Of course, not every idea floated during these tough fiscal times is worth adoption or even consideration. Some are just downright bad. Take New York, for instance. As the National Conference on State Legislatures (NCSL) indicated earlier this week, the Empire State is expected to face a budget deficit of $12.5 billion in the coming fiscal year. Unfortunately, that dire outlook has not stopped Governor David Paterson from continuing to embrace an ill-advised property tax cap. On December 1, New York's Commission on Property Tax Relief issued its final report, recommending a 4 percent limit on annual property tax growth. Governor Paterson had backed the idea previously and does not seem likely to change his position any time soon, remarking upon the report's release that "Property taxes... have been the enabler of Albany's dysfunctional culture." As the Fiscal Policy Institute and others have observed, the problem with tax caps are legion and could be particularly harmful if put in place during a recession.
Similarly, North Dakota Governor John Hoeven, as part of his budget plan for the 2009-2011 biennium, has proposed cutting property taxes by $300 million and income taxes by $100 million. Fiscal circumstances in North Dakota are, to be sure, markedly different than those in New York; after all, the Peace Garden State is one of the few expected to experience a budget surplus by the end of the current fiscal year. Yet, as the Grand Forks Herald recently warned, "oil prices already have plunged, threatening the energy boom that has dramatically boosted the state's surplus," suggesting that state legislators should proceed slowly and carefully. Caution certainly seems to be what the voters of North Dakota want anyway -- in November, they resoundingly defeated a ballot measure that would have cut income taxes by more than $200 million.
Legislators in Virginia, despite that state's $2 billion plus budget deficit, seem bent on cutting taxes too, as a special House-Senate subcommittee has recommended that the state offer a new corporate tax break known as single sales factor. Where North Dakota officials should listen to the recently expressed views of their constituents, Virginia should follow the hard-learned lessons of other states. Simply put, single sales factor is a costly and ineffective means of spurring economic activity. Just ask Massachusetts: In 1995, Massachusetts adopted single sales factor for manufacturers, a move that was hailed by some proponents as "a bold step towards restoring Massachusetts as a manufacturing state." After thirteen years -- and millions of tax dollars and thousands of manufacturing jobs lost -- it's clear that that restoration has not occurred.