ON-Lion Letter
In December, the Tax Foundation in Washington, D.C., released a review of significant changes in state tax laws during 2009.  "During most of this decade, state lawmakers responded to surging tax revenue by boosting state spending growth to an unsustainable level," according to the review, by Tax Foundation director of state projects Joseph Henchman.  "Now that boom has turned to bust, significant structural budget deficits have opened up in many states.  Throughout 2009, state officials struggled to close these gaps."

In these circumstances, according to Henchman, state officials generally have three choices:  raise taxes; cut spending; or use one-time funds and accounting gimmicks to paper over the current state budget shortfall, but without significantly curtailing spending, as some states have done.
"[M]ost state leaders in 2009 have tapped high-income earners, smokers, out-of-state business transactions, or other targeted groups, those being the only people that politicians feel safe raising taxes on," his review finds.
"When the recession ends, states need to have the right policies in place that will promote economic growth and maintain revenue stability.  Relatively high taxes on high-income individuals, smokers, and out-of-state business transactions can make a state less attractive and create more volatility in an already uncertain economic climate."

For more information on each state's tax system, see the Tax Foundation website's interactive State Tax and Spending Policy page.

Milwaukee's Lynde and Harry Bradley Foundation supports the Tax Foundation.
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