Republicans in Congress may be sounding more moderate these days, passing emergency hurricane relief, backing down on threats to force the nation to default over the debt ceiling, and indicating a willingness to consider immigration reform.
It’s a different story at the state level where Republican governors are pushing ambitious experiments in eliminating income taxes as a prelude to severely reducing government services. Republican “experiments” to cut income taxes aggressively at the state level could influence the national debate.
In Louisiana, Governor Bobby Jindal, who may be eyeing a run for the presidency in 2016, is pushing repeal of the state’s income taxes. Jindal proposes recouping lost revenue through higher sales taxes. In a statement issued earlier this month, the governor said: “Our goal is to eliminate all personal income tax and all corporate income tax in a revenue neutral manner.”
Louisiana already has the third highest sales tax rate in the nation, following Tennessee and Arizona.
Governor Sam Brownback of Kansas already has presided over the largest tax cut in state history. At the same time, Kansas has turned over most of its Medicaid system, which provides medical services for people with low incomes and for the disabled, to private insurers. Brownback has introduced a new bill to slash taxes further as a step toward eliminating the state’s individual income tax.
Brownback proposes paying for the cuts by keeping in place a temporary sales tax increase and by eliminating the mortgage interest deduction.
Kansas used to be known for moderate Republicanism. Alf Landon accepted most of the New Deal when he ran against FDR in 1936. The state was long represented in the Senate by Nancy Landon Kassebaum and Bob Dole, both of whom were considered moderate Republicans.
That’s changed in recent years. Now, the House, the Senate, and the governor’s office are in the hands of conservative Republicans, enabling the state’s elected officials to realize the ultraconservative dream of paring government to its barest essentials.
Other Republican governors are considering following Brownback’s lead. Governor Dave Heinemann of Nebraska favors eliminating individual income taxes, and Governor Mary Fallin of Oklahoma plans to push for income tax cuts.
Some Kansans object to Brownback’s plans, pointing to repeal of tax credits for food, rental housing, and child care that once benefitted those with low incomes. State Senator Oletha Faust-Goudeau says the poor in the state “will still struggle. They’ll pay the highest taxes [because of the reliance on a sales tax].”
Conservatives have long favored sales taxes over income taxes on the theory that taxing consumption rather than income encourages savings and investment, which in turn lifts economic growth. The theory has not been proven; but one thing is clear: Taxing consumption furthers inequality. It benefits the wealthy, who spend a smaller share of their income on consumable items, while punishing the poor, who pay little or no income taxes but who spend most of their meager income.
The issue of taxing income or spending is proxy for two other arguments. One is the conservative hope of drastically reducing government services. The other is the question of fairness.
“These aren’t pro-growth policies — they’re shell games that reward the wealthiest Americans at the expense of everyone else,” said Danny Kanner, a spokesman for the Democratic Governors Association.
Democratic governors have taken a different tack, most notably in California where Governor Jerry Brown has balanced the state’s budget for the first time in years, aided by a voter-approved $6 billion tax increase on the wealthy. The governor says California’s finances are strong enough to increase aid to public schools and the state university system, both of which suffered draconian cuts in recent years.
Conservative Republicans may look to Kansas as a model for slashing incomes taxes and eviscerating government, but California shows it’s possible to balance state budgets and preserve services.
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