GOP states begin to chafe against Grover Norquist’s ‘no new taxes’ pledge

NorquistThe Ayatollah of the “No New Taxes” Pledge, Grover Norquist, has exercised far too much influence for far too long in this country. His destructive philosophy in the reason why so many states are in the dire circumstances they find themselves in, including Arizona.

Several Republican-run states — not including Arizona — are beginning to chafe against the Ayaytollah Norquist’s “No New Taxes” fatwa. It’s time to end his reign of error.

Bloomberg News reports, Norquist’s No-Tax Pledge Chafes Republicans in Tattered States:

Republican leaders who control U.S. states are confronting the consequences of no-new-tax pledges as they face shortfalls and try to preserve education and infrastructure.

Nevada, Kansas and Alabama have enacted or are debating increases in taxes on sales, tobacco, corporate income and other items, and six others have passed higher fuel levies despite a small-government dogma. In Louisiana, Republican lawmakers and Governor Bobby Jindal are engaged in a near-theological debate about what constitutes a tax increase as they seek to close a $1.6 billion budget gap.

Across the nation, 21 states have yet to pass budgets for fiscal 2016, which begins July 1 in most states. After years of post-recession spending cuts and tepid revenue growth, states that came under Republican control with the Tea Party’s rise have reached the limits of austerity. Some Republicans are even willing to violate a pledge backed by anti-tax crusader Grover Norquist to oppose all increases.

“There’s a threshold, even for Republicans, where they don’t want to cut spending any further,” said Scott Pattison, executive director of the National Association of State Budget Officers in Washington.

 * * *

Seventeen states cut taxes significantly in 2013, 14 last year and a similar number will in 2015, said Jonathan Williams, vice president at the Center for State Fiscal Reform at the American Legislative Exchange Council, an Arlington, Virginia-based nonprofit that crafts bills sought by corporations.

At the same time, aggregate state general-fund revenue and spending haven’t recovered on an inflation-adjusted basis to levels before the 18-month recession that started in December 2007, according to the budget officers group. That’s forced politicians to make cuts and tap reserves, and given some a newfound appreciation for taxes.

Nevada Governor Brian Sandoval, a two-term Republican, and the legislature his party controls approved the largest onetime increase in state history this year to raise money for schools. It’s a $1.1 billion plan that pays for initiatives such as expanding full-day kindergarten.

Sandoval has said he had no choice with a shortfall caused by declining mining and gambling revenue, as well as a need to improve the worst high-school graduation rate in the U.S. Republican Senator Don Gustavson of Sparks said that “throwing more money at the problem is not the answer.”

Yet Moody’s Investors Service said the action is “credit-positive” for the state, whose debt it rates Aa2, third-highest level of investment grade. It addresses a gap in the budget and “will stabilize the finances of the state and its school districts,” the company said in a June 8 report.

Alabama Governor Robert Bentley, a two-term Republican who has signed the no-new-taxes pledge, on June 4 vetoed a general-fund budget passed by the Republican-led legislature that didn’t include $541 million in new taxes he proposed. He will call a special session before the fiscal year begins Oct. 1, his office said.

Bentley has said he spent his first term making cuts and improving efficiency, and that now the only path forward is to raise taxes.

In Kansas, two-term Republican Governor Sam Brownback has said he would accept increasing the sales tax and higher tobacco levies to fill a $400 million shortfall after the state cut taxes in 2012 and 2013 to create what he has called a free-market laboratory.

The Republican-led House and Senate have yet to agree on a tax plan in what already is the longest legislative session in state history.

* * *

“Since the Great Recession started, Kansas has been scaling down government,” Turner said. “We’re in a position right now that the budget didn’t balance, and something had to give.”

What may give is the “Taxpayer Protection Pledge.”

Americans for Tax Reform, which Norquist founded in 1985, offers the oath to every candidate for state and federal office and all incumbents. It commits an elected official to vote against or veto “any and all efforts to increase taxes,” and almost 1,400 have signed it, the group said.

* * *

The strain of trying to raise revenue without violating his pledge is most evident in Louisiana.

Jindal, a two-term Republican governor and expected presidential candidate, has threatened to veto tax increases unless legislators also pass a $350 million “offset.”

The arrangement is byzantine:

It would create a fee for college students — Norquist doesn’t consider fees taxes. Then, the state would give them an equivalent tax credit, which they would assign to the state’s university system, which would then in turn forgive the students’ fees.

