With the Government Accountability Office last year projecting that states would need to adopt an overall state tax increase of 15.2 percent or a spending cut of 12.9 percent, but both state and local tax policy makers confronting increasing difficulties in both finding politically feasible sources of new revenue,the road out of recession is hard. In addition, states confront the realization that their tax structures are increasingly failing to reflect the 21st century U.S. economy. As the U.S. economy has continued to evolve toward a service and intangible economy, the combination with the recession will dramatically reduce state revenues, since most state sales and use taxes apply only to tangible goods and, absent the federal legislation to address Streamlining, are limited from collecting the aforementioned $12 billion in use taxes as the growth in electronic sales continues to swamp on-street retailers. Perhaps more importantly, with few exceptions, states do not tax services, the fastest growing component of demand, and many items, i.e., CDs, DVDs, etc, which used to be sold in stores as a good and were taxed, are now digitized, downloaded, but generally not taxed. This digitalization of products will only accelerate in the future. The inability to collect taxes on content such as video, which comes into individual households via cable, satellite or telephone, will further accelerate the erosion of state tax revenues. The implication for this is higher and higher sales tax rates on shrinking tax bases, which is contrary to one of the most basic tenants of good tax policy, i.e., broad based and a low rate. Taxing goods at a high rate, but not taxing services or Internet-related products and services distorts prices and creates economic distortions throughout the economy, particularly in investments. It will also create major equity issues between sellers and consumers.