South By North Strategies, Ltd.

An article in The American Prospect profiles North Carolina as one of seven states that have made reforms to their state revenue systems despite the challenges poses by the recession.

Says the article about the Tar Heel State:

… Gov. Bev Perdue, a Democrat, and the two Democrat–controlled chambers of the state Legislature jousted for more than a month beyond the July 1 fiscal year deadline to settle on a budget that received no Republican votes. Their agreement added a tax surcharge of 2 percent for married couples with incomes between $100,000 and $250,000 and single filers with incomes between $60,000 and $150,000. The additional rate is 3 percent above those thresholds, with the surcharges applying only for 2009 and 2010. A 1-cent increase in the sales tax was also approved. The main sticking points between Perdue and the Legislature related to her preference for higher taxes in exchange for more support for education and other public services.

According to the article, the experiences of states like North Carolina hold important lessons for other states coping with revenue shortfalls.

Although the worst of the recession is winding down, populous states are expected to confront an ongoing budget squeeze for years to come. State and local tax revenues are likely to remain meager, the share of the population relying on state and local services will be high, health-care and educational costs will continue to soar, state pension plans will remain badly underfunded, and the federal stimulus money that staved off disaster will run out unless Congress passes bolder emergency aid. In that climate, governors and state legislatures can’t on their own fix a system of federalism that is rapidly breaking down. But, as demonstrated during the immediate crisis, they can act to shift the burden of financing state government more toward residents who are best able to afford higher taxes. In a small but meaningful way, that’s progress.