As the fiscal contagion spreads among the states, policymakers are clearly casting about for ways to close large and growing budget deficits. In Nevada, Governor Jim Gibbons may be open to tax increases in light of a shortfall that is projected to reach $1.8 billion over the next two and half years, but he has also floated the idea of 'voluntary' payroll reductions of 5 percent. New Hampshire faces an approximately $600 million budget gap over the same period, with lawmakers weighing such options as selling state properties, legalizing gambling, or deferring needed payments to the state pension fund. Florida may have to confront an eye-popping deficit of $6 billion over just 18 months, driving elected officials to think about raiding a variety of trust funds and imposing a 4 percent across-the-board cut in agency budgets.
Of course, these three states have more in common than difficult days ahead. They also share a steadfast refusal to levy a personal income tax. Rather than continue to cast about for half-measures and temporary fixes -- or, worse, policies that would undermine working families' already precarious economic situations -- policymakers in states like Nevada, New Hampshire, Florida, Washington, and Tennessee need to acknowledge the elephant in the room and consider whether the tax policies that brought them to this point are the ones that will carry them to a better future.