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Why Republican governors are flirting with tax hikes

Is 2015 the year of reluctant GOP tax hikes or triumphant GOP tax cuts? It depends. Republican governors are open to new tax revenue—as long as it is never, ever from individual income taxes.

°Õ³ó±ðÌý recently reported Republican governors across the country were "bucking the party line" on taxes, citing eight GOP executives proposing tax hikes. also noted the trend of Republican governors and "much-regretted" tax increases earlier this week. However, the  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—as 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 , 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 .

So the GOP tax hike talk is real, to an extent. Republican governors in Georgia, South Carolina, and South Dakota proposed—and several —some form of increase this year. Republican  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  proposed a big business tax hike to pay for his education plan. Alabama says his state desperately needs new tax revenue to fill a budget gap—although, 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, . The only significant tax change actually signed into law this year—not counting Michigan's ballot-dependent package—was Arkansas's income tax cut championed by Republican . Mississippi is also considering a considerable income tax cut.

And many GOP governors have proposed tax hikes only to offset income tax cuts:

• ²Ñ²¹¾±²Ô±ðÌý proposed increasing the state's sales tax to fund income tax cuts—including the eventual elimination Maine’s income tax.
• °¿³ó¾±´ÇÌý 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  wants her state's gas tax increased but if and only if the state’s income tax is cut.
• °­²¹²Ô²õ²¹²õÌý, 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’s plan requires a large business tax increase in part because his state does not have an income tax—and 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:

• °Â¾±²õ³¦´Ç²Ô²õ¾±²ÔÌý, faced with a budget shortfall, decided to skip debt payments rather than adjust previous tax cuts.
• New Jersey  pledged to veto any income tax increase passed by New Jersey's legislature.
• °¿°ì±ô²¹³ó´Ç³¾²¹Ìý said she would proceed with despite her state’s budget problems.
• ±õ±ô±ô¾±²Ô´Ç¾±²õÌý 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—every 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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