In October 2007, two months before the onset of the worst U.S. recession since the Great Depression, Maryland's Democratic governor, Martin O'Malley, convened a special session of his state's Democrat-controlled General Assembly in a high-stakes effort to close an unexpectedly large $1.7 billion budgetary shortfall. A central component of O'Malley's proposal was converting the state's flat income tax of 4.75 percent to a progressive system with higher brackets of 6 percent and 6.5 percent for upper-income households. At the same time, he advocated a combination of tax hikes on corporate income, sales, tobacco, and vehicle titles, along with reductions in taxes on property and the incomes of lower earners.

In July, Oregon's Democratic governor, Ted Kulongoski, and the state's Democratic legislature soaked the rich. They agreed on a budget that includes an income tax hike for married couples earning more than $250,000 a year and individuals making over $125,000. Corporations netting more than $250,000 annually also will pay higher taxes. At the same time, the Oregon legislature largely avoided the kind of draconian cuts to public services California approved at the insistence of its Republican governor, Arnold Schwarzenegger, even though Oregon has the second highest unemployment rate in the country and faced a huge budget gap of its own.