As the nation's robust economy generates federal, state, and local revenue windfalls (thank you, Bush tax cuts), state governments are regrettably repeating their disastrous 1990s budget indiscretions.  Unless taxpayers demand change, they will ultimately pay the price. 

According to the U.S. Census Bureau, state revenue collections increased 9.7% in fiscal year 2005, on the heels of 2004's revenue boom.  This year alone, state revenues have shot up 6.8% during the January-March quarter from one year earlier. 

New Mexico provides a perfect illustration, where the state's top income tax rate was cut from 8.2% to 4.9%, and the capital gains tax was reduced by half since 2002.  Consequently, economic growth has produced a 27% rise in state receipts as well as a $500 billion budget surplus. 

This parallels the federal experience, where revenues have actually increased following the Bush tax cuts, despite hysterical predictions to the contrary from tax-cut opponents.  Arthur Laffer famously explained this phenomenon with his "Laffer Curve," according to which tax cuts actually increase government revenues because they trigger economic growth. 

In fact, a Heritage Foundation study concludes we'd have a federal budget surplus today if federal spending had merely kept pace with inflation.  Simply put, tax cuts have once again proven to increase government revenues due to their economically stimulative effects.  Liberals and spendthrift politicians, however, continue to bury their heads in the sand. 

Regardless, 40 or more states now maintain budget surpluses due to the strong economy, with exceptions centered largely in the Gulf states devastated by Hurricane Katrina. 

So what's the problem, you ask? 

Unfortunately, politicians consider these increased revenues a reason to spend like drunken sailors.  Instead of returning surpluses to taxpayers or saving for a rainy day, states are instead ratcheting up spending and tempting the same budget perils that they confronted following the 1990s market bubble.  In other words, instead of relieving taxpayers, they're raising spending levels and wasting away surpluses. 

When the economic cycle inevitably cools at some future date, politicians will predictably call for so-called "responsible" tax increases or budget "compromises," rather than truly responsible spending restraints. 

Many examples of such false compromises during economic downturns exist.  In 1981, President Reagan directed his historic 25% reduction in individual income tax rates and corporate tax cuts, which sparked the greatest peacetime economic expansion in history.  One year later, however, he reluctantly agreed to a Congressional deficit-reduction proposal that raised telephone, cigarette, and airport taxes in exchange for stipulated spending cuts.  Unsurprisingly, taxes were indeed raised, but Congress miraculously never delivered the promised spending restraints. 

In 1990, President Bush recanted his famous 1988 "Read My Lips" anti-tax pledge based upon Democratic Senate Majority Leader George Mitchell's promise to contain future spending.  Once again, however, taxes increased by some $125 billion, while spending only continued to spiral upward to the tune of $209 billion.  Some deal. 

At the state level, former Virginia Governor Mark Warner, a supposedly "moderate" 2008 Presidential hopeful, pledged unequivocally during his 2001 campaign that "I will not raise your taxes."  So what did he do in 2004?  You guessed it – he proposed a $1.1 billion tax increase, the largest in Virginia history.  Governor Warner hoodwinked enough timid Republicans to agree to his tax hikes, rather than bringing the 1990s spending orgy back under control. 

New Jersey's current budget crisis further illustrates this phenomenon.  There, Governor Jon Corzine has shut down state services while he and the Democratic legislature argue not about whether to raise taxes at all, but rather how to raise taxes on already-overburdened New Jersey residents.  Governor Corzine prefers to raise sales taxes to 7%, whereas legislators prefer to raise other types of taxes.  If Governor Corzine gets his way, his sales tax increase will cost the typical New Jersey family some $275 per year.  Perish the thought, of course, that leaders would moderate the bloated $31 billion state budget.  Meanwhile, state politicians don't seem to notice the exodus of 60,000 overtaxed New Jersey residents in 2004, which merely creates a vicious cycle of future tax increases to compensate for the revenues leaving with them.  Will bureaucrats ever learn? 

Fortunately, taxpayers can take measures into their own hands and compel budget responsibility even if politicians won't.  Taxpayer Bill of Rights ("TaBOR") measures, which limit tax and spending increases to rates of inflation and population growth, are gaining traction across the country.  Colorado's TaBOR experience illustrates its value in forcing budget responsibility and spurring economic growth, and voters in Maine and other states are advancing similar measures. 

Taxpayers can also fight to enact super-majority measures, under which tax increases require a 2/3 or other super-majority vote by legislatures.  More fundamentally, voters can demand fiscal responsibility from their local, state, and federal representatives, and vote only for candidates who advocate fiscal responsibility and measures such as TaBOR, hoping most will not renege on their commitments like Governors Warner and Corzine did. 

Taxpayers who instead opt for complacency during these prosperous times will only pay a heavier price down the road.