State revenue still growing, but more slowly

Tuesday, November 27, 2001

State spending is once again in the news, and not just in Missouri.

A nationwide survey shows that 44 states are experiencing drops in the expected rate of increases in revenue. Budget cuts were passed or on the table in 28 states, according to the report from the National Conference of State Legislatures.

Emergency budget cutting continued in the last month with special legislative sessions in Arizona and Connecticut, following emergency actions by Florida, Hawaii and Iowa.

So far, North Carolina is the only state to pass a significant tax increase. The state's new budget raises income and sales taxes by $620 million.

Virginia Gov. Jim Gilmore, a Republican, announced this month that he won't be able to fulfill a campaign promise to eliminate the much-hated tax on cars and trucks.

Indiana Gov. Frank O'Bannon, a Democrat, is proposing a new cigarette tax to help cover a $1.3 billion deficit.

Ohio Gov. Bob Taft, a Republican facing a $1.5 billion deficit, wants $465 million in targeted business taxes.

There are also proposals for new taxes in Alabama, Wyoming, Tennessee and Washington state.

Not everyone is jumping on the tax-increase bandwagon.

"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," said Republican Gov. Mike Huckabee in a statewide address earlier this month.

And before widespread tax increases become unavoidable, most states will cut spending, delay big projects and dip into cash reserves that were built up after the last recession in the early 1990s.

Tax increases should always be the path of last resort. The fact is that laying more taxes on a business sector that already sends 40 percent to 50 percent of its income to the government in taxes is a recipe for a slower economy and a less-than-robust recovery when the economy does recover.

Moreover, states that make the tough choices necessary to live within their means without higher taxes are proven to grow faster than states such as Ohio, that have been on an extended spending binge for more than a decade now. Higher taxes will only accelerate the long-running pattern of faster growth in the states in the South and West that do a better job of managing their state budgets.

We hope Missouri joins the latter group, and turns away from the idea that we can tax ourselves into economic health.

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