Promote Fair Income and Estate Taxes

How are Arizona's right-wing legislators responding to the state's most severe fiscal crisis since the Great Depression?

Massive corporate income tax cuts, of course.

Last Tuesday, Oregonians overwhelmingly approved two ballot initiatives that ratified legislative action last year to increase high-end personal income and corporate taxes.  The failure of the anti-tax movement in Oregon is one more in a long stream of right-wing initiatives rejected by voters at the ballot box.  In fact, progressive revenue generation as part of a balanced approach to addressing state deficits has been popular with both voters and legislatures for years.  This Dispatch will provide both the facts and messages to debunk opposition to smart revenue options, while outlining a few of the best revenue approaches to filling budget holes.

Earlier this year, policymakers in Oregon enacted both temporary and permanent changes in the state’s tax system to help close an enormous budget gap and, by extension, provide funding for vital services like education, health care, and public safety... Yet, due to quirks in Oregon’s legislative process, opponents of these changes have an opportunity to put them before the voters for approval via referendum.  Not surprisingly, representatives of big business and a who’s who of anti-tax organizations are attempting to take full advantage of that opportunity.

Oregon became the latest state to address the current fiscal crisis with progressive revenue increases.  This is part of a welcome trend that we highlighted back in April of states recognizing that budget cuts need to be balanced with wealthier state residents being asked to pay their fair share to address the effects of the economic downturn.

After resisting the proposal for months, New York Governor Patterson has agreed with legislative leaders to raise income taxes on the wealthiest state residents in order to help close the state budget gap.  “It’s a profound breakthrough for tax fairness,” said Dan Cantor, executive director of the Working Families Party, an organization of New York individuals, labor unions and other groups that was a leader in the campaign to raise the tax rates.  The New York deal is part of a national movement of state leaders looking to raise new revenue from high-income residents to avoid budget cuts and fund needed investments for long-term economic recovery.

The budget news is grim in some states.  Twenty states face a combined budget shortfall of at least $35 billion for 2009, according to analysis by the Center on Budget Policy & Priorities (see CBPP graph below). Another 8 states will likely have budget problems next year or the year after.

Because it lacks a state income tax, Washington State creates one of the highest tax burdens on poorer families, but some relief is being proposed, as the Washington State Budget & Policy Center outlines in this policy brief, in the form of a Working Families Credit which would give 350,000 Washington residents the equivalent of 10% of their federal Earned Income Tax Credit (EITC) refund.

It's now ten years since the 1996 welfare law promised to end "welfare as we know it." That goal may have been accomplished, but the results have been decidedly mixed, both for poor families and for state lawmakers coping with changing federal mandates.