states generally cannot collect taxes on these purchases.

"State income taxes have weakened in recent decades as well. Corporate income tax revenues have shrunk by nearly half as a share of total state revenues over the past two decades, as a result of obsolete state corporate tax policies and corporations’ increasingly aggressive tax-avoidance schemes."