In Washington, this may be the era of tax cuts and more tax cuts.
But in statehouses around the nation, it's increasingly a time of
big tax increases.
Faced with budget shortfalls and mounting pressure to avoid
cutting social services during economic doldrums, more state
lawmakers are abandoning their usual reluctance and raising taxes,
some boldly enough to risk their political futures in the process.
Alabama, New York, California, and Nevada are moving to raise taxes
by record amounts.
The growing gap between Washington and states on taxes stems
partly from the requirement most states face to balance their
budgets - a mandate Washington doesn't have. But it also highlights
an increasing division - including within the Republican Party -
over the role of government in a weak job climate. In fact, the
trend may herald the rising role of states as key providers of
America's social safety net.
In most states "we're going to see big tax increases this year.
It almost seems inevitable," says Nicholas Jenny, a tax analyst at
The Rockefeller Institute of Government in Albany, N.Y.
This doesn't mean states are boosting income taxes across the
board. They're targeting higher-wage earners instead. But the
magnitude of the increases in some states is stunning. In many
cases, sales taxes are going up, affecting whole state popluations.
Consider what happened in Mr. Jenny's home state of New York this
month: The Republican-controlled Senate overrode Gov. George
Pataki's veto of a tax increase of more than $2 billion. By one
measure, it's the largest hike in state history.
How is it that a Republican-led senate championed a giant tax
increase? First of all, at the state level, "Ideology matters less
than you would think," says Mr. Jenny. New York faced an $11.5
billion budget gap. Something had to be done.
But in passing the hike, the legislature also undid roughly $1.3
billion in cuts to education and healthcare that Governor Pataki had
planned. Raising the sales tax and income taxes for those making
more than $100,000 clearly aims to ensure the state provides for its
citizens during tough economic times. "New Yorkers expect government
to serve them," says John Zogby, an independent pollster in Utica.
"We're the original welfare state."
That's far less true in Alabama, a famously tax-averse place. But
even there, a conservative Republican rookie, Gov. Bob Riley,
recently shocked many by proposing a $1.2 billion increase in sales,
income, and other taxes - mostly aimed at boosting education. …