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Why Smart States Are Raising Revenues, in One Graph


Five years after the start of the Great Recession, state revenues remain 5 percent below pre-recession levels, after adjusting for inflation, even as the number of people needing state services has grown.  So, it’s not surprising that more than a dozen states have enacted or are seriously considering revenue increases to begin reinvesting in schools, roads, and other important services and to make new investments in future economic growth.

  • Minnesota recently raised income taxes and modernized its outdated sales tax, which will enable the state to expand investments in early childhood education and hold public college tuition steady.
  • California voters last November approved a measure to raise personal income taxes on high-income people and boost the sales tax.  The new revenue will help fund schools and community colleges — both of which have seen big cuts in recent years.
  • Colorado raised pre-school and kindergarten funding as part of a broader school reform plan that is contingent on voters approving a tax increase in November.
  • In Washington, a special session of the legislature is debating raising revenues by closing loopholes in business and sales taxes and by extending a temporary business tax.  Washington needs the revenue in part to meet its obligations under a court order to raise K-12 funding, which the state has cut in recent years.
  • And at least ten states are considering — or already have enacted — gas tax increases or other revenue-raising proposals to finance transportation investments.  They are:  Maryland, Massachusetts, Michigan, New Hampshire, Pennsylvania, South Carolina, Vermont, Virginia, Washington, and Wyoming.

Meanwhile, proposals this year from governors or legislative leaders in five states — Kansas, Louisiana, Nebraska, North Carolina, and South Carolina — to eliminate the income tax hit the rocks, partly because they cost more than the state could afford without putting funding for education, health, public safety, and other services even deeper in a hole.

A few major tax cut proposals are still alive, most notably in North Carolina, where lawmakers are essentially debating the size of the hole to blow in the budget, as we recently explained.  Fortunately, many states are charting a more responsible course.