Cash-Strapped States Raise Taxes as Revenue Declines

At least 10 states face substantial budget gaps

By Clay Dillow, Newser Staff

Posted Apr 9, 2009 7:31 AM CDT

(Newser) – A precipitous decline in tax revenue has at least 10 states considering major increases in sales or income taxes to close budget gaps that in some cases run into the billions, the Wall Street Journal reports. States like Oregon, facing a $4.4 billion budget gap and 10.8% unemployment, have few other options for boosting revenue. Tax revenues are projected to decline by as much as one-third this year.

"Income taxes and sales taxes are the go-to taxes when you really need to raise a lot of money," said one expert. California and New York have already imposed multibillion-dollar increases, and several other states are expected to do the same after the April 15 income tax deadline. "The problem is that they are filling a hole that has gotten a little deeper," said one budget expert.

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A for sale sign hangs in front of a Homestead, Fla. home. In states hit hardest by the recession, tax revenues are falling so quickly that lawmakers will likely raise taxes to close budget gaps. (AP Photo/J Pat Carter)

Nebraska state senators are seen in the legislative chamber during debate, in Lincoln, Neb. Many state legislatures will have to consider raising taxes this year to close budget gaps. (AP Photo/Nati Harnik)

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Income taxes and sales taxes are the go-to taxes when you really need to raise a lot of money.
- Donald J. Boyd, Rockefeller Institute of Government in Albany, N.Y.

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Cash-Strapped States Raise Taxes as Revenue Declines