Fwd: 10 Ways States Can Solve Their Fiscal Crises
Jim Schulman
-- Jim Schulman, Executive Director
---------- Original Message ----------From: The Main Street Journal <mainstre...@substack.com>Date: 08/06/2026 2:19 PM EDTSubject: 10 Ways States Can Solve Their Fiscal Crises
Devolution is happening right now as you read this paragraph, but in an unplanned, messy way. At least ten states report facing serious fiscal crises: Alaska, California, Colorado, Illinois, Maryland, New Jersey, New York, Oregon, Pennsylvania, and Washington, and the proximate cause is the “Big, Beautiful Bill,” which slashed federal payments for health insurance and Medicaid. Those states with the most robust social safety nets—surprise!—have been the ones most adversely affected. Add to this the overall slowdown of the economy, precipitated by the Iran War (which has increased oil prices), deportations (which have made labor more expensive), and across-the-board federal government cuts.
I’m an optimist and believe devolving power to the states, over the long haul, can lead to a fiscal bonanza. The ineptitude of this Congress and erratic decisions by this President offer a stark lesson, and why states should seek to reduce their dependency on all future presidents and Congresses. The short-term challenge for states, however, is to identify new sources of revenue in a hurry. So here are ten suggestions for how these states can generate hundreds of billions of new dollars.
(1) End Economic Development Subsidies — States and localities continue to waste, according to Brookings, $45-90 billion on ”incentives” to attract nonlocal businesses. These subsidies are completely counterproductive. (Our lead story this issue, below, shows that the only net jobs created by these subsidies are for industry lobbyists.) If you’re in a hole, rule number one is: “Stop digging!”
(2) Tax Waste — Two decades ago, the state of South Australia (population 1.9 million) placed a small fee (around $100 per ton) on all waste disposal, and it now yields about $170 million per year. Every U.S. state should do the same. Americans generate about a billion tons of waste annually. A $100 per ton fee would net $100 billion per year, as well as incentivize composting, recycling, reuse, and repair.
(3) Tax Carbon — Even conservative economists favor taxing carbon as an efficient way of slowing and reversing destructive emissions of greenhouse gases into the environment. Per capita consumption of oil, coal, natural gas, and related products is about 234 million BTUs per year. For our entire population nationwide, a tax of $1 per million BTUs would generate $80 billion per year. To put this tax in perspective, this would only increase the price of gasoline by about 10-12 cents per gallon—far less than the impact of the Iran War in recent months.
(4) Impose a Tobin Tax — A great innovation, best at the national level but still plausible at a state level, is to impose a tax on high-speed stock trading gains. The Congressional Budget Office estimates that this tax could produce about $30 billion per year, or about $91 per capita.
(5) Expedite Solar Implementation — Incentivizing households and businesses to accelerate the implementation of solar systems with batteries will prevent the unnecessary expenditure of trillions of dollars on new transmission and distribution systems or new central power stations (of any type). As readers here know, my recent study for the Mayor of Irvine (population 330,000) showed that over the next 20 years, $16 billion of investment in solar could save $42 billion of utility expenditures. States should enact the solar tax credits that the federal government foolishly rescinded.
(6) Create a Public Bank — The Bank of North Dakota generates a profit of $200 million per year for a population of 750,000. Take surplus revenues from tax collections and transfer payments, put them on deposit in local banks and credit unions, enjoy a renaissance of local businesses, and collect massive interest payments. Every state in the union should be doing this, rather than surrendering money to global financial instruments.
(7) Enter a Tax Compact — Note the political valence of the ten states in trouble. Eight are solid blue, and two are purplish. Progressive states cannot individually raise taxes, as California voters might do on billionaires this November, without prompting their wealthier residents to leave. But if progressive states raise taxes as a group, as other countries in the world have, they make it harder for residents to flee. These states should enter into an agreement on principles and practices for restoring more fairness to the tax code. Better still, make joint enforcement part of the compact. Details are in point 8.
(8) Implement Modest Tax Reforms — Extend sales taxes to services and digital goods. Tax capital at the same rate as labor, or at least shift tax burdens from workers to robots. Revise property tax assessments more rapidly (many states have multi-year lags). Invest more in enforcement (tax cheats deprive states of at least 5% of their potential income). To share just one number, taxing billionaires at the same rate as the working class would generate about $0.5-1.0 trillion per year. Honestly, I would like to replace all these taxes with bigger taxes on carbon and waste, but that’s another conversation.
(9) Health Care Compacts — Speaking of interstate compacts, these states should create more uniform policies around one of their biggest areas of spending—health care costs. Important reforms could include new systems to detect fraud, joint procurement of drugs (to bring down prices), and systems of price disclosure (to encourage greater competition). Just reforming drug purchasing prices to the world’s best benchmark pricing could save states like California or New York billions of dollars each year.
(10) Local Procurement — States spend about $3 trillion per year, much of it through antiquated public procurement processes. By failing to account for the tax implications of contracts, states have lost hundreds of billions of dollars each year through nominally cheaper, nonlocal contracts. New systems are needed to account for the multiplier effects of local procurement.
