How States Should Spend Their Tax Windfall

Away from the shutdown in Washington, the battle over government spending is being fought in state capitals against a different backdrop: Rising tax revenue, and the debate over how to spend it. Many states are choosing to cut taxes -- a worthy goal that’s being embraced a little too carelessly.

State tax revenue in the second quarter of 2013 was almost 10 percent higher than a year before, according to U.S. Census data. The uptick has encouraged states, especially those with Republican governors or legislatures, to cut corporate or individual income taxes. Wisconsin, Indiana, New Mexico and North Carolina have done so, and Florida and South Carolina are thinking about it. The cuts are intended to “encourage work and investment,” as Ohio Governor John Kasich said in August.