Michael Hendrix testified before a subcommittee of the U.S. House Ways and Means Committee in a hearing entitled “Tax Tools to Help Local Governments.”
Chairman Thompson, Ranking Member Smith, and Members of the Subcommittee, thank you for inviting me to participate in today’s hearing. My name is Michael Hendrix, and I serve as the director of state and local policy at the Manhattan Institute. Along with my colleagues, we seek to advance freedom and opportunity across America’s communities.
My key message today is this: Congress should focus on targeted support to fight the pandemic of Covid-19 and its direct impact on budgets, while helping state and local governments to rebuild and get their economies back on track. Rather than papering over long-running budget problems or underinvesting in public health, we should prioritize what our infrastructure and communities actually need—and do so transparently and wisely. In so doing, state and local governments can help end this pandemic and safely reopen our economy.
THE FISCAL PICTURE
Covid-19 has devasted the lives and livelihoods of many Americans. Their communities have also felt the fiscal pain. States and localities at first faced large budgetary shortfalls as their economies locked down and public health costs soared. Indeed, many places would still be facing this fiscal plight were it not for the federal government's already unprecedented levels of aid, resilient consumer spending, and strong high-end employment. In fact, some states are in finer fiscal health than even before the pandemic. What this suggests is a need for targeted fiscal relief.
While America’s real GDP fell in 2020, states and local tax receipts actually increased—once you add in federal aid, revenues actually grew by nearly 10 percent. As their costs from fighting the pandemic grew and layoffs loomed, Congress rightly stepped up to help. There’s been $360 billion in direct relief for Covid-19 and hundreds of billions more in indirect aid—all told, Washington sent more than $1 trillion to states and localities last year.
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