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Watchdog: State, Local Taxes Must Rise to Keep Services

Tuesday, 22 Mar 2011 01:31 PM

States and localities will likely raise taxes to maintain healthcare services, said the chief economist at the U.S. Government Accountability Office.

The difference between what states and localities spend and what they take in will grow to about 2 percent of gross domestic product over the next 40 to 50 years without changes in spending and revenue policies, said Susan Offutt, whose department evaluates government activities for Congress. The growth will be driven by an increase in spending on healthcare, including Medicaid and payments to retirees, she said.

“The nature of the fiscal problem is so daunting that to think about achieving reasonable debt-to-GDP ratios without tax increases of some kind is difficult,” she said today at the State and Municipal Finance Briefing hosted by Bloomberg Link in New York.

Some 44 states face a collective budget gap of $112 billion for fiscal 2012, according to the Washington-based Center on Budget and Policy Priorities. Without spending and tax changes, the cumulative gap is likely to grow and states may have problems making payments, Offutt said.

“Certainly we expect them to be able to meet their obligations in the short term,” she said. “Long term may be a different story.”

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States and localities will likely raise taxes to maintain healthcare services, said the chief economist at the U.S. Government Accountability Office.The difference between what states and localities spend and what they take in will grow to about 2 percent of gross domestic...
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2011-31-22
 

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