Revenue Options

Basics
States that rely solely on spending cuts to close their budget gaps put the well-being of their residents, businesses and communities at risk. They may also undermine economic recovery, since both the public and the private sectors suffer when spending in slashed. Cuts in areas such as education and infrastructure can be especially “penny wise, pound foolish,” resulting in long-term economic damage. At a time when most states are still feeling the impact of the Great Recession and 44 states are projecting budget shortfalls totaling $112 billion for fiscal 2012, states need to consider alternatives to spending cuts in order to close budget gaps. Fortunately, there are several smart options for both saving and generating additional revenues as part of a balanced approach to closing state budget gaps. These options include “spending smarter” in areas where short-term cuts lead to higher costs down the road, revising tax systems to better reflect the mix of economic activity in economies that have shifted significantly towards consumption of services rather than goods, looking for savings in tax expenditures, and increasing taxes. Asking wealthy residents to pay more through the state income tax allows states to increase revenues while also making their tax structures fairer: The wealthiest 1% of Americans has more income than the poorest 40% put together. Fair taxes are essential to adequate funding of public services because they tax those who have the most to give.

Learn More
For the best reporting on revenue options, see the work of the Center for Economic and Policy Research, especially their work on the potential of a financial speculation tax. United for a Fair Economy offers revenue ideas for both federal and state budgets, as does the Center for Budget and Policy Priorities.

Various federal revenue options are explored in the Joint EPI/Demos report, Investing In America's Economy: A Budget Blueprint for Economic Recovery and Fiscal Responsibility (2010); Chapter 8 of the The National Academy of Public Administration's report Our Fiscal Future (2010); Congressional Budget Office, Reducing the Deficit; Spending and Revenue Options (March 20110; and the Campaign for America's Future, Report and Recommendation of the Citizen's Commission on Jobs, Deficits, and American's Economic Future (2010).

Why Tax the Rich?

Recent Research Highlights

Added February 8, 2012 Source: Policy Matters Ohio
Issue: Budget Basics, Revenue Options
State: Ohio

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