States begin freezing tax refunds to fix budget

States Consider Holding Tax Returns to Save Money
— New York’s Governor Paterson froze $500 Million in refunds
By Oregon Tax News,

USA Today reported that California, Hawaii, Alabama, North Carolina, Kansas, Idaho and New York are considering delaying issuing refunds because the states did not have the cash on hand to cover the costs.  The delays come as states continue to face deep budget holes.  While some economists say the say the nation as a whole is recovering, a recent report conducted by the National Governors Association said state fiscal conditions continue to worsen, and that state revenues will likely lag one to three years behind a national recovery from recession.

California delayed tax refunds and issued billions of dollars in IOUs to vendors and others who the state owed money because of its massive budget shortfall that exceeded $20 billion last year.

Hawaii’s Department of Taxation says some residents may not see state income tax refunds until the end of August.  Governor Linda Lingle believes this delay will help deal with the revenue drop-off by pushing costs into the next fiscal period, which begins in July.

New York’s Governor Paterson froze $500 Million in refunds affecting several hundred thousand New York taxpayers.   Taxpayers who filed in late February and early March might have to wait as long as six weeks until the checks are in the mail. It’s likely that New York will not send refund money until April.

Even Oregon found itself delaying tax returns.  The state delayed its refunds by requiring taxpayers to file their 2009 taxes after the January 26 special election, which passed Measures 66 and 67. Measure 66 raised taxes on households with taxable incomes of $250,000 or more and individuals with $125,000 or more. Measure 67 added new taxes for some businesses.

This fiscal year alone, 36 states cut nearly $56 billion in spending, and 30 states have cut funding to public and higher education.

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