According to a recent article in the New York Times, Alabama’s new GOP Governor, Bob Riley, considers himself a Reagan Republican. In light of recent events, the term “country club” or “green eyeshade” would be more appropriate.
The title of the article was “G.O.P. Chief’s Idea for Raising Alabama: Taxes.” According to the article, Governor Riley is calling for a $1.3 billion tax increase, “or 22 percent of the taxes the state now collects.” (Note: the Washington Post reported Sunday that the Alabama legislature had approved $1.2 billion of Riley’s tax increases. The proposal now goes to the voters.) The Times article portrays much of Alabama’s current fiscal crunch as the result of dysfunctional government and a regressive tax system. The solution, in Riley’s world, is to raise taxes and let Alabama government spend more. Furthermore, according to the article, “this conservative Republican wants not merely to raise taxes but to redistribute money from the wealthy to Alabama’s working poor.” Why, you can almost hear the Times‘ editors squealing with glee! One even has to wonder if the appearance of the article has anything to do with the recently enacted Bush Tax Cut. No, must be a coincidence.
There are the usual bits of liberal bias such as “Mr. Riley, a proud product of the Bible Belt who speaks of his goals in moral and religious terms, seems to be emphasizing compassion over conservatism.” And it isn’t until about halfway through the piece that you find out what is driving most of Alabama’s fiscal woes:
Indeed, it was Don Siegelman, the Democrat whom Mr. Riley unseated in November, who twice tried to get a state lottery enacted. Mr. Siegelman also doubled the state’s debt and gave teachers a big raise, Mr. Riley complains, contributing to a budget deficit that his aides put at about $675 million.
There is more to this story, however, than just the bias of the New York Times. Indeed, in recent weeks panning the Times has become less challenging than shooting fish in a barrel. First off, has Governor Riley considered the economic damage a $1.3 billion tax increase will do to a state with a population of not even 4.5 million? Businesses that can flee the state, will. The ones that can’t will decrease productivity as the taxes increase their costs. Alabama may be on the verge of becoming the economic pariah of the South.
The most troublesome thing is the implications that the article holds for Republicans and conservatives. For Bob Riley is not the only GOP governor to stray from the reservation during the most recent legislative session. Here is a rundown:
Alaska: After campaigning on a “No New Taxes” pledge, newly-elected Governor Frank Murkowski proposed a budget with 11 new tax increases, including a 12 cent increase in the gasoline tax. This inspired the state legislature to toy with the idea of the first-ever state sales tax. Better hope for a good salmon season.
Arkansas: Governor Mike Huckabee won new increases in the sales and cigarette tax by warning of “drastic cuts” in state services. He also signed into law an extension of the beer excise tax which funds pre-school programs.
Idaho: The only reason that the state has not enacted an increase in the cigarette tax favored by Governor Dirk Kempthorne is that the GOP-controlled state senate is opposed to it. Kempthorne did get a “temporary” increase in the sales tax, however.
Massachusetts: Not even six months in office, and Governor Mitt Romney has already managed to make Taxachussetts slightly less business friendly by signing into law elimination of business tax “loopholes.”
Nevada: Governor Kenny Guinn has proposed raising taxes on business licenses, cigarettes, and alcohol.
Ohio: Governor Bob Taft — a.k.a. Governor Tax — approved the first state gasoline tax hike in a decade. He is also pursuing hikes in the cigarette tax, alcohol tax, and business taxes. This comes on the heels of almost $750 million in new business taxes over the last two years, plus a 31 cent increase in the cigarette tax.
Vermont: Live in the Ben and Jerry State and like beer? Sorry, but beer, along with soft drinks, could soon lose its sales tax exemption. This is part of a plan Governor James Douglas hammered out with the state legislature to address inequities in Vermont’s property tax and educational financing system. It includes a 1 percentage point increase in the sales tax. Most ominously, some Republicans in the state legislature felt it didn’t go far enough because it didn’t shift more of the education tax burden to income taxes via a surcharge on middle-income taxpayers.
(Not depressed enough yet? Six states — some with GOP Governors — have recently taken major action on the streamlined sales tax [a.k.a., Internet sales tax]: Arkansas, Mississippi, North Dakota, South Dakota, Utah, and West Virginia. My state, Iowa, is on the verge of doing so.)
This does not bode well for the GOP for a couple of reasons. Republicans are unlikely to ever get a handle on spending if some of their leaders are willing, if not eager, to raise taxes to close budget gaps. For in the long run, new taxes unleash eras of new spending. Then, when the good times end, it becomes time to make “the hard choices” and raise taxes again. Wash, rinse, repeat.
State governments also act as a “farm club” for the national level GOP. Yet it becomes more difficult to send Republican governors to the U.S. Senate — or even the White House — if they have raised taxes. Democrats can potentially neutralize the traditional advantage the GOP has on taxes if a Republican candidate made significant tax increases as governor.
Worse, if such leaders do make it to Washington, the consequences for the GOP range from bad to disastrous. We’ve recently seen what green eyeshade Republicans like George Voinovich and Olympia Snowe can do to a tax cut. And if a future GOP President decides to propose a major tax increase, well, those on the right remember vividly how that creates massive dissension within the Republican Party.
Well, most on the right remember. The Times article notes that Governor Riley’s tax proposal is visiting chaos on Alabama politics, “with Democrats grinning from the sidelines and conservative Republicans, who thought they knew him, ducking for cover.” Perhaps Governor Riley needs a trip to Reagan’s woodshed.
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