Friday, January 08, 2010

Republican governors playing tax games

There's a strain of thought among some conservatives that taxes are bad per se, that just about anything government does except maybe for public works, public safety and national defense is bad. Most people do not share that strain of thought - there are roles, especially with the provision of public goods where the government will provide better benefits and provide them to a broader population than the private sector would on its own.

For that reason, Democrats and moderate Republicans need to beware of attempts by Governors Tim Pawlenty (Minnesota) and Rick Perry (Texas) to sabotage their states' tax systems.

As reported by the Wall Street Journal, Pawlenty is pushing caps on public spending:

Mr. Pawlenty has proposed an amendment to the Minnesota constitution that would limit spending during any two-year budget period to the amount of revenue collected during the previous budget cycle. At a Republican fund-raiser in New Hampshire on Dec. 16, the governor also pushed the idea of an amendment to the U.S. Constitution that would force Congress to pass, and the president to sign, a balanced budget.

"Government spending in the country and in many states is progressing at an unsustainable, irresponsible and reckless pace," Mr. Pawlenty said in an interview this week. "The bathtub is overflowing onto the floor, and the first thing we need to do is shut off the faucet."

Pawlenty's idea is particularly insane because in a recession, a state's revenue declines significantly - and under his cap system, that would permanently lock a state into a lower level of spending going forward, no matter whether the economy improved. This is particularly pernicious, because the programs that states run or fund, such as public healthcare, education and criminal justice, all have costs that are growing faster than GDP. The way to cut those costs is not to starve funds from needed services.

As reported by the Wonk Room blog on Think Progress, Governor Rick Perry of Texas wants to require a two-thirds majority in the legislature to pass a budget. This requirement has caused incredible difficulties in California, where the Republican minority has stalled any attempt to raise taxes in good times or bad. This undermines the ability of the legislature to actually govern and should be opposed by conservatives and liberals alike. Indeed, Bruce Bartlett, a former Bush administration official, is quoted in the article as saying:

There are legitimate differences between responsible conservatives and liberals on how to deal with taxation, but as one of those responsible conservatives, Bruce Bartlett, wrote, the right has to “accept the necessity of higher revenues.” “Instead of opposing any tax hike, I think it makes more sense for conservatives to figure out how best to raise the additional revenue that will be raised in any event,” he added.

Bartlett has previously spoken in favor of a value-added tax; although these taxes are regressive on their own, they raise revenue very efficiently. If the tax structure as a whole is progressive, then progressives should accept them.

No comments: