Like Mr. Schwarzenegger, other governors who had vowed never to raise taxes appear to be changing their minds in the face of declining revenues. Nevada Gov. Jim Gibbons, a Republican, refused to raise taxes this year, calling instead for $1.2 billion in spending cuts. But now he is saying, “Nothing is off the table this time.”
Wisconsin legislators are considering tax and fee increases, and South Dakota is weighing a higher gas tax.
Cities, too, have been raising taxes and in some cases cutting payrolls.
New York Mayor Michael R. Bloomberg is planning to raise property taxes by 7 percent, increase the tax on hotel rooms, and cut 3,000 jobs from the city’s payroll in an attempt to shrink a $4 billion budget shortfall over the next two years.
“The gravity of the budget situation requires us to propose both deep spending cuts and revenue increases starting right now,” the mayor said last month.
At a conference of state legislators last week, a top official at Standard & Poor’s, which issues credit ratings to state and local governments, said the worsening recession would force them to raise taxes as well as cut spending.
“You’re going to have to bite the bullet and accept there are going to have to be significant budget cuts and tax increases as well,” said chief economist David Wyss.
But fiscal conservatives said that raising taxes in a recession would only worsen the budget outlook for the states.
“Even die-hard Keynesians would tell these governors that raising taxes in the middle of an economic slowdown will only perpetuate the recession cycle,” said Pete Sepp, spokesman for the National Taxpayers Union.
One positive trend among the states in this economic decline is the reluctance to raise income taxes, fiscal analysts said.
“The only good news is that the politicians know it’s bad politically and bad for the economy to raise tax rates at a time like this,” Cato’s Mr. Edwards said.