Growing Income Gap Impacting State Revenues

The growing gap between the wealthy and less wealthy is impacting businesses, the economy, and now the states.  The wealthy tend stay wealthy by saving more and spending less, and they also earn more from investments.  As a result, sales taxes are growing stale, which is presenting a “macroeconomic problem” for states.

The increase in income inequality that is continuing to divide the rich and everyone else is causing more than socioeconomic issues, it’s creating a serious financial challenge for states.  Worse yet, states may be unable to adjust their tax policies to adjust for the widening gap.  As discussed in “Income Gap a ‘Macroeconomic Problem’ for States, S&P Says,” posted by Matthew Heller on, the average annual state tax revenue growth shrunk from 10% to 5% and the total income for the top 1% doubled.  The wealthy tend to spend a lower percentage of their income, which can put a dent in sales taxes.  On top of that, the wealthy are typically better about shielding their income, which further hurts tax-based revenues.

While raising taxes may help schools, transportation, and other programs, high taxes can also make businesses think twice about expanding or moving into your state.  Political pressures may also cave to lowering, instead of raising, taxes which could further burden states.  Left with tighter budgets and the need to show fiscal responsibility, states may be able to get through these tough times by implementing an enterprise resource planning (ERP) solution.

Government offices can simplify common tasks such as managing people, processes, and programs with an ERP solution.  An integrated ERP solution offers time-saving automations that can improve productivity and provide the insight needed to increase efficiency and effectiveness with the services that you offer.  ERP also offers control and visibility needed for regulatory compliance, grant management, fund and account management, and encumbrances and commitments management.   Electronic signatures, audit controls, and robust reporting offered by ERP can be used to show fiscal responsibility to constituents.

Government offices can weather tough economic conditions by implementing an efficient, innovative technology, such as an ERP solution.  Contact AKA Enterprise Solutions for more information about using ERP to gain insight and control over financial and other operations to counter the pressure from the growing income gap.

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Contributor: AKA Enterprise Solutions

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