Because the never-paid fees aren’t taxes, the equivalent credit can then can be said to offset increases in taxes that actually would be paid, said Jan Moller, director of the Louisiana Budget Project, which advocates policies that benefit low- and middle-income people.

The measure satisfies the pledge, Norquist said this week in response to a letter from Republican legislators who opposed the complicated plan and wanted approval to raise revenue without resorting to a “purely fictional, procedural, phantom, paper tax credit.”

Kyle Plotkin, Jindal’s chief of staff, said the governor campaigned against tax increases and that without the college-fee plan or some other offsetting credit, he will veto them.

“He made a promise not to raise taxes on the families or businesses of Louisiana,” Plotkin said. “He held the line.”

Hmmm, does this sound vaguely familiar to you? Arizona Governor Doug Ducey has promised not to raise taxes, and like Governor Sam Brownback of Kansas, to “reduce income taxes to as close to zero as possible.” That’s worked out so well for “Brownie.”

The Washington Post reported last week, How did Arizona and Nevada, neighbors under GOP control, end up on such wildly different paths this year?

Cactuses and Republicans are native to both Nevada and Arizona, but this year, that’s pretty much where the comparison ends.

As spring budgetmaking sessions came to a close, GOP leaders in each state emerged with bold — and wildly divergent — plans for the future.

On Monday, Nevada passed its largest tax increase ever — $1.1 billion — in order to raise money for the state’s struggling schools. Local papers heaped praise on Gov. Brian Sandoval (R ) for pulling off this unlikely feat, which took months of coaxing his recalcitrant Republican colleagues.

Arizona made history of a different kind last month. Propelled by his campaign-trail pledge to reduce taxes every year he is in office, Gov. Doug Ducey (R ) led his legislature into passing one of the state’s stingiest budgets in the past 30 years. The hundreds of millions in cuts come at the expense of Arizona’s colleges, Medicaid and the poor.

It’s a strange break between these two states—both of whom were hit hard by the mortgage crisis, since which they have limped along more or less in lockstep.

Arizona has strained to sustain the tax cuts it passed in the lush years before the recession. The state has gained a reputation for using budget tricks to pay its bills. For instance, in 2009, legislators sold off most of the Capitol — including the house and senate buildings — to help raise $735 million in quick cash. A temporary sales tax increase from 2010-2013 provided some relief during the slow recovery. Now, even the state’s newest budget, which the governor touts as “balanced,” relies on $113 million from the state’s rainy day fund to make the numbers add up.

Nevada has had revenue problems of its own. The state constitution prohibits taxing income, so it relies largely on fickle gaming and sales taxes. In 2009, the legislature passed a desperate $650 million sales and payroll tax increase that was supposed to expire two years later, but lawmakers have been renewing it ever since to fend off destitution. In 2011, a Brookings Institution report forecast regular deficits if the state did not reform its taxes.

This year, both states sought lasting fixes for their perennially imperiled finances. What’s remarkable is how different those visions look.

Austerity for Arizona

Arizona chose austerity. Ducey, the former Cold Stone Creamery CEO, ran on a pro forma pro-business platform in 2014. Upon being sworn in this year, he came out with a harsh formula for closing the state’s $1.5 billion deficit: cuts, cuts, and more cuts.

From Arizona’s public universities, the budget withholds $99 million, representing a 13 percent reduction in state funding. That’s a hefty sum even in a state as inured to higher education cuts as Arizona, which has halved per-pupil spending since the recession. Students have been forced to make up the difference. Tuition at Arizona’s public four-year colleges has more than doubled in the past decade. Now, Arizona State University is seeking to charge students a one-time emergency fee of $320 to compensate for Ducey’s cuts.

From Arizona’s Medicaid program, the austerity budget imposes a 5 percent reduction in what doctors and hospitals get paid, saving $37 million but risking perhaps many times that in federal matching funds. Another $40 million in savings will come from shifting administrative costs onto counties and cities.

Then there was the cruelest cut.

Starting next summer, Arizona will kick out any family that has been on welfare for more than 12 months. That’s 12 payments, averaging $200 each month, before a household gets banned from welfare for life in Arizona.

* * *

On the day he signed the budget, Ducey emphasized his fealty to fiscal fundamentals. The austerity budget “restores much-needed fiscal responsibility to government by forcing the state to live within its means and stop spending money it doesn’t have,” he said in a statement.

And in the opposite corner, Nevada

Contrast Arizona to Nevada, where Sandoval made an audacious plan last year to fix the state’s ailing K-12 education system: Raise taxes by $1.1 billion, and funnel that money into schools.

