La Crosse Tribune: Matthew Gardner: Anti-tax govs just getting started

Original Post

July 31, 2011

COMMENTARY

Twelve new governors who ran on anti-tax platforms have now signed their first fiscal year budgets.

All of them will tell you they were elected with a mandate to get their state’s fiscal house in order, rein in government spending and cut taxes. Some of them will even tell you they view Chris Christie as their model — a “primo example” according to Wisconsin’s Scott Walker — of how a conservative governor governs.

This should alarm you.

Gov. Christie recently vetoed a widely popular and eminently sensible tax on New Jersey millionaires. This temporary tax, affecting a mere 0.2 percent of all households, would have generated about $500 million, primarily for public schools. In the same budget, Christie raised (yes, raised) taxes on his state’s working poor by cutting about $45 million from the Earned Income Tax Credit, which helps people working full-time in low-wage jobs to make ends meet.

Christie went on to shred the Democratic legislature’s budget, which paid for things such as police protection, a health care safety net and college tuition grants. Christie said no to all of it, insisting the state didn’t have the money.

And yet he managed to set aside $640 million ($365 million if you accept his revised math) he calls a “healthy and necessary” surplus — necessary to his career, maybe, but not healthy for his constituents.

New Jersey is one of more than 30 states that, in 2009, decided temporarily to boost some taxes to help make up revenues that were drying up with the recession. Even with those temporary infusions, states had to excise billions from their budgets to stay in the black. Those mostly two-year fixes have now expired, as have the federal stimulus dollars that kept many state budgets afloat.

Now, with hospitals, schools and police forces scarcely shadows of their former selves, and college tuition up as much as a 50 percent and even 100 percent since 2008, governors like Christie are hoarding surpluses while heaping burdens on average taxpayers, too many of whom remain un- or under-employed.

In Michigan, with its infamously precarious economy, freshman Gov. Rick Snyder delivered a particularly irrational budget. He slashed all kinds of spending, cut business taxes by well over a billion dollars, then reduced the state’s Earned Income Tax Credit by 70 percent, raising taxes on the state’s working poor by more than $260 million each year.

According to our analysis, the poorest 20 percent of Michiganders will be hit hardest by the package of tax hikes (including some on senior citizens) that Snyder pushed through. All to pay for allegedly job-creating tax cuts for business, even as the governor admits he “can’t guarantee” economy-boosting results.

Governors across the country have signed budgets like these, with excruciating cuts in government services, incomprehensible tax increases for low- and middle-income households and utterly mystifying tax breaks benefitting businesses and individuals with healthy portfolios.

Always in the name of “fiscal responsibility,” and often — astoundingly — with a surplus squeezed out.

In Ohio, for example, Gov. John Kasich signed a two-year budget that cuts about $630 million in aid that local governments rely on, $700 million from public schools and $340 million from nursing home care. At the same time, it eliminates the estate tax, which, with its various exemptions protecting farms and other family businesses, is a genuinely progressive and productive tax. In 2011 alone, it generated $230 million for Ohio localities and $55 million for the state.

In Wisconsin, the new budget takes $56 million from the pockets of the working poor by reducing the Earned Income Tax Credit, and gives $36 million to wealthy Wisconsin investors in the form of a capital gains tax break. And, because Gov. Walker’s budget cuts were especially hard on education, 354 teachers in Milwaukee alone got pink slips.

Like Christie, each of these governors left hundreds of millions of available funds (previous surpluses or projected revenues) unspent. They like to call it

“fiscally responsible,” but sitting on millions while raising the cost of living for low- and middle-income families and passing the buck to cities and counties is anything but fiscally responsible.

It is, however, politically profitable. A governor who balances the budget during an economic crisis, cuts taxes and shows off a shiny new surplus to boot is someone we can trust, right?

Wrong. And taxpaying citizens should not fall for this shell game. Last November, when we looked ahead to this budget year, we anticipated the worst. Ohio’s Kasich had campaigned on repealing the state’s entire personal income tax, while Florida’s Rick Scott and South Carolina’s Nikki Haley campaigned on the promise of repealing corporate taxes.

We were dreading flat-tax schemes and tax capping laws designed to choke off revenues into the future. But even though these new anti-tax governors didn’t get everything they wanted this year, if they get away with calling this fiscal responsibility, then next year, they just might.

 Matthew Gardner is executive director of the Institute on Taxation and Economic Policy.

 

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