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TAX NEWS - may 2010

State Revenue Increases Across the Nation Continue to Ease Pain of Downturn

Better Enforcement of Tax Law
Tea Party protests are purportedly an indication of Americans demanding tax and spending cuts.  Yet, last Tuesday, Arizonans overwhelmingly approved Proposition 100 to temporarily increase the state's sales tax by one percent for the next three years.  The measure is estimated to generate $1 billion in additional revenue per year.  In spite of opposition to the tax cuts by many of the Legislature's conservative leaders, Republican Gov. Brewer campaigned diligently for the increase, emphasizing, "If we don't get the revenue we will have to cut another billion dollars."

This vote in Arizona, a state whose Legislature is so tax averse that it has enacted 42 tax cuts to its three major revenue sources since 1992, not only highlights the depth of the fiscal crisis, but additionally demonstrates that voters across the political spectrum recognize that budget shortfalls cannot be solved solely by budget cuts.  The approval of the Arizona sales tax increase follows a strong vote for raising income and corporate taxes in Oregon in January.  

As this Dispatch will detail, these votes mirror actions taking place in both conservative and progressive states and localities around the country.  In 2009 and 2010, states have enacted a wide-ranging set of revenue increases to cope with cumulative 2010 and 2011 deficits of approximately $375 billion.  Although revenue forecasts are improving, states are still reeling from historic declines in the past year.

What is remarkable is that the anti-tax movement has wracked up such regular failures in the crisis, as even many state leaders previously signing "no taxes" pledges have reneged on them.   Instead, popular demand for new revenue to avert budget cuts has driven legislative movement on progressive tax and budget policy.

Adding to the general public support has been research consistently showing that progressive revenue increases during a downturn is a better alternative to cuts in order to promote growth and protect vulnerable populations suffering during the recession.

Finally, this Dispatch will outline some of the effective messaging and research to demonstrate to voters that progressive measures and tax increases are economically sound and go to the programs they want preserved -- the critical step in the success of revenue campaigns.
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