Now that most state legislatures have adjourned for the year, it
is time for a round-up on how Republicans and Democrats did on the
tax issue. This matter is of particular importance to the GOP.
Since state government often acts as a “minor league” for
politicians with national aspirations, it is incumbent on
Republican politicians at the state level to hold the line on
taxes. After all, if the GOP doesn’t stand for lower taxes, what
does it stand for? Unfortunately, every year there are Republican
politicians who fail to get the anti-tax memo. This year the GOP
zeroes were found in:
Alaska: Governor Frank Murkowski failed to win
a $1 increase in the cigarette tax to fix the budget during the
regular legislative calendar. So he has called for a special
session in late June to try again.
Massachusetts: Governor Mitt Romney continues
to make Taxachusetts worse — at least in the short term. This year
he signed a bill lifting a business property tax cap to 200% above
residential rates. It is currently at 175%. The law eventually
reduces the cap back down to 170% — in 2009. Furthermore, Eileen
McAnney, of Associated Industries of Massachusetts, complained that
Romney’s proposal to improve the Department of Revenue would boost
business taxes by $70 million.
Michigan: Democratic Governor Jennifer Granholm
proposed hikes in the cigarette tax and liquor tax, and a new state
inheritance tax. Thirteen Republicans In Name Only in the House
aided Granholm by joining 42 Democrats to approve a 75 cent hike in
the cigarette tax. The Republican speaker of the house, Rick
Johnson, pushed for an even higher tax, precipitating threats of a
no-confidence vote in the party caucus.
Nebraska: Republican Governor Mike Johanns
initially proposed a budget without tax increases, despite a
projected $217 million shortfall. He then turned around and agreed
to a “temporary” 0.5 percentage point increase in the sales tax
rate and an increase in the property tax levy for the school system
from $1.05 to $1.10 per $100 of assessed valuation.
Ohio: Secretary of State J. Kenneth Blackwell
is leading a tax revolt, attempting to get a measure on the ballot
that would rescind the “temporary” sales tax increase imposed last
year. Meanwhile, Governor Bob Taft (a.k.a. Governor Tax) shows he
still doesn’t get it. To encourage job creation he wants to extend
an enterprise zone tax credit, and create a Jobs Cabinet to focus
on regulatory reform to help companies find skilled workers — as
if employee recruitment were the business of government. He is
calling for overhauling the state tax code, but he also said he
wouldn’t rule out future tax increases to shore up the state
budget.
Texas: Governor Rick Perry is calling a special
session to deal with the Texas school funding system that he hopes
will yield some $6 billion in property tax relief. It seems like a
great idea until you realize that he wants to replace the school
property tax with gambling revenue, cigarette taxes, adult
entertainment tax (read “porn tax”), and ending a break against the
corporate franchise tax. These measures will not only replace the
$6 billion in property taxes, but yield over $2.5 billion more for
schools, a net tax increase.
Vermont: Governor Jim Douglas seems a bit
confused. On the one hand this Republican wants an across-the-board
reduction in income tax rates, aimed heavily at lower and
middle-class taxpayers, tax credits for health insurance, and a
reduction in the corporate income tax rate, which, he complains,
ranks 5th highest among all states. On the other hand, he calls for
the elimination of the state capital gains exclusion to raise
revenue to cover the personal income tax cut and close loopholes
that allow multinational corporations to redirect profits to other
states. There was no discussion on whether the high corporate rate
is what causes corporations to redirect profits. Meanwhile,
residents of Killington, Vermont, voted to join New Hampshire to
avoid, among other things, Vermont’s income tax.
Virginia: Were there any bigger traitors to the
anti-tax cause this year than the Republicans in the Virginia
Statehouse? Democratic Governor Mark Warner went back on the no tax
increase pledge he made in the election of 2001, and proposed hikes
in sales and income taxes to balance the state budget. Apparently
not realizing the political opportunity the Governor had just given
them, 17 RINOs in the house of delegates and 15 RINOs in the state
senate joined the Democrats to pass a $1.5 billion tax increase.
Adding insult to injury was a report from the state Secretary of
Finance about two weeks later showing that revenue collections for
the past fiscal year had been far ahead of projections, suggesting
that a surging economy might have solved the budget shortfall.
AS IT HAPPENS, THE GOP NEEDS governors (and state legislators)
willing to cut taxes, because there is currently no shortage of
Democratic governors who, at least this year, appear to understand
that if they want to run for higher office, they need to neutralize
the tax issue:
Arizona: Governor Janet Napolitano promised not
to raise taxes to deal with a budget shortfall estimated to be
between $800 million and $1 billion. On the down side, she has gone
squishy on tax reform, despite campaigning on it. She continues to
put it off, currently claiming that she is waiting for her Citizens
Finance Review Commission to finalize its recommendations.
Illinois: Near the end of 2003 Governor Rod
Blagojevich reaffirmed his pledge not to raise any general taxes to
deal with state budget problem. But it depends on what the meaning
of the word “general” is. He later called for closing $400 million
in corporate tax loopholes to help deal with the budget. Despite
the damage this reversal might do to a future presidential run by
the governor, word has it that the most dangerous place to be in
Springfield is still between Blagojevich and a TV camera.
Indiana: Despite a projected $1 billion budget
shortfall, Governor Joe Kernan called for more property tax relief
and continuation of a business tax credit program. His mood seemed
to change somewhat, however, when the legislature took him
seriously and passed an expansion of the business credits and
eliminated some portions of the sales tax. Kernan reluctantly
signed the bill, saying that he liked parts of the business credits
yet complained that the bill “will cost the state revenue during
difficult budget times.” It remains to be seen if Kernan will
survive the challenge from GOP candidate Mitch Daniels.
Louisiana: Governor Kathleen Blanco is moving
ahead with gradual tax reform in Louisiana after backing off the
immediate change that she campaigned on.
New Mexico: Bill Richardson, fresh from cutting
income taxes last year, won an elimination of the state sales tax
on food and medical services this year. He also threatened to veto
a gas-tax increase. Is there any governor who has done more to
prove his anti-tax bona fides in the last two years than
Richardson? Can you say 2008 (or 2012)?
Oklahoma: Governor Brad Henry pushed to lower
the top income tax rate permanently to 6.75% and to eliminate
capital gains taxes on property held more than five years. Thus
far, the state senate has approved it.
NOW, BEFORE CONSERVATIVES start pressing the panic button, there
are some Republican governors out there fighting for tax reform.
Governors Ernie Fletcher of Kentucky and Mark Sanford of South
Carolina pushed for income tax cuts this year, although both were
thwarted by recalcitrant legislatures. Tim Pawlenty of Minnesota
wants to make the state corporate income tax more business
friendly, while in Florida Jeb Bush managed to get a nine-day sales
tax holiday (July 24 to August 1 for those of you planning shopping
holidays) and an 8 cent reduction in the gas tax for the month of
August. Finally, Craig Benson of New Hampshire wants legislators to
support a Taxpayers Bill of Rights that would limit increases in
the state budget to the rate of inflation and changes in population
and would require a two-thirds majority in the state house and
senate to pass new taxes.
Yet the Republicans need more tax heroes; at present, they can
ill-afford sellouts. When GOP governors and state legislators cave
on higher taxes, they lose one of the GOP’s natural electoral
advantages. This hurts their chances later on should they decide to
run for U.S. Senate or even president. With many Democratic
governors apparently getting wise to the tax issue, Republican
politicians have diminishing room for error.