The Los Angeles Times called it “a frontal assault against the tea party” — but the struggle to improve Nevada’s underfunded schools predates that movement. In 2003, Gov. Kenny Guinn (R ) proposed a business tax increase to raise money for education. The legislature would not approve it — so Guinn sued them, spawning a messy case that went up to the Nevada Supreme Court. It so happens that Sandoval, serving as Guinn’s attorney general at the time, was the one who filed the case.

By 2014, Sandoval himself was in the governor’s seat, running for his second term, and contemplating a similar tax increase.

His vision is of a diversified Nevada, a state that attracts high-tech workers, not just gamblers. A cornerstone of his plan is education reform. But only until after Sandoval won reelection with 70 percent of the vote did he make widely known how he would pay for his education initiatives.

Sandoval’s $1.1 billion tax hike includes a new tax on corporate revenues and an increase in the cigarette tax. About $500 million of the money comes from making permanent some temporary payroll and sales tax increases that were enacted during the recession.

In April, Sandoval defended his record-setting tax increase to the Wall Street Journal. “I’m as conservative as anybody, but it’s not conservative to have bad schools. It’s not conservative to have bad roads. It’s not conservative to have budget struggles every other year,” he said.

After a legislative session that turned into a nailbiter, Nevada’s lawmakers signed off this week on Sandoval’s tax increase. The money will fund programs for English-language learners; special needs education; low-income schools; STEM and technical education; all-day kindergarten, and elementary-school literacy initiatives.

Hold on,  wait for it . . . On Tuesday, Sandoval signed a bill allowing parents to withdraw their children from the public school system and use their tax money pay for private schools or homeschooling. Parents will get about 90 percent of what the school system spends on an average student. The most controversial part is that all students are eligible, not just those who are low-income, which raises concerns from voucher critics that upper-class families will flee public schools.

[Nevada is actually one step ahead of our Arizona legislature which has been enacting vouchers piecemeal for several years with the goal of privatizing public education — in direct violation of the Arizona Constitution.]

[It should be noted that Governor Sandoval recently announced that he is not running for the U.S. Senate seat held by Senate Minority Leader Harry Reid, who is retiring. You can read into it that Sandoval does not want to face the T.E.A. Party crazies in a GOP primary after raising taxes.]

Who got it right?

On the other hand, Arizona is even worse than Nevada when it comes to per-pupil K-12 spending. Like Nevada’s Sandoval, Ducey also made improving K-12 an important part of his campaign, promising “serious reform” during his inaugural speech. The difference is that Ducey refuses to raise taxes.

So Ducey’s goals have been somewhat hard to square. The best that Arizona’s austerity budget could deliver was a meager increase in K-12 funding. Most of that was to keep up with inflation and enrollment growth, and it still might not be enough to resolve the inflation problem. The state is currently battling a lawsuit from its own public schools, who claim that the legislature has been shorting schools hundreds of millions of dollars by not properly accounting for inflation.

This spring, Ducey faced mounting pressure to come up with some way to finance Arizona’s schools. On Thursday, he offered an unorthodox solution.

Arizona has a trust fund worth $5.1 billion, money that it has accumulated from sale of public land. The state withdraws 2.5 percent each year to help fund public education. Ducey proposes increasing withdrawals to 10 percent a year for five years. In the course of that time, he says schools will get an additional $1.8 billion, or roughly $350 million a year. That’s an increase of about 8 percent on the $4.5 billion the state spends on K-12 education.

But this is more of a longer-term plan. Arizona voters would have to approve such a measure, and the earliest the schools could get the money is in 2017.

In the meantime, Arizona’s public schools will muddle though as usual, while Nevada’s will see a gush of money. And that’s to say nothing of the repercussions wrought by Arizona’s cuts to Medicaid, higher education and welfare.

trickle downArizona’s governor makes the standard conservative claim that tax cuts yield good economic karma — that some sacrifice today will lead to a better tomorrow. Nevada’s governor, meanwhile, believes that tomorrow will be brighter only if residents dig into their pockets to invest in the state’s children.

It’s something of a natural experiment. Time will tell which state got it right.

Sorry, Dude, the verdict is already in. We have 35 years of experience with faith based supply-side “trickle down” GOP economics. There are reams of data and studies which demonstrate that this disproved and discredited economic theory (religious dogma) is a complete failure. It is long past time to discard it, and Grover Norquist, on the ash heap of history.

One response to “GOP states begin to chafe against Grover Norquist’s ‘no new taxes’ pledge

  1. It’s about damn time!