Why Republican governors are flirting with tax hikes
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罢丑别听聽recently reported Republican governors across the country were "bucking the party line" on taxes, citing eight GOP executives proposing tax hikes.聽also noted the trend of Republican governors and "much-regretted" tax increases earlier this week. However, the聽聽just heralded "The Tax-Cutting Boon Sweeping the States." So is 2015 the year of reluctant GOP tax hikes or triumphant GOP tax cuts?
The answer depends on the tax. Given budget demands, Republican governors are open to new tax revenue鈥攁s long as it is never, ever from individual income taxes.
Let's start with the budget challenges. States are generally expected to balance their books, so revenue-losing tax changes must be paired with spending cuts. That's not an easy trade even in the most politically conservative states. Furthermore, as my colleague聽, states are projecting revenue growth significantly below long-term averages, suggesting many governors will struggle simply to meet current needs. No governor wants his or her state to become聽.
So the GOP tax hike talk is real, to an extent. Republican governors in Georgia, South Carolina, and South Dakota proposed鈥攁nd several聽鈥攕ome form of聽increase this year. Republican聽聽is pressing Michigan voters to approve a May ballot initiative that (among other changes) increases gas and sales taxes. GOP governors in Kansas, Nevada, and Ohio want cigarette tax increases. Nevada聽聽proposed a big business tax hike to pay for his education plan. Alabama聽says his state desperately needs new tax revenue to fill a budget gap鈥攁lthough, he won't say what taxes he would raise.
But don't let all this GOP talk of tax increases confuse you. Republican governors are still determined to slash, if not eliminate,聽. The only significant tax change actually signed into law this year鈥攏ot counting Michigan's ballot-dependent package鈥攚as Arkansas's income tax cut championed by Republican聽. Mississippi聽is also considering a considerable income tax cut.
And many GOP governors have proposed tax hikes only to offset income tax cuts:
- 惭补颈苍别听聽proposed increasing the state's sales tax to fund income tax cuts鈥攊ncluding the eventual elimination Maine鈥檚 income tax.
- 翱丑颈辞听聽wants to raise taxes on sales, cigarettes, and businesses to fund his individual income tax cuts, including the elimination of taxes on small businesses that report "pass-through" income. Like LePage, Kasich's goal is eventually eliminating Ohio's income tax.
- South Carolina聽聽wants her state's gas tax increased but if and only if the state鈥檚 income tax is cut.
- 碍补苍蝉补蝉听, the ultimate anti-tax hero (or villain), is proposing tax hikes on alcohol and cigarettes this year, but that's part of a budget that keeps his previous income tax cuts. Brownback did propose slowing the annual pace of those income tax cuts, but he did not back away from his plan to eventually repeal the tax.
- Nevada Gov. Sandoval鈥檚 plan requires a large business tax increase in part because his state does not have an income tax鈥攁nd he is not proposing one anytime soon.
Other Republican governors are searching for answers to budget problems, but income tax increases are off the table:
- 奥颈蝉肠辞苍蝉颈苍听, faced with a budget shortfall, decided to skip debt payments rather than adjust previous tax cuts.
- New Jersey聽聽pledged to veto any income tax increase passed by New Jersey's legislature.
- 翱办濒补丑辞尘补听聽said she would proceed with聽despite her state鈥檚 budget problems.
- 滨濒濒颈苍辞颈蝉听聽first term began just days after his state's temporary income tax hikes expired (reverting to pre-2011 rates) as scheduled on Jan. 1. Rauner's first budget kept the lower rates and proposed only spending cuts to close deficits.
Some GOP governors may sign tax increases this year. And spending needs and balanced-budget requirements will rein in the most ambitious tax plans鈥攅very year there are far more proposals than actual tax changes. But the overarching state tax story of 2015 for Republican governors is nothing new: avoiding income tax increases at all costs.
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