This is all well and good but as long as CAPSS and others engage in a struggle to keep as much as possible of a State budget that gets adjusted only on the expenditure side, all of us are in the position of trying to keep dry our own particular sections of a ship that is sinking. In other words, to address only the expenditure side of the State budget with no attention being paid to the revenue side of the budget is to engage in an effort that is doomed to failure before it even begins.
CAPSS recognized this in the early 1990s when the State faced a budget situation that was similar to the one that the State currently faces. At that time, CAPSS was among the first educational organizations that called for the institution of a State income tax in order to bolster State revenues so as to avoid reductions in State expenditures. A State income tax was established and this made possible the avoidance of a major reduction in State financial support for public education and other publicly provided services.
Since the State faces today a budget situation that is in many ways similar to the one that it faced in the early 1990s, CAPSS has decided to call for a reasonable increase in State taxes as a portion of the effort that the State should make to resolve the current and near future budget problems. If the State were to do this, it would re-employ the approach that worked well in the past whereby the solution to similar problems depended on a balance between reduced expenditures and increased revenue.
By deciding to call for a reasonable increase in State taxes, CAPSS hopes to focus attention on the following questions.
· Would a reasonable increase in taxes hurt or hinder a recovery from the current recession? The conventional wisdom indicates that an increase in taxes would hinder a recovery but this wisdom appears to ignore the negative economic impact of the layoff of public employees at the state and local levels that would be the result of reductions in State expenditures.
· Would reductions in State expenditures actually balance the State budget? If state and local employees experience either a reduction in wages and salaries or a total loss of wages and salaries, the State revenue that is derived from the income tax would decrease. So, reductions in State expenditures would result in further losses in State revenue. If this process were to be repeated enough times, it could constitute a fiscal death spiral.
CAPSS believes that a candid and comprehensive discussion of these and other related questions would lead to a resolution of the present fiscal problem and would also foster a cooperative spirit among all state leaders, a spirit that would enhance the State’s ability to address similar problems in the future. CAPSS stands ready to participate in these discussions and to do so in a responsible and cooperative manner.
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Contact Steve Collins at firstname.lastname@example.org