August 19, 2009
Governing Magazine Interviews Director of State Projects Joseph Henchman on State Budgets
By Penelope Lemov
When the recession ends, states need to have the right policies in place to promote economic growth and maintain revenue stability. The question is, are tax increases or tax cuts the best way to end up in good shape. ... This month, Joseph Henchman, director of state projects at the Tax Foundation, argues that raising taxes is not the best answer and that raising rates for high-income citizens isn't productive in the long run. Here's an edited version of our conversation:
Should states cut taxes in a recession like this one?
It depends. Different states have different situations. Some states—California, for instance—ran up their spending beyond anything sustainable during the boom years. So, in their case, cutting spending is preferable to cutting taxes. There may be example on the other side where cutting spending would cut into bone.
Can you cut spending and taxes in times like these?
It would be tough to get political support for that, but there's no inherent reason you couldn't do it. The idea behind cutting taxes or spending is that you don't do it for the sake of doing it. You cut so that spending will go down and you can reduce the involvement of government in society. It's a means to an end.
