They are coming back to bite those state’s on the butt….
“Energy prices are not the only factor that put these state budgets into disarray,” Carl Davis, the research director of the Institute on Taxation and Economic Policy (ITEP), told me. “There are conscious policy decisions being made here as well.” What’s happening across the country is that state legislatures have made decisions about taxation that don’t jive with the 21st-century economy. They’ve tried the supply-side model pushed by Reagan economist Arthur Laffer, who said cutting taxes could help spur job growth and spending to such a degree that revenue would not be significantly affected. They’ve found that this theory has not played out, and that although the recession is over, they’re still cash-flow negative.
Other states have cut taxes on the wealthy, creating their own budget deficits. Oklahoma slashed its top tax rate from 6.65 percent in 2003 to 5.5 percent in 2009 to 5 percent currently. Davis says this series of cuts reduced the state’s revenues by $1 billion. Kansas instituted massive income-tax cuts in 2013 that favored the wealthy, and the state has flailed since. North Dakota, buoyed by a booming economy and a seemingly endless (at the time) supply of oil and gas, cut both personal income taxes and corporate income taxes.
But it’s not just income taxes either. Motivated perhaps by Tea Party vigor, states have rolled back other forms of taxation as well….Share on Facebook