Some final points about these ideas. Even one or two of these items would be enough to put most states back in the black. Consider Oregon, currently facing a $128 million deficit—or about $30 per capita. That’s how much changing drug purchasing policies could save the state. In fact, either a $100 per ton waste tax or a $1 per million BTU carbon tax would generate $303 per capita. If Oregon launched a public bank as successful as North Dakota’s, it could yield another $267 per capita.
None of these ideas are fanciful. They have all been done somewhere, to some extent, with positive results. We have precedents to build on. And many of these ideas could and should be implemented, not just by states, but by larger cities (attention, Mayor Mamdani!).
What’s missing are not good ideas, but the political will to implement them. So… stop complaining about your crisis… and start legislating!
If you want more news about the virtues of devolution and localization, we have it below, with articles on “neighborhood trusts” and rural pushback against AI centers. We also pass along our sadness and condolences on the passing of one of the great localists on the planet, Richard Heinberg. I’ve been a fellow of his Post-Carbon Institute for more than a decade and long appreciated his creative research, writing, and advocacy. He was a dear soul and will be missed.
A final note: We will publish next week and then take a few weeks off to catch our breath and spend some money in our favorite Main Streets.
— Michael Shuman, Publisher
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NEWS
Study Shows Corporate Subsidies Only Create Jobs for Lobbyists (Boondoggle, July 29) and that, “instead of creating new, sustainable economic activity that actually helps a locality, incentives just stimulate more political horse trading and dealmaking.”
How a Neighborhood Trust Helped Bring Fresh Food Back to Kensington, Next City (July 24) highlights the effort to bring an affordable grocery store and so much more to this Philadelphia community.
Devastating News: The Loss of Richard Heinberg (Resilience, July 23) captures the heavy hearts of many after learning of Richard’s passing. “The world has lost a voice of clear, truth-telling wisdom—a man whose work reached millions of people and fundamentally changed the lives of thousands,” wrote Asher Miller, executive director of Post Carbon Institute.
Mamdani Taps Lina Khan to Lead NYC Economic Development Board (Bloomberg Law, July 22), bringing Khan’s experience as the former Federal Trade Commission and antitrust work to the helm.
Freedom of Choice (Stanford Social Innovation Review, July 20), written by Julie Menter, program director at Transform Finance, calls on business leaders to lead with their values—ahead of their financial endeavors. Ensuring a business is set up to act on its values depends on “freedom of choice” factors, including ownership, governance, capital, stakeholder relationships, financial position, market conditions, and political environment.
AI Data Centers Are Just the Tip of the Iceberg (The Nation, July 17) writes Anthony Flaccavento, describing the push back happening in rural areas and inspiring action across party lines.
New MSJ Slack Conversation about the Seattle Loop model.
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Lansing Growth Fund Celebrates Ribbon Cutting Ahead of Capital Raise This Month
The Lansing Growth Fund marked a major milestone this summer with a ribbon-cutting ceremony that drew more than 500 attendees, celebrating the fund’s progress toward its official capital raise launching this month.
The Lansing Growth Fund is one of several communities participating in NC3’s Accelerator Program, which provides hands-on technical assistance to communities designing and launching locally owned community investment funds. These funds give local residents direct, shared ownership stakes in businesses and projects in their own community—keeping wealth and decision-making close to home.
The turnout at the ribbon-cutting reflects the level of community enthusiasm building around the fund and positions Lansing as one of the standout examples of NC3’s Accelerator model in action, alongside other communities like Amplify GR, NewTown Macon, and Rhode Island’s Local Return fund.
With the capital raise now on the horizon, the Lansing Growth Fund is poised to become a model for how community-owned investment can drive durable, shared economic growth at the local level. As Lansing prepares to open its raise to local investors, NC3 will continue offering fund structuring, legal and compliance guidance, and community engagement support to carry the fund through launch—the same playbook already fueling momentum in Accelerator communities from Grand Rapids to Providence.
For residents interested in learning more or getting involved as the raise approaches, updates on the Lansing Growth Fund will be shared in the coming weeks as the community moves from ribbon cutting to reality.
PARTNER NEWS & VOICES
A Great Start for an Incorruptible Company, Jenny Kassan (August 4)
Own the Block, Kensington Corridor Trust (July 31)
Cascadia Should Follow North Dakota’s Lead and Create Public State Banks, Cascadia Journal (July 23)
Retirement Capital, Re-Directed, Impact Entrepreneur (July 22)
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Community Capital Wealth Building Handbook, Centre for Community Capital (July 28)
The Hidden Impact in Corporate Supply Chains, Telos (July 24)
Baby Bonds Education & Community Engagement Toolkit, Prosperity Now (July 21)
Buy Social Corporate Challenge Annual Report, Social Enterprise UK (June 9)
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New England Community Capital Ecosystem Map, Invest New England
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