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July 5, 2017

A Red State Forewarning on Taxes

Illinois budgeting is a cancer that doesn’t need to spread. But some Republicans are pushing tax increases.

At least three Democrat-controlled states are working to dig themselves out of a financial sand trap fomented primarily through burgeoning pension costs. Illinois is the most immediate state on the verge of going underwater, and Democrats there are pushing hard for even more tax increases — as if siphoning additional tax dollars without major (and we mean major) reform will solve anything. It doesn’t make sense, but it’s the Democrats’ modus operandi for escalating debt woes.

Truth be told, though, Republican-controlled states are just as prone to the temptations of tax increases. Even here in Tennessee — the economic model for America — a budget surplus did not dissuade Gov. Bill Haslam from authorizing a gasoline tax increase. Elsewhere, The New York Times reports, “In South Carolina, Republicans overrode their governor’s veto and blocked a filibuster to increase the gas tax. They also rejected a series of broader tax cuts on the grounds that they were too expensive and voted instead to create a smaller tax incentive for low-income families.” The report adds, “And in the most striking rebuke of conservative tax policy in recent memory, Republicans in Kansas have undone much of the tax overhaul that Gov. Sam Brownback held up as a model for other states and the federal government to emulate.”

It’s important to note, as The Washington Times does, that “Kansas’ failed tax experiment offers economic lessons for Republicans at national level.” The article notes, “Whether the Kansas experiment is a referendum on conservative, low-tax policies is an open question. Obsession with tax rates often obscures other factors in businesses’ decision-making, such as the availability of a good workforce, quality of life for employees, and proximity to airports and other infrastructure, analysts say. … Adam Michel, a tax policy analyst at the conservative Heritage Foundation, said Kansas’ problem wasn’t the tax cut but how the state handled it. He said eliminating taxes for some corporations created an incentive for businesses to ‘recharacterize’ income, which created an unsustainable financial picture. ‘Their reform wasn’t designed properly,’ Mr. Michel said.”

Governing is about more than policy; it’s about management. And poor management even among the best of teams doesn’t ensure success. That pertains to both blue and red states. In Kansas, Republicans opted for a broad-brush tax increase instead of addressing the other intricacies that play an economic role. Likewise, Tennessee and South Carolina chose tax increases that aren’t normally part of the Republican platform. Hopefully it’s not the beginning of a trend, because the alternative looks like Illinois. And that’s a cancer that doesn’t need spreading.

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