Will Your State Taxes Go Up? How Legislatures Are Leaning

Article excerpt

Americas red-blue divide is growing more pronounced in state governments, and this rise of one-party politics along with increasing revenues is pushing states to consider bold changes in tax policy.

Republicans now control the legislature and governorship in 24 states, with several moving forward on plans to eliminate their income tax a holy grail of the conservative movement.

Meanwhile, Democrats control 13 states, with several angling to raise taxes to finance new government spending an idea that might have been seen as politically toxic even a year ago.

The opposite approach to taxes highlights the polarization of state politics, which has been building for the past decade but reached an apex after the 2012 election. The 37 states controlled by one party is the highest number since 1928, according to the National Conference of State Legislatures.

But it also suggests how American attitudes on taxation may be shifting. While Republicans appear to be doubling down on their conviction that low taxes drive economic growth, Democrats willingness to raise taxes suggests that, at least on the left, there is a fresh openness to at least some higher taxes after decades of virtually no support for new taxes across the American electorate.

In some ways, tax policy is one of the leading indicators of legislatures shifting away from the middle, regardless of single- party control, says Josh Goodman, staff writer for Stateline, the news service for the Pew Center on the States.

On the right:

Kansas Gov. Sam Brownback (R) is proposing reductions to personal income taxes for the second year in a row, despite the fact that last years tax cuts put a $700 million hole in the budget.

Louisiana Gov. Bobby Jindal (R) wants to eliminate all personal and corporate income tax this year while keeping the sales tax as low as possible. In the coming weeks, he will meet with legislators to work out the details of his prior to the legislative session in April.

Gov. Dave Heineman (R) of Nebraska is proposing similar measures. He proposed that the state close business sales tax exemptions, accounting for $5 billion revenue losses per year, which he said will pave the way for the elimination of individual and corporate income taxes.

North Carolinas Senate President Phil Berger (R) is considering a proposal that would eliminate income taxes while increasing sales taxes, especially on services.

Those moves contrast strikingly with proposals and new laws in blue states:

Massachusetts Gov. Deval Patrick (D) wants to increase income taxes and cut sales taxes in order to spend $34.8 billion more on education and transportation.

Minnesota Gov. Mark Dayton (D) proposed to decrease local property taxes and the sales tax rate while increasing the income tax rate for high-income earners as well as closing tax loopholes. His plan would add $2.1 billion to revenues and cover the projected $1.1 billion deficit in the state's fiscal year 2014-15 biennial budget.

During a special legislative session in May 2012, Maryland Gov. Martin OMalley (D) signed a law that raised income taxes on individuals making over $100,000 and a new top rate of 5.75 percent on income over $250,000.

In California, voters approved Democratic Gov. Jerry Browns Proposition 30, which included a temporary income tax hike to get the states budget out of the red.

The economics of taxes is fiercely debated.

The American Legislative Exchange Council, a conservative public policy think tank founded by former Ronald Reagan economic adviser Arthur Laffer, advocates that states eliminate income taxes and put rigid limits on spending as a strategy to promote economic growth. …