Yesterday’s USA Today reports that state government revenues are soaring, ending a period of budget shortfalls. "Tax collections rose to a record $600 billion in the states last year, up 7.2% over 2003, the biggest increase since 2000. The money is rolling in even faster this year as many states report double-digit revenue increases through April." In 2003 Massachussetts faced a $3 billion shortfall. Now, Gov. Romney (R) wants to use about half the surplus to cut the state income tax to 5% from 5.3%. This windfall is already affecting politics in the states and in many the more conservative candidates for governor will benefit in the primaries for 2006. In Ohio there are calls for reducing the state income tax, and in California Gov. Arnold wants to use the windfall to borrow $1.9 billion less.
This is encouraging, but a bit confusing. I’m not familiar with other State’s budgets, but I don’t think Ohio’s tax proposal is a result of surplus as much as it is an attempt to make Ohio more marketable for investment. I hope that the tax reform works out, but I’m afraid there will be some tough years ahead as far as the budgets go (in Ohio for the State as well as Local Government and Schools) before we can realize any benefit. I very much hope that the leaders in Ohio are looking at contingency plans to be sure that all other elements of making a State attractive (quality schools, quality of life, energy prices etc.) do not become a liability while only focusing on making our tax code more attractive. I also hope that the citizens of Ohio realize a net benefit and not simply reorganize their finances from income tax to property tax, utility rates and user fees.