May 09, 2004

Back in black

The Washington Post takes a survey of states who have raised taxes and fees to get rid of onerous budget deficits:
So in Virginia and many other states, taxes will continue to go up next year. The budget officers' group notes that more than half the governors have called for tax and fee increases for fiscal 2005, which begins July 1 in most states. Only four governors have called for tax cuts. Many cities also are raising taxes, and seeking to boost revenue from sources such as parking meters and library fines.
The real story though—or in this case, the overlooked story—is what kind of tax increases are being rolled through state legislatures. In the case of Texas, Gov. Rick Perry's highly regressive 'sin taxes' will shift state tax burdens onto the backs of the lower classes. Some local fees—like those on parking meters—can work to similar effect. On the other hand, Nevada's idea of a "transfer fee" on every real estate purchase is a great idea—if housing speculators are benefiting from a splurge-happy housing market, why not tax them for it?

(In fairness to the noble questers at Heritage, the Post also neglects to mention that some governors are getting rave reviews for making difficult program cuts.)

At this point, it's difficult to assess Bush's strategy of making states pay their own way, without massive federal grants. As Gregg Easterbrook noted long ago, it's certainly a more honest and transparent means of budget bookkeeping, and prevents wealthy states from subsidizing states that run deficits. But if the result is that some states end up heaping forth monstrously regressive fines and taxes, suddenly this doesn't look like such a spiffy idea.
-- Brad Plumer 2:46 PM || ||