New national report: More states raising, reforming taxes to address recession

 

The Center on Budget and Policy Priorities released a new report yesteday that further clarifies what North Carolina lawmakers simply must do to address the current budget crisis.

Here are the key fiindings:

In response to the current recession, 16 states this year have enacted tax increases. Another 17 states are considering revenue-raising options.

This response is consistent with past practices. States often reduce taxes during economic expansions and increase them during downturns. In the recession of the early 1990s, some 44 states raised taxes; in the early 2000s, some 30 states did so.

Raising taxes reflects sound policy judgment. Tax increases can be less harmful to families and less damaging to state economies than the likely alternative: deep cuts in services.

Federal economic recovery funds are reducing the size and extent of state tax increases. But those funds are insufficient to avert the need for tax increases.

 

The bottom line: The state Senate was right to propose a half-billion in new revenue — even before the latest, bigger shortfall numbers came out. In contrast, the House will be placing the state on an insane, suicidal path if it persists with what appears to be its current plans –i.e. to craft a budget with two-billion dollars LESS revenue that the Senate used and NOTHING in the way of tax hikes.  

At some point, tax increases (hopefully of the progressive variety) MUST be a part of the final budget deal if North Carolina wants to avoid a retreat that could damage public services and structures for decades to come.

7 Comments

  1. Rob Schofield

    May 14, 2009 at 11:58 am

    Heck, even Mississippi (with an ex-tobacco lobbyist for a Governor!) raised its cig tax by 50 cents yesterday,

  2. Peace loving conservative

    May 14, 2009 at 1:48 pm

    Its gonna tack a combination of salary cuts and tax increases. Gov. Douglas of Vermont proposed a 5 percent paycut for all those state employees making over $60,000 a year. He also proposed a 5 percent paycut for the heads of tax exempt non-profits completely reliant on taxpayer funding. Makes sense doesnt it?

  3. Rob Schofield

    May 14, 2009 at 2:03 pm

    Not sure about salary cuts of that magnitude, but as described here , a “50/50 solution” is clearly the way to go.

  4. IBXer

    May 14, 2009 at 2:28 pm

    Increasing taxes during a recession makes perfect sense.

  5. Rob Schofield

    May 14, 2009 at 2:36 pm

    Though less than an optimal,time, raising taxes during a recession AT THE STATE LEVEL is often a better solution than allowing the state to spiral into Hooverite downturn.

    To quote the CBPP report:

    “North Carolina, for example, raised taxes by about 3.5 percent of revenues during the last downturn. From 2004 to 2007, total personal income in the state grew by about 6.7 percent each year compared to the nationwide rate of 6.2 percent during this period. North Carolina experienced faster-than-average growth in employment following the last recession, growing about 2.5 percent each year from 2004 to 2007. Nationwide, employment grew at an annual rate of 1.7 percent during this period.”

  6. dmin

    May 14, 2009 at 4:38 pm

    @Rob: That is all fine and good in practice, but it seems many don’t believe it will work in theory.

  7. A NORML Guy

    May 15, 2009 at 6:37 am

    look at the win/win that would be achieved by ending marijuana prohibition: Taxpayer expenses for arresting people for possession and low level distribution would be CUT. Also, revenues would be RAISED through the taxation and regulation of the distribution of the cannabis plant that has been used by mankind for thousands of years. The only problem is that the governing elites of this state are AFRAID to have a debate on this issue.