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Higher taxes seem inevitable

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In January, lawmakers will arrive at the 2010 session of the Iowa Legislature hoping to avoid raising taxes. But then, they’ll be hoping for warm weather, too. Hope only goes so far.

Iowa State University economist Liesl Eathington, a member of Gov. Chet Culver’s Council of Economic Advisors, said in a recent press release: “I think the sooner we come to terms with the fact that we are in for a fairly protracted period of economic stress for households and fiscal stress for the state, the better off we’re going to be in terms of decision making, because it’s not just going to turn around.”

Eathington said Iowa avoided much of the initial blow from last fall’s meltdown, but now it’s catching up to us.

“Many of the things we produce in the state are farther back in the supply chain, so we’re starting to really feel the hit now from the one that was taken by the firms that buy what we make,” she said. “Until household and business spending starts to pick up again, and those first-line industries start to respond, then they’re not going to demand the things that we make.”

Things are tough all over. MSN Money columnist Jim Jubak reported that a survey by the National Conference of State Legislatures found that 26 of the 45 responding states expect to collect less in taxes in fiscal 2010 than in 2009.

“And that’s even though 20 states raised taxes in 2009 to the tune of $27 billion. A slumping economy wiped out all the effects of higher tax rates,” Jubak wrote.

Faced with figures like these, every state looks for ways to cut the budget. However, Jubak noted: “spending cuts tend to be the appetizer that shows voters that politicians have no choice but to serve up a main course of tax increases. Right now we’re on a path that will result in just about every state raising taxes. … In the much milder recession of the early 1990s, 44 states raised taxes.”

Brace yourself.