States Should Cut Spending, Not Raise Taxes | Citizens Against Government Waste

States Should Cut Spending, Not Raise Taxes

The WasteWatcher

As taxpayers and businesses try to recover from the economic fallout of the coronavirus pandemic, state governments should be focused on cutting spending to offset revenue losses, not raising taxes.  

According to the National Conference of State Legislatures, some state revenues could fall as much as 18 percent from pre-coronavirus projection in fiscal year (FY) 2020 and projections for FY 2021 are even worse. State revenues could decline as much as 30 percent from earlier estimates in FY 2021.

As revenues diminish, costs continue to increase. Although the national unemployment rate is 13.3 percent, in some states, the unemployment rate is much larger.  Hawaii and Michigan have unemployment rates close to 22 percent and Nevada has an unemployment rate of 28.2 percent.  An April 2020 National Bureau of Economic Research study estimates that more than 100,000 small businesses have permanently closed due to the pandemic.  With tens of millions of Americans out of work, the number seeking government assistance will continue to rise, racking up expenses and reducing revenue for states.

While the negative economic effects of the pandemic are immense for both states and their citizens, the answer to resolving these issues is not to increase taxes.  But many states are planning to do so, and some are demanding a bailout from the federal government for not only the cost of the pandemic, but also to cover their profligate spending over many years, along with their substantial public pension shortfalls. 

In New York, the first epicenter of the pandemic in the U.S., residents pay the ninth-highest income tax in the country.  Before the coronavirus crisis, New York was already facing a $6 billion deficit and had done little to set up sufficient reserve funds in case of a downturn.  New York is perennially among the worst states in economic rankings, and has the highest-paid state legislators in the country after they gave themselves a $50,500 pay raise in 2019.  New York is expecting a 14 percent decline in revenues from its original projections for FY 2021.

In Illinois, which has one of the worst pension crises in the country and whose fiscal condition has been ranked dead last by George Mason University’s Mercatus Center, revenues are expected to decline in FY 2021 by 19 percent.

It is past time for states facing a budgetary and debt crisis that was exacerbated by the coronavirus to tighten their own wallets, not take more from the pockets of taxpayers..  Fiscal responsibility must be a guiding virtue and state legislators must be held accountable for the billions of dollars they have wasted in prior years to truly recover from this crisis and protect taxpayers.  The loss of revenue from the COVID-19 pandemic only makes reckless, unnecessary spending a more pressing issue that can no longer be tolerated.

-- Will Blakely