State budget deficits are prompting governors to slash spending, but also shift the tax burden away from corporations.
The most notorious case that has been making headlines in recent weeks has been in Wisconsin, where recently elected Governor Scott Walker faced thousands of angry protestors in the state capital outraged by his plan to end the right to collective bargaining over benefits for most state employee unions while cutting wages and benefits. Soon after he arrived in office, the Republican governor signed a series of tax cut bills granting tax breaks to businesses that would add about $117 million to the budget deficit.
The state is projecting a $3.7 billion budget shortfall, and Walker and the Republican-dominated state legislature managed to pass their controversial budget repair bill even after Democrats in the state Senate fled to neighboring states to try to prevent a quorum and a vote on the bill. Meanwhile, the state is reducing the ability of local school districts to be able to pay for cuts in state aid by raising property taxes and other local taxes.
In Michigan, another newly elected governor, Rick Snyder, has managed to pass legislation that would give “emergency managers” the ability to fire a city government in a fiscal emergency. Snyder has also proposed to end the state’s Earned Income Tax Credit and $600 per child tax deduction, while raising taxes on retiree pensions. Meanwhile, Snyder has proposed a $1.7 billion tax cut for businesses.
In Florida, Governor Rick Scott has also proposed deep corporate and property tax cuts despite a projected $3.6 billion revenue shortfall. Under one bill already approved by the Florida House, the business tax cuts would be paid for by cuts in unemployment benefits.
With so many states facing yawning budget deficits, it seems like a curious time to be cutting corporate taxes, especially when it means slashing school budgets and jobs. Yet in Washington too, the push for tax reform continues unabated even after last December’s deal to extend tax cuts for businesses and individuals for another two years. Unfortunately, while cutting taxes is generally a good way to win votes, it’s not so easy to slash spending without hurting the voters.
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