The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released Monday by Standard & Poor's.
Even as income for the affluent has accelerated, it's barely kept pace with inflation for most other people. That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend a lower percentage of it than others do, thereby limiting sales tax revenue.
As the growth of tax revenue has slowed, states have faced tensions over whether to raise taxes or cut spending to balance their budgets as required by law.
"Rising income inequality is not just a social issue," said Gabriel Petek, the S&P credit analyst who wrote the report. "It presents a very significant set of challenges for the policymakers."
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