Over the past few years, Governors Bobby Jindal (R-LA) and Sam Brownback (R-KS) massively cut taxes in their states.
But this month, in a major defeat for both, they were dragged, kicking and screaming, into raising taxes — while desperately trying to insist they did nothing of the sort.
In Louisiana, Jindal agreed that hundreds of millions of dollars more in revenue should be raised — but he demanded the budget be designed in such a way that anti-tax activist Grover Norquist wouldn't count it as a tax hike.
In Kansas, the legislature raised revenue by hiking the sales tax and the cigarette tax — yet Brownback said it's "not accurate" to characterize the budget as raising taxes.
While these weird contortions may look silly, they reveal a lot about the modern GOP and the power of its anti-tax wing.
Why Jindal and Brownback raised taxes without "raising taxes"
For one thing, Jindal and Brownback's about-faces show Republican governors and state legislators remain deathly afraid of being labeled tax hikers, even if reality forces them to find more revenue.
The solutions chosen by Jindal and Brownback are also revealing — because they don't involve raising income tax rates. Instead, the Louisiana deal rolls back various subsidies and credits for businesses, the Kansas deal raises the sales tax (which hurts low- and moderate-income workers most), and both states are hiking cigarette taxes. Indeed, both Jindal and Brownback say they still want to get rid of their states' income taxes entirely at some point.
The upshot is that Brownback and Jindal's cuts in income taxes, which made their states' tax codes less progressive, will survive their governorships. And they'll only grow more difficult to reverse as people get used to them. So if the main target of conservative activists is the progressive income tax, then the right is still winning the war.
Bobby Jindal reversed income tax hikes on middle- and high-income earners
Shortly after Bobby Jindal took office as Louisiana governor in 2008, he was under heavy pressure to sign a massive tax cut. A few years earlier, the state's voters had narrowly approved a hike in income tax rates for middle- and high-income earners. This measure, the "Stelly Plan," was coupled with cuts on certain sales taxes, and was progressive overall.
It soon became intensely controversial. As the Advocate's James Gill recounts, the previous governor, a Democrat, had already hollowed out part of the plan. Jindal was initially hesitant to give up the Stelly Plan's revenue, thinking the change too expensive. But eventually he changed his mind, and teamed with the legislature to repeal its income tax increases entirely (while leaving the sales tax cuts in place). By 2013, Jindal wanted to go even further. He proposed eliminating the state's income and corporate taxes entirely and replacing them with a higher sales tax and cigarette tax.
That most recent plan didn't end up passing, but even under what had passed, revenues quickly began to fall short. Jindal cut spending and used various temporary fixes to balance his budgets, promising that soon enough, strong economic growth would refill the state's coffers, as the Associated Press recounts.
Jindal has devised a bizarre gimmick so he can claim he's not raising taxes
But when last year's oil price collapse was added to the mix, the state's projected shortfall for its $25 billion budget grew to $1.6 billion. (The majority of the gap, about $1 billion, was because of Jindal's fiscal policies, not oil prices, according to the AP.)
Finally, there was no way around it — taxes needed to go up. The deal approved by the legislature last month raised hundreds of millions of dollars in new revenue, according to the News Star's Greg Hilburn. It includes a cigarette tax hike, as well as limits on credits and subsidies for businesses in general and the film industry specifically.
But there was one big problem — Grover Norquist, the head of the national activist group Americans for Tax Reform, who famously presses politicians to sign a pledge not to raise taxes. Jindal had enthusiastically signed on to Norquist's pledge for governors, and therefore promised to "oppose and veto any and all efforts to increase taxes." A flip-flop wasn't in the cards, because Jindal was hoping to launch a presidential campaign later this year. So what was he to do?
Jindal's "solution" was truly bizarre. He demanded the legislature approve a program that would charge a new "fee" on higher education students that would raise $350 million — but immediately created a "tax credit" that would exempt all students from paying that $350 million.
