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Tax Hikes, State Deficit Nightmares

Illinois hikes its income taxes 67 percent to help close its budget deficit. We look at states swimming in red ink, and the way out.

Illinois House Speaker Michael Madigan, D-Chicago, left, and Rep. Jack D. Franks, D-Woodstock, right, at the State Capitol in Springfield, Ill., Jan. 13, 2011. (AP)

American states – state governments – are in trouble. They are facing deficits and budget gaps like never before — huge, wide gaps that the federal government won’t cover.  The gaps are so big they swallow up cutbacks faster than many statehouses can cut.

Now one of the most hard-pressed states, Illinois, has pulled the emergency cord – raising state income taxes overnight, in a desperate, midnight move, by 67 percent in one go.

Illinois’ “fiscal house,” said the governor, “was burning.”

We look at state budgets in turmoil, and extreme measures on the way.

-Tom Ashbrook

Guests:

Ray Long, statehouse reporter for the Chicago Tribune.

J. Fred Giertz, professor of economics and faculty member of the Institute for Government and Public Affairs at the University of Illinois. He’s executive director of the National Tax Association.

Susan K. Urahn, managing director of the Pew Center on the States, a division of the Pew Charitable Trusts that identifies and advances effective solutions to critical issues facing states.

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