This past Tuesday, Maine votersconsidered legislation which would have reformed the state's tax structure and bond measures that will bolster infrastructure investment.By a large margin, Mainers rejected a law passed last June, LD1495, to lower the top income tax rate from 8.5 percent to 6.5 percent for state residents earning less than $250,000 annually by broadening the sales tax to include different services and shifting tax burden to nonresidents by increasing the meals and lodging tax from 7 to 8.5 percent.
As this Dispatch will detail, these votes mirror actions taking
place in both conservative and progressive states and localities around
the country. In 2009 and 2010, states have enacted a wide-ranging set
of revenue increases to cope with cumulative 2010 and 2011 deficits of
approximately $375 billion. Although revenue forecasts are improving,
states are still reeling from historic declines in the past year.
What is remarkable is that the anti-tax movement has wracked up such
regular failures in the crisis, as even many state leaders previously
signing "no taxes" pledges have reneged on them. Instead, popular
demand for new revenue to avert budget cuts has driven legislative
movement on progressive tax and budget policy.
Adding to the general public support has been research consistently
showing that progressive revenue increases during a downturn is a better
alternative to cuts in order to promote growth and protect vulnerable
populations suffering during the recession.
Finally, this Dispatch will outline some of the effective
messaging and research to demonstrate to voters that progressive
measures and tax increases are economically sound and go to the programs
they want preserved -- the critical step in the success of revenue
The Council of Economic Advisers (CEA) recently released its third
quarterly report on the impact of the American Recovery and
Reinvestment Act (ARRA). The report generally confirms what economists across the board
have concluded: the Recovery Act has prevented a full economic
collapse; generated millions of jobs; boosted national economic
performance; and provided sorely needed state fiscal relief.
As states struggle to close budget gaps, it's worth highlighting that
due to tax changes at the federal level, most middle income families are
paying a far smaller percentage of their income in federal taxes than
they did a few years ago. So while states should concentrate revenue
increases on those who can most afford it, there is greater capacity
among middle income families to absorb some tax increases due to the
lower federal tax burden.
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.