Posted on 11/16/2001 1:22:25 PM PST by kattracks
Nov 16, 2001 (AP Online via COMTEX) -- With their finances rapidly souring, several states are considering reversing course and raising taxes after a seven-year run of tax cuts.
On Thursday, Indiana Gov. Frank O'Bannon went on statewide television to call for budget cuts and increased taxes to overcome a fiscal crisis that "threatens our very way of life." Virginia Gov. Jim Gilmore announced he won't be able to fulfill a campaign promise and eliminate a much-hated tax on cars and trucks.
So far, North Carolina is the only state to pass a significant tax hike. But the idea has top support in Indiana and Ohio, while cuts passed or promised last year are now looking shakier in Massachusetts, New York and elsewhere, besides Virginia.
Even those opposed say the question, at least, can't be avoided.
"We really have no option," said South Carolina Rep. Bobby Harrell, the Republican chair of the House budget-writing committee. "We're either going to have to cut the budgets or raise taxes. ... There are going to be problems like this all across the country."
Emergency budget-cutting continued this week with special legislative sessions in Arizona and Connecticut, following emergency actions by Florida, Hawaii, Iowa and beyond. Since all states except for Vermont must balance their budgets, state lawmakers can't approve deficit spending like their congressional counterparts.
Forty-four states saw revenue growth fall from August through October, according to a Nov. 1 report from the National Conference of State Legislatures. Budget cuts were passed or on the table in 28 states, the report said.
Now, with the states' already weak economies worsening after Sept. 11, these tax issues have emerged:
-Ohio Gov. Bob Taft, a Republican facing a $1.5 billion deficit, wants $465 million in targeted business tax increases.
-North Carolina, with the encouragement of Democratic Gov. Mike Easley, raised taxes by $620 million in the new budget passed in September.
There are also proposals for new taxes in Alabama, Wyoming, Tennessee, and Washington state.
"We just concluded there's only so much you can cut," said North Carolina Rep. Paul Luebke, a Democrat who sits on the House finance committee. "We're one of the few (states) that have the courage to bite the cliched bullet," said Luebke.
If the economy continues to slide, the pressure will build to increase revenue to pay for government services, economists say. But tax proposals - almost always unpopular with voters - face bruising tests in legislatures. Many leaders remain adamantly opposed.
"Asking Arkansas families who are already wounded from a hurting economy to pay even more in taxes - that would be like asking a bleeding friend to donate a pint of blood," Gov. Mike Huckabee said in a statewide television address Wednesday.
Tax cuts, on the other hand, have proven popular. Since 1995, states cut an aggregate $36 billion in taxes, the NCSL said. That includes $1.8 billion cut last year, when forecasters already predicted the economy would slow.
Those cuts followed several years of tax increases, with a high of $15.4 billion in 1991 during the height of the early '90s recession.
"Politically it is very difficult" to raise taxes, said Harley Duncan, executive director of the Federation of Tax Administrators, a group that monitors state economies. "Many of these elected officials ran on a very firm no-tax-increase platform. But the sands really shifted beneath them."
While the pressure for new or increased taxes might be building, it depends on how long the hard times last, economists said.
"Ask me the question two months from now," said Arturo Perez, a fiscal analyst with NCSL. "We know it's getting worse. But have we seen the worst times behind us, or is there a continuing slide?"
In a fiscal crisis, state budget writers say, the first steps are to cut spending, delay big projects and dip into cash reserves that were built up over the years.
Some already have: Wisconsin froze hiring, Connecticut warns it will lay off workers, North Carolina has put off a $1.5 million renovation of the governor's mansion.
Some say previous tax cuts set states up for an economic stumble. Harrell, in South Carolina, rejects that argument. The problem is that budget forecasters didn't accurately prepare for the slowing economy, he said.
But forecasters were warning things eventually would slow down, and were quick to note the drop in tax collections, Sept. 11 and its economic aftershocks have caused an even steeper downturn.
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On the Net:
National Conference of State Legislatures: http://www.ncsl.org
Rockefeller Institute of Government: http://www.rockinst.org
By ROBERT TANNER AP National Writer
Copyright 2001 Associated Press, All rights reserved
The economy's tanking, so Bush hastens to cut federal taxes.
The states are hastening to do just the opposite.
Only one of these moves can be correct...
The only one that helps is Bush politically, by claiming to have cut Federal tax, in reality, with the States grabbing it on the other end, you have no tax cut.
I am truly beginning to HATE politicians.
Luebke added, "You know, I've never seen a tax I didn't love."
It does no good for the current economic situation, but I'd much sooner pay taxes to my state than the federal government. Accountability is much higher - I can find my state rep. and demand my say. No such luck with Arlen Specter.
With the ever increasing demands of Government, without votes, to raise taxes, this is the reason so many Local Tax Levys are defeated at the ballot box.
The Populace rarely has a voice in larger taxes, and when given the chance in the form of local levy and bond issues, they increasingly just say no, because of the enormous burden of Federal Taxes.
With the ever increasing demands of Government, without votes, to raise taxes, this is the reason so many Local Tax Levys are defeated at the ballot box.
The Populace rarely has a voice in larger taxes, and when given the chance in the form of local levy and bond issues, they increasingly just say no, because of the enormous burden of Federal Taxes.
Simply eliminate all taxes on income and replace them with a single sales tax. That would prevent the tax cut/tax increase game.
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