Paul L. Caron

Tuesday, May 28, 2013

WSJ: States Differ on Tax v. Spending Choices

Wall Street Journal:  States' Rift on Taxes Widens: Minnesota, Others Move to Raise Revenue as Cuts Remain Popular Elsewhere:

Minnesota's move to raise $2.1 billion in new taxes, largely from the wealthy, to fund government programs puts it among a handful of states controlled by Democrats that are adopting more liberal fiscal policies at a time when many Republican-dominated statehouses are pushing to cut taxes....

The measures contrast starkly with initiatives to cut or eliminate taxes on individual and corporate incomes that have dominated the discussion in much of the country, thanks to Republican control of nearly half the statehouses. ...

Other blue states are taking similar steps, betting that new spending on education and infrastructure funded by tax increases can produce sustained economic growth that reaches a broad swath of the population. Massachusetts Gov. Deval Patrick and fellow Democrats who control the legislature are debating proposals to raise taxes on income and gasoline to fund new investments.

In Colorado, Democratic Gov. John Hickenlooper signed legislation this week that would require an additional $925 million in taxes to boost education spending. Raising income taxes would still need to pass in a statewide vote, which is necessary to raise the income and other taxes in Colorado. Those efforts follow income-tax increases approved last year in Democratic strongholds such as Maryland and California.

Republican governors in states such as Ohio, Nebraska and Louisiana argue income taxes impede economic growth and discourage businesses from locating in their states. Proposals from the GOP have achieved limited success, as support for cutting income taxes is balanced by opposition even within the Republican Party to making up for lost revenue by broadening the sales tax and eliminating exemptions. ...

"You have got these two theories being played out of what creates economic growth," said David Madland, director of the American Worker Project at the liberal think tank Center for American Progress.

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