Senior Vice President for State Fiscal Policy
Our new guide to state fiscal policies that can create jobs now and prepare states for long-term prosperity has four main recommendations:
By limiting additional spending cuts and beginning to reverse past cuts, states can boost the recovery and restore their investments in the future. To help do so, states should boost their revenues through steps like raising taxes on high-income households and profitable corporations and expanding the sales tax base to include more services. And they can free up funds for investment by scrutinizing all forms of spending — including spending in the form of tax breaks — to determine if they are cost-effective.
Similarly, arbitrary limits on revenue and spending (like Colorado’s Taxpayer Bill of Rights, or TABOR) and supermajority requirements for tax increases make it difficult for states to protect priority investments, especially during recessions.
For example, states should create effective “rainy day funds” — reserve funds designed to help states meet people’s needs during recessions — or improve the ones they already have to make them effective. Also, states can help avert unaffordable tax cuts or program increases by adopting a “pay-as-you-go” (PAYGO) system that requires policymakers to fully offset the cost of proposed tax cuts or spending increases.
Thus, policymakers should redouble their efforts to keep struggling families from falling into poverty and avoid cutting supports that ease hardship. For example, they should protect and expand state Earned Income Tax Credits, properly fund state unemployment insurance systems, and protect supports for the neediest families through the Temporary Assistance for Needy Families program.