Look Who’s Taxing

Look Who’s Taxing

Weary of tax cuts for the rich, state politicians are rethinking their aversion to tax-and-spend.


Texas State Senator John Carona is the very image of a Republican lawmaker, right down to the salt-and-pepper hair, the monogrammed tie and the day job in real estate. He represents north Dallas and the adjacent suburbs, a bastion of country club Republicanism, whose residents are not typically enthusiastic about either taxing or spending. So it was more than a little surprising to hear him say that it was high time the State of Texas raised taxes. “No one likes to pay higher taxes,” he told me when I interviewed him in Austin earlier this spring. “But the people who elect us send us to the capital to do what is best for the state. The vast majority didn’t send us so that we would never raise new revenue. Somehow along the way, the conservative movement–and I am a political conservative–has taken the definition of conservatism to mean the unwillingness to ever raise taxes for any purpose no matter what the need. And that is just foolish and wrongheaded.”

Carona’s not alone. Over the past few years, momentum has begun to build, bit by bit, against the antitax movement, and it has largely flown under the radar of the national media. A number of governors, from Democrats Jon Corzine of New Jersey and Mark Warner of Virginia to Republicans like Mitch Daniels of Indiana, have pushed through significant tax increases and been rewarded with high approval ratings. Daniels’s apostasy was particularly meaningful, since he was once Bush’s budget director and had been a lifelong fellow traveler of antitax warrior Grover Norquist. This year, other states are emulating Indiana. A recent article in the online publication Stateline noted that many states facing budgetary shortfalls are proposing significant tax hikes, in stark contrast to just a few years ago, when “legislatures…bent over backwards to avoid major tax hikes, instead raiding rainy day funds, borrowing money or expanding gambling to raise more revenue.”

This is big news, because for much of the past two decades states have been the sites of Norquist’s greatest victories. Conservative activists pushed through the disastrous Taxpayer Bill of Rights in Colorado, which made raising taxes nearly impossible, and have cowed thousands of state legislators and governors into signing a pledge to “oppose and vote against any and all efforts to increase taxes.” The antitax fever spread to Democrats as well. Even Rod Blagojevich, running for governor in the friendly blue confines of Illinois in 2002, pledged to somehow address the state’s fiscal woes and expand state services without raising sales or income taxes.

Unlike the federal government, which has the luxury of cutting taxes, increasing spending and selling its debt to finance the gap, many states are legally required to balance their budgets, so they’ve resorted to a grab bag of tricks and gimmicks to keep the government funded. Gambling has exploded, pension funds have been raided and many states are now reduced to selling off public assets. But eventually the bill comes due. Having spent the past four years running through every conceivable gimmick and trick, Blagojevich is now proposing $7 billion in new taxes, the largest increase in the state’s history. What’s more, the lion’s share of the money would go not to closing a budget shortfall but to greatly expanding the state’s medical coverage of the uninsured. He seems to think the politics are on his side. “It will be Armageddon,” he said at a recent rally. “But we are on the side of the Lord, and we will prevail.”

Blagojevich has made something of a fetish of picking fights with lawmakers, so his enthusiasm should be taken with a grain of salt. That said, the ground is clearly shifting. In 1994, when the tax revolt was arguably at its zenith, 66 percent of Americans said that the amount of federal income taxes they paid was too high. By 2006 that figure had dropped to 48 percent. And in 1994, one poll showed that people trusted Republicans over Democrats to handle taxes by a margin of 38 percent to 23 percent. By 2007 it had almost flipped: Respondents trusted Democrats on taxes by a 38 percent to 30 percent margin.

As is often the case with political trends, Washington is the last place to notice. Even while antitax fundamentalism flared in the states, Presidents were at least partially insulated from its most extreme strains: Conservative hero Ronald Reagan raised some taxes, as did both George H.W. Bush (after famously promising not to) and Clinton. But Norquist managed to convince fellow Republicans that H.W.’s defeat was the result of his signing a tax increase, and the son, ever vigilant against repeating the sins of the father, has committed himself to the Norquist catechism with zealous devotion, holding to it even in the face of a massively expensive war.

In so doing he has run up deficits and baited a trap for Democrats, particularly presidential hopefuls, who might be toying with the possibility of raising taxes. Driven by a desire for the approval of the Beltway mandarins, Democratic candidates are going to be tempted to package potential tax increases (for instance, repeal of the Bush tax cuts) as a means of restoring fiscal discipline and reducing the deficit. But telling people you’re going to raise taxes to reduce the deficit is like telling them you’re going to garnish their wages to pay off the gambling debts of their crazy vagabond uncle. It’s no fun.

People seem ready to accept higher taxes, but only if those taxes are sold to them as paying for services they want the government to provide. “The notion that [social programs] are what Democrats want and what Republicans abhor may have been true thirty years ago,” Carona told me. “But I feel like there’s been a shift. Now everybody wants the programs, but one group is unwilling to pay for them and the other group is unable to pay for them.”

Over the past six years, Republicans have succeeded in de-linking taxes from the public services and social programs they pay for. It is the job of Democrats, particularly the presidential candidates who will have the largest platform, to re-establish that connection in voters’ minds. John Edwards has the right idea on this score. He has proposed a fairly ambitious universal healthcare plan and says he’ll push to raise taxes in order to help pay for it. “We’re asking everybody to share in the responsibility of making healthcare work in this country,” he says.

There’s a phrase to describe this approach, and it will likely strike terror in the hearts of those Democrats who still carry the battle scars from tax-revolt skirmishes: tax and spend. Yes, that’s become a toxic phrase in American political life, but after six years of tax cuts for the wealthy and an extortionate war, we might just have arrived at a moment when good old-fashioned tax and spend doesn’t seem like such a bad idea.

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