Just one percent of income taxpayers, about 150,000 families in a state of 40 million people, account for nearly half of income taxes and therefore for a third of all general fund revenues.
Their incomes largely come from earnings on stocks and other investments, which are very likely to plunge during recessions. It’s called “volatility” and it threatens the state budget because it’s almost impossible to adjust expenditures to cope with revenue fluctuations, leading to immense deficits.
Volatility shredded the budget during the Great Recession a decade ago, and one result was that Brown inherited what he called a multi-billion-dollar “wall of debt” when he returned to the governorship in 2011.
Since then, the state has become even more dependent on taxing the rich, thanks largely to a “temporary” income tax rate increase on them that Brown sponsored to close the deficit, and that unions and other pro-spending groups later persuaded voters to extend.
Therefore, as Brown prepares to leave the governorship, the potential negative impact of recession on the state budget has become even greater, with only his relatively puny reserve to cushion the blow.
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