And Now, Son of Tax Reform

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The windfall issue will crop up often as other newly elected legislatures convene this month. Wisconsin's Republican Governor-elect Tommy Thompson has pledged to reduce state income taxes by 5% and reduce the state inheritance tax. In Missouri, Republican Governor John Ashcroft wants to enact a $100 ) million tax cut, which Democratic Leader Griffin opposes, even though it is, he admits, a "politically popular" idea.

In fact, keeping the money is what several states are tempted to do. In Louisiana, legislators met last month to consider how to deal with a budget deficit estimated this year at $125 million. Giving back a tax windfall of $60 million was not on their minds; giving the executive branch more power to cut budgets was. Minnesota's Democratic Governor Rudy Perpich campaigned on a promise of no tax hikes, but he now expects an $813 million budgetary shortfall. The $719 million that his state expects from tax reform over the next 2 1/2 years would come in handy. Taxpayer lobbies, though, are squawking.

Other Governors face the same dilemma. They must weigh the advantages of extra tax money against the political costs of public resentment.

FOOTNOTE: * States without any personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

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CREDIT: TIME Map by Joe Lertola

[TMFONT 1 d #666666 d {Source: State tax officials and U.S. Advisory Commission and Intergovernmental Relations}]CAPTION: Estimated % change from 1986 in a state personal income tax revenue resulting from federal tax reform

DESCRIPTION: Color illustration: Map of U.S. showing estimated percentage change from 1986 in personal income tax revenue resulting from federal tax reform.