Stateline Story

State Legislators Want Revenue on Table in Debt Talks

A bipartisan group of state lawmakers from around the country spent Wednesday (September 21) on Capitol Hill, urging the congressional "Super Committee" to consider " all possible avenues for deficit reduction " — including new revenue that House Speaker John Boehner appears to have taken off the table.

Legislators from more than a dozen states urged the 12-member Super Committee, which kicked off its meetings earlier this month, to "go big" and reach a bipartisan deal that would cut the nation's debt but spare states from severe budget cuts. State Representative Peggy Welch, an Indiana Democrat, said the lawmakers were told during their visit that states could expect cuts of "10 to 25 percent" of their overall budgets as a result of the committee's work.

"We know that there will be cuts," New Hampshire Representative Terie Norelli, a Democrat, told reporters during a briefing at the offices of the National Conference of State Legislatures, which organized the lobbying trip. "What we are asking is that cuts to state budgets be proportional to everything else that's on the table."

As Stateline has reported , states were spared the worst budget cuts when the Super Committee was created as part of the federal debt deal in August. Medicaid, the Children's Health Insurance Program, welfare and food stamps all were specifically exempted from the $1.2 trillion in automatic cuts that will be triggered if the committee fails to reach agreement, leading to speculation that it would actually be in the states' interest for the committee to be at loggerheads.

Norelli emphatically rejected that assertion on Wednesday. She said deep cuts to K-12 education, military installations and other priorities would still happen if the committee is unable to reach a deal, and that the states want the committee to take a comprehensive approach.

"Not succeeding is unacceptable," she said.

In calling for action, the state legislators not only asked the Super Committee to consider new revenue as part of the equation, they asked for a specific tax proposal: passage of NCSL-backed legislation that would allow states to collect sales taxes from online retailers. The so-called "Main Street Fairness Act" has been an NCSL priority since 1999, but the organization sees the current debt crisis as an opportunity to get it passed. California's recent agreement with Amazon.com, allowing the state to collect sales taxes from online retailers beginning in a year, may provide further momentum.

Welch said the legislation, though not a panacea for state budget woes, could generate hundreds of millions of dollars for states that would help them offset federal cuts.

But getting congressional Republicans to go along with any new tax will be a challenge. Earlier this month, Boehner said that the Super Committee should focus entirely on budget cuts, not new revenue, and virtually all Republican members of Congress have signed a pledge not to raise taxes. The state legislators who gathered in Washington said the Main Street Fairness Act is not a new tax because it simply extends existing sales taxes to online businesses, but it is far from clear whether members of Congress will see it that way.