Republican governors across the nation are proposing tax increases — and backing off pledges to cut taxes — as they strike a decidedly un-Republican pose in the face of budget shortfalls and pent-up demands from constituents after years of budget cuts.
“My jaw dropped,” Assemblywoman Michele Fiore, a conservative Republican in Nevada, said after hearing Gov. Brian Sandoval, a Republican, propose a $1.1 billion tax increase for education this month. “Whether we kill it by five votes or 15 votes or 25 votes, we are going to kill it.”
At least eight Republican governors have ventured into this once forbidden territory: There are proposals for raising the sales tax in Michigan, a tax on e-cigarettes in Utah, and gas taxes in South Carolina and South Dakota, to name a few. In Arizona, the new Republican governor has put off, in the face of a $1 billion budget shortfall, a campaign promise to eliminate the unpopular income tax there.
“It’s not based on partisanship; it’s based on common sense and good government,” said Gov. Rick Snyder of Michigan, a Republican who has urged voters to support a ballot measure that would raise $1.9 billion by increasing the sales tax and gas tax. “We’ve been underinvesting in Michigan for some time, so I view it as a way to, long term, save us resources.”
Republican governors are now in office in 31 states — the highest number since 1998 — and they have certainly not stepped away from the party’s bedrock platform of smaller government and lower taxes. Indeed, some of the proposed tax increases, like one from the governor of South Carolina, are part of broader proposals that would result in net tax reductions, usually by cutting income taxes.
Many of these tax increases face tough sledding in Republican-controlled legislatures like Nevada’s. And a host of Republican governors are pushing for cuts or holding the line on taxes.
Still, the shift is striking, and it comes in the wake of problems that Gov. Sam Brownback of Kansas, a Republican, suffered after pushing though sharp cuts in business and income taxes. Governor Brownback, who found himself in an unexpectedly tough race for re-election in part because of a budget deficit fueled by the tax cuts, recently called for raising cigarette and liquor taxes and slowing planned reductions in the income tax rate to help reduce the shortfall.
By most accounts, the proposals emerging from state Republican lawmakers seem like acts of pragmatism rather than shifts in philosophy for the Republican Party. In Washington, Republicans, who control Congress, have made clear they will block a series of tax increases proposed by President Obama.
Grover Norquist, the president of Americans for Tax Reform and a driving force in pressing Republicans to sign no-tax pledges, said he was annoyed by some governors who were calling for tax increases, like Governor Sandoval, whom Mr. Norquist described as “really bad on taxes.” But these Republicans are the exception, he said.
“You can’t just look at governors these days,” Mr. Norquist said. “You’ve got to look at the legislatures. The legislature in North Carolina is much more pro-growth and anti-tax than the governor.”
The financial picture for states has stabilized, with five straight years of revenue and spending increases. But when those numbers are adjusted for inflation and population growth, they are still far below their pre-recession peak. The National Association of State Budget Officers recently warned that revenue growth was not strong enough to both maintain basic services and meet the growing demand to spend more on such things as higher education and prisons.
And the recovery is uneven: In 20 states, revenues in the current fiscal year are lower than expected, according to a December survey by the association.
“As new governors and legislators begin the session, they’re realizing that money is tight — there’s not enough to go around even if you just want to do the basics, like increase K-through-12 spending and fully fund Medicaid,” said Scott D. Pattison, the association’s executive director. “I think what’s going to happen is that elected officials want to implement tax cuts, but they can’t do anything significant or dramatic because the growth is so limited.”
The governors, including ones returning to office and some new ones, are responding in different ways to this unsteady ground.
In South Dakota, Gov. Dennis Daugaard proposed an increase to the gas tax and several taxes and fees related to motor vehicles because highway funding is falling short. Gov. Gary R. Herbert of Utah has increased the tobacco tax, proposed extending it to e-cigarettes and said he was open to an increase in the gasoline tax.
Gov. Nikki R. Haley of South Carolina, a Republican, said she would allow the state to raise its gas tax, a move she had previously promised to veto, but only if the legislature cut the income tax by almost a third and reformed the State Transportation Department. And Gov. Doug Ducey of Arizona, a Republican elected last November, has moved away from his campaign pledge to eliminate the income tax, which provides about one-third of the state’s budget.
“It’s been a very sluggish recovery in Arizona,” said Dennis Hoffman, an economics professor at the W. P. Carey School of Business at Arizona State University. “A stalled-out real estate market. We have just not rebounded.”
In Michigan, legislators had tried for years to fix a serious shortfall in spending on roads and bridges. The governor’s proposal involved increasing the gas tax, but the House — the more conservative of the two Republican chambers — blocked that idea and would agree only to a compromise subject to voter approval in May. It calls for an increase in both the gas tax, which would be dedicated to transportation needs, and the sales tax, which would fund education and local governments.
State Representative Todd Courser, a newly elected Tea Party Republican, said the increase was unwarranted. “It’s not $1.9 billion when you look at it. It’s billions and billions in perpetuity forever,” he said. “I certainly will be an outspoken voice opposing it.”
Governor Snyder said in an interview that he had gotten some pushback, but that the plan had won a two-thirds vote of approval in both the House and the Senate. He noted that the popular vote would come in the spring, during prime pothole season.
The state also had done some belt-tightening, he said, and taxpayers would get a dedicated funding source for road improvements. “What we’re doing is following some principles that our taxpayers wanted, I believe,” Governor Snyder said.
On the other side of the ledger, Republican governors in Arkansas, Mississippi and Nebraska have proposed cutting taxes. There are also several states, like Illinois and Maryland, where Republican governors have not suggested tax increases despite serious budget shortfalls.
In some cases, governors are proposing increases in the sales tax and other levies only to offset the cost of a larger goal: eliminating the personal income tax. In Maine, Gov. Paul R. LePage called for increasing the sales tax and subjecting more goods and services to taxation, but only to offset the cost of lowering the income tax and eliminating the estate tax.
There is little evidence that cutting the income tax or other taxes creates jobs or attracts business, said Michael Leachman, the director of state fiscal research at the Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group. Of the states that cut their personal income taxes the most in the 1990s, three grew more slowly than the average and three — all energy states benefiting from a rise in gas prices — grew more quickly, according to a study by Mr. Leachman and his colleagues.
Republicans say that these kind of tax reductions boost economic growth. But critics like Mr. Leachman argued that shifting from income tax to consumption-based tax does push the burden further down the income ladder, a sentiment echoed by Democratic lawmakers in Maine. “If there’s a tax cut, we think it should benefit the middle class, and from the numbers we’ve seen this disproportionately benefits the upper classes,” said Maine’s speaker of the House, Mark W. Eves, a Democrat. Under the LePage plan, low-income families would receive a credit ranging from $250 to $500 to help mitigate their increased burden.
Governor Sandoval, in laying out his tax increase plan to the Nevada Legislature, said he expected it to face opposition, but argued that the state needed to do something to improve its education system. “What we must all agree on is that another generation of young Nevadans cannot move through our schools without more resources, choice and reform — and that we must modernize our revenue system,” he told lawmakers.
If Republicans were distressed by Governor Sandoval’s speech, Democrats were nothing short of ecstatic. “I never thought I’d see the day when a Republican governor was proposing all the things we’ve been proposing for the last 20 years,” said State Senator Moises Denis, a Democrat from Las Vegas.
Reply With Quote
Originally Posted by Zippyjuan
Connect With Us