Over the last couple weeks, state governors around the country have unveiled their budget proposals amid political tumult. Not only are state governments unclear how Trump and the GOP Congress may impact their funding, but nearly 40 states are facing some level of short-term, or more structural long-term, revenue shortfall in the upcoming fiscal year.
While the factors behind these deficits vary, many are driven by aggressive, and regressive, tax cuts of yesteryear, which a number of GOP-controlled states endeavored to offset by cuts to schools and other social essentials. Confronted by deficits that their own cuts created, many Republican governors are now calling for further cuts to state education spending and other critical services. Even more boldly, they continue to call for further flattening or even eliminating of income and business taxes, while covering the cost with more regressive consumption taxes—higher sales taxes in particular. While kicking the can down the road on addressing more structural revenue problems, they are using the budgetary crisis, however illogically, as a political bludgeon to secure more tax cuts for the wealthy.
In Ohio, Governor John Kasich released his two-year budget plan Monday, which calls for reducing income tax rates across the board by 17 percent—and a reduction in income brackets from nine to five—to be paid for with a higher and broader sales tax, a tax hike on alcohol and cigarettes, and a new e-cigarette tax—a move critics say would merely shift tax burdens from the wealthy to the poor and middle class.
In Missouri, new Republican Governor Eric Greitens has announced $146 million in cuts to state higher education funding. With wall-to-wall Republican control of state government, tax policy experts anticipate that major tax reform—perhaps even a flat tax—could be on the horizon.
In Kentucky, Governor Matt Bevin is looking to use the new GOP control of the legislature to pass massive tax cuts for the wealthy and businesses.
Despite dramatically depleted revenue streams, GOP Governor Greg Abbott of Texas is gearing up for another battle to whittle down or even eliminate the state’s franchise tax—the state’s primary business tax. Without a state income tax, lost revenue from the franchise tax would likely have to be made up with higher sales taxes or increases to local property taxes.
Meanwhile in Kansas, ground zero for failed conservative economics, the state is reeling from Governor Sam Brownback’s massive tax cuts. Kansas faces a budget deficit of $340 million for the current fiscal year, and more than $580 million the following year. Yet, in his 2017 State of the State address, Brownback dug his heels in and said he’d look to “budget efficiencies” (that is, draconian funding cuts) to address the shortfall. “The days of ‘tax first, cut never’ have come to an end,” he pronounced. He promised to vigorously resist attempts from the state legislature to roll back his zero percent tax rate for limited liability companies and other “closely held” companies. Next door, in Nebraska, Governor Pete Ricketts is facing a $900 million shortfall in the current state budget (and even more next year), yet is still calling for tax cuts for the highest income earners.
In Mississippi, Governor Phil Bryant announced in mid-January $51 million in cuts to the current budget, on top of the $49 million in cuts previously enacted. The budget shortfall is a direct result, the Associated Press reports, of the some 43 bills passed between 2012 and 2015 that cut taxes—and in 2016 alone accounted for $287 million in lost revenue. Bryant also approved legislation last year that will phase out the corporate franchise tax and slash income taxes, dragging down state revenue by another $415 million over the next 12 years.
“We haven’t created as many jobs as we’ve lost the last 10 years,” Democratic House Minority Leader David Baria told The Clarion-Ledger. “The trickle-down theory has been disproven. It does not work. We have to find a way to generate more revenue. We can’t cut our way to prosperity.”
Several other GOP-controlled states, including Michigan and Maine, are gunning to enact flat tax rates, which (despite the conservative rhetoric) often end up creating some of the most unequal taxation systems in the country.
Not only do these types of budget approaches fail to address the structural forces that are driving deficits; flat taxes and consumption taxes reduce burdens on the rich and shift the costs to low- and middle-income residents.
In fact, most low- and middle-income residents already pay more in consumption taxes than they do in incomes taxes, according to a new report from the Institute on Taxation and Economic policy. When flat-tax rates are instituted, most taxpayers end up paying more while the upper brackets get a tax cut.
Despite the right’s claim that it is the provenance of fiscal responsibility, more and more Republican governors—and their allies in the statehouses—are selling blunt-force spending cuts as a necessity to cover the cost of their ill-advised tax cuts for the rich, creating a vicious cycle of trickle-down travesties. Yet, despite all the evidence refuting their claims that tax cuts at the top will magically drive growth and increase revenue, Republicans will continue hawking this economic theology. It’s simply the most effective way to provide cover for the wealthy elites and powerful corporations on whose donations the Republicans depend. Worse yet, they’ll pass the costs on to you. For this, Republican governors are our Trickle Downers of the Week.