Politico: Ambitious governors dominate tax debate
media mentionBy: Rachael Bade
January 22, 2013 04:41 PM EST
Looking for the next big tax debate? Talk to a governor — preferably one with presidential ambitions.
From Louisiana to New York, and Wisconsin to Massachusetts, some of the nation’s most prominent governors in both parties — more than a few of whom have grander aspirations — are using their megaphones to propose bold state tax initiatives.
And while they may be moving in different directions, they have one thing in common: their proposals cater to more than just a local audience.
Gov. Bobby Jindal, who is flirting with a 2016 presidential run, recently proposed scrapping Louisiana’s income and corporate taxes.
His tax plan will play nicely with conservatives across the nation, simultaneously serving his political ambitions.
“Across the county there are people who are trying to make a name for themselves,” Grover Norquist, president of the conservative Americans for Tax Reform, told POLITICO. “It’s the right thing for the state, but it has the added advantage of being a political advertisement for somebody who may be a potential presidential candidate at the national level.”
Think of the state as a résumé-builder, and governors’ tax proposals as their credentials — particularly for Republicans.
Norquist and other national-level tax advocates on both sides of the aisle are watching closely.
“It seems pretty clear that a lot of governors are proposing anti-tax measures to burnish their credentials with Republican voters,” said Matthew Gardner, executive director at the left-tilting Institute on Taxation and Economic Policy. “The tea party adherents are going to want to hear tax-cut stories from any electoral candidate.”
More broadly, the myriad plans underscore how the national debate over taxes is quickly shifting to state capitals, after the fiscal cliff left tax reform plans in limbo.
Just Tuesday, Norquist launched a campaign against Virginia Gov. Bob McDonnell’s plan to hike the state’s sales tax from 5 percent to 5.8 percent. Although it also abolishes the 17.5-cent gas tax, the changes net about $2.4 billion more into the Old Dominion’s coffers over five years — a far cry from the governor’s goal of “revenue neutrality.”
Other Republican governors with an eye to the national stage — Nikki Haley of South Carolina, Scott Walker of Wisconsin, Susana Martinez of New Mexico and Mary Fallin of Oklahoma — are also pitching tax cuts or huge overhauls of their state Tax Codes.
Haley asked her statehouse to eliminate corporate taxes last year, a proposal that fell by the wayside. Last week, Haley scaled back her request, calling for vague tax cuts in her State of the State address.
Despite the lack of movement on her corporate tax plan, Gardner says the pitch could be a sweetener for a Haley presidential run in 2016.
“Whether or not these governors try to act on these tax plans, just the act of proposing them is going to endear them to some in the right-wing base,” Gardner said.
Walker, whose state enjoys a multimillion-dollar surplus, told Badger State residents that his budget request will include an income tax cut.
Martinez last week also suggested that lawmakers spend surplus funds on tax cuts in 2013.
Fallin is cooking up a major tax reform in the Sooner State that would also slash income rates — even as Oklahoma enters the last phase of a series of tax decreases enacted a half-decade ago.
There’s far more than national politics at play, of course. Each state’s situation is unique — and for decades it has been common practice for state and local politicians to entice big companies to their localities with generous tax breaks — in exchange for the promise of jobs and money those factories may bring.
Any state that can promise stable tax rates, and breaks, has a leg up in the ongoing competition to attract businesses small and large — just one reason tax reform has become a goal for governors this year.
“There is great competition for growth. States are trying to get business from other states [and] trying to get companies from other states,” U.S. Chamber of Commerce President Tom Donohue told reporters last week. “In some states, people are trying to get out [when] the tax and regulatory burdens are so oppressive.”
Still, there’s a long history of governors using their records on taxes at the state level as a springboard to greater things.
George W. Bush flaunted the $1 billion tax cut he signed as Texas governor during his 2000 election campaign. And as a presidential candidate, Ronald Reagan touted Proposition 13, California’s famous anti-real estate tax law, though it actually passed after he’d retired from his governorship.
Republicans won’t be the only candidates framing themselves through state tax policy in 2016.
Considering Barack Obama won the 2012 election on a promise to make the wealthy pay their “fair share,” expect Democratic contenders in 2016 to do the same.
Larry Sabato, director of the University of Virginia Center for Politics, says Democratic governors considering presidential bids will have to go way left on everything, including fiscal policy.
“If you’re running for president, you do not have the luxury of thinking about the general election; you must focus on the primaries when you will be competing with other progressives and where the voters will be heavily progressive,” he said.
Maryland Gov. Martin O’Malley, considered a presidential contender, is already there. Last May, he raised taxes on single filers earning more than $100,000, while cutting their personal exemptions. He said it was the “fairest way” to close the state’s budget cap and cover the increase in spending he wanted, which included an expansion of Medicaid for the poor.
He’s expected to soon roll out a gas tax hike to fund transportation.
In Massachusetts, Gov. Deval Patrick called for an income tax hike, partially offset by a reduction in the sales tax, in his State of the Commonwealth address on Jan. 16. His priority for the new revenue: education and transportation projects.
Patrick ruled out a 2016 presidential bid in an interview with ABC News last September, but he wouldn’t dismiss the suggestion that he’d try for the White House eventually.
The Massachusetts tax plan is part of a broader “legacy building” campaign Patrick must create before running for president, says Jeffrey Berry, a professor at Tufts University.
“What Patrick wants to do is to leave a record, a legacy of accomplishments,” Berry said. “If he wants to run for president, he needs to create more of a record and this is a good opportunity.”
If Patrick does decide to pursue national ambitions, he has “wiggle room,” Berry said, to sell the tax increase as a hike only affecting the wealthy — similar to President Obama’s fiscal cliff package that consistently polled well among voters.
One particular 2016 Democratic contender, New York Gov. Andrew Cuomo, will have to reposition his fiscal messaging if he wants to compete for the White House, Sabato said.
Cuomo has painted himself as a moderate on a whole swath of issues, including taxes — though he did sign into law a higher tax bracket for millionaires in 2011. In his State of the State address last week, Cuomo promised no new taxes and flaunted efforts to curb property tax growth.
He plans to tackle tax reform soon, and that’s where Sabato expects a fiscal shift if Cuomo is serious about becoming the next president.
“There’s no choice; he will have to go after millionaires,” Sabato said. “He’s going to have to match O’Malley and others tax increase for tax increase.”
Lauren French contributed to this report.