January 24, 2002

Washington, D.C.-The Small Business Survival Committee (SBSC) today issued a report today noting that many states are considering tax increases right now, and that this development will have a negative impact on the economy.

"While President Bush and Congress are working on an economic stimulus package that includes further tax cuts, the benefits of those cuts may be negated as several states look to raise taxes or delay tax cuts to solve their budget problems," Said SBSC President Darrell McKigney.

Some of the states currently considering tax increases are: Alaska, California, Delaware, Indiana, Kansas, Maine, Maryland, Minnesota, Michigan, Missouri, New Jersey, New York, Rhode Island, Tennessee, Washington, Wyoming, and others.

SBSC chief economist Raymond J. Keating, author of "State Tax Increases: Potential Negative for the Economy," notes: "From 1990 to 2000, real, per capita state taxes grew by 28%.  Individual income taxes took a big leap of 45% in real, per capita terms.  Unfortunately, most of these new revenues were spent on new and expanded government programs, with substantive tax relief largely neglected."

Keating continues: "Of course, with an economic slowdown starting in the third quarter of 2000 and the economy slipping into recession in March 2001, this flood of new revenues has slowed to a relative trickle.  Therefore, actual and projected state budget deficits are mounting around the nation.  While there is a lot of talk about belt tightening, unfortunately far too many states are considering tax increases."

The report points to assorted tax increases under consideration around the nation, while also commending some state's elected officials who are not advocating tax increases.

Keating adds: "Even if just a portion of these state tax increases is passed, they will serve as a real, significant restraint on economic recovery.  Whether you are talking about income, sales or various excise levies, tax increases are always damaging to the economy, and always distort the marketplace, though to varying degrees.  It is particularly misguided to raise taxes during an economic slowdown or recession."

Keating concludes: "Like many businesses and families are forced to do, governors and state legislators should be cutting their expenditures in the face of recession and a fall off in projected revenues.  In addition, and most important, the tax debate should be focused exclusively on implementing pro-growth tax cuts, not anti-growth tax increases."

For a copy of "State Tax Increases: Potential Negative for the Economy," visit SBSC's website at www.sbsc.org.  For more information, please call SBSC at 202-785-0238.  SBSC is a nonpartisan, nonprofit small business advocacy group headquartered in Washington, D.C.