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Smart States Liberalize Regulation, Reap Rewards

by Brandon Greife / /

Deficits plague all forms of government from the local to the federal level.  A mixture of lower levels of revenue and continued reckless spending has caused budget fights across the country.  From Wisconsin, where budget negotiations caused Democrats to flee the capitol, to Minnesota, where the state government has been shutdown, America seems to be at a standstill due to the tax increase vs. spending cuts war.

At the federal level, Democrats are insisting that tax increases be part of any debt ceiling agreement.  However, history proves that higher taxes do not necessarily equate to higher revenues.  Another way to increase revenue is to decrease the number of regulations, especially on smaller businesses, which in turn drives sales.

Many states have done just that this year in an effort to boost tax revenues. While 2009 saw many “sin” taxes increase in an attempt to cure budget woes, many Republican majorities who recently took office at the state level have taken the smarter path and reaped the rewards for their constituents.

Tennessee, Washington, California, Michigan, New Jersey and Virginia passed sampling laws, allowing liquor stores or wineries to hold tastings. Many other states have loosened their controlling grip on Sunday sales, either allowing or expanding hours for sales.  Only two states, Texas and Connecticut forbid any sale of alcohol on Sundays. Alcohol sales generate about $41 billion a year for state and local governments according to the Distilled Spirits Council of the United States.

Changes in regulation can have a big effect on sales and subsequently revenue.  “Between 2002 and 2005, 12 states liberalized their laws to permit Sunday sales. According to DISCUS, each state saw an increase in tax revenue of 5 to 7 percent,” reports Stateline, a state level policy organization.

These states should be applauded for finding creative ways to improve their budget situation through free market policies, while avoiding tax increases.