Why would Jindal do such a seemingly pointless thing? Because the new "fee" apparently does not count as a tax increase under the Norquist pledge, but the new "tax credit" counts as a tax cut. So now, to avoid violating the pledge, Jindal could claim that he was counterbalancing hundreds of millions of dollars the revenue was raising with his new tax credit — even though he really wasn't doing anything of the kind, since his supposed tax credit was meant to counteract a fee that he himself had just created.
The main objections to this were, interestingly enough, from far-right Louisiana legislators. A group of them harshly criticized Jindal's solution, writing a letter to Norquist calling it "the biggest threat to fiscal responsibility our state has ever faced," since it would let governors raise taxes but "claim revenue neutrality solely based on the creation of a purely fictional, procedural, phantom, paper tax credit."
For whatever reason, though, Norquist has decided to go along with Jindal's charade, and didn't deem his solution a tax increase. Republicans called it "money laundering" and "stinky, yucky stuff," but the deal was passed, to avert huge cuts to higher education. Even in this deal, many of the fixes remain short-term, and more serious budget-balancing reforms will be left to Jindal's successor (who will take office in January) to handle.
Despite all this, Jindal remains unbowed. He's expected to announce his presidential candidacy on Wednesday, and told Louisiana reporters recently that his main regret from his two terms in office was failing to eliminate the Louisiana's income tax entirely.
Sam Brownback slashed taxes in Kansas
Governor Sam Brownback of Kansas also had big ambitions to eliminate his state's income tax cuts entirely — ambitions that were derailed by an increasingly dire fiscal situation.
Brownback started in 2012 by announcing a plan to cut the top income tax rate from 6.45 percent to 4.9 percent to simplify tax brackets, and to eliminate state income taxes on most small-business income entirely. In a nod to fiscal responsibility, he suggested paying for it by ending several tax deductions and exemptions.
But as the bill moved through the state legislature, these deductions proved too popular, and they all stayed in. The bill's estimated price tag rose from about $105 million to $800 million, but Brownback kept supporting it anyway. "I'm gonna sign this bill, I'm excited about the prospects for it, and I'm very thankful for how God has blessed our state," he said.
Revenue soon collapsed, education funding was slashed, Moody's cut the state's bond rating, and the state's job growth lagged. Brownback's popularity took a serious hit, too, though he did manage to win reelection in 2014. When he began his second term this January, the state's surplus, which had been built up over several previous years, was finally about to run out, and a shortfall of $600 million for the state's budget of around $15 billion was projected for the 2016 fiscal year.
Brownback's tax increase is regressive
So Brownback acknowledged that revenue had to be raised, and this month legislators approved a deal to raise the state's sales tax (from 6.15 percent to 6.5 percent, one of the highest in the country) and cigarette tax (up 50 cents per pack), along with certain other changes to business taxes and a new tax hike on HMOs. Some of Brownback's scheduled future income tax cuts will be delayed, but not repealed.
Here again, getting legislative approval was difficult — since so many legislators (along with Brownback) had signed Grover Norquist's pledge, or a similar one from the group Americans for Prosperity. And unlike in Louisiana, where there was some wiggle room, this deal wasn't Norquist-approved (he called it "unfortunate backsliding"). "Some Republicans cried when they ultimately voted yes," wrote Jonathan Shorman of the Topeka Capital-Journal.
Brownback has been defiant. "Some would have you believe this bill represents a tax increase, and that is not accurate," the governor said last week. "When looked at in totality, from 2012 to 2015, as I said at the outset, Kansans are paying less in taxes and continuing to move off income taxes to consumption-based taxes."
That point is a revealing one — because, according to an analysis by the liberal Institute on Taxation and Economic Policy, the bottom 40 percent of Kansans by income will, on average, be paying a higher percentage of their income in taxes than they were in 2012. Meanwhile, middle-class Kansans will be paying slightly less, and the top 1 percent of Kansans will be paying, on average, 1.9 percent less:
But that may be a feature of Brownback's plan, rather than a bug. It's well-known that sales taxes, which the governor prefers to income taxes, are usually regressive. That's because poor people spend more of their income per year, so sales taxes hit them harder overall.
So even though Brownback — like Jindal — has been forced to raise more revenue, he's protected his income tax cuts. The wealthiest Kansans still have a lot to thank him for.