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
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.
Grover Norquist's Americans for Tax Reform has a policy center called the Center for Fiscal Accountability, where they promote many of their anti-government policies, from deadlocking legislatures with supermajority requirements to mandated spending limits to strangle social services.
sales taxes often contribute to tax inequality, they can be made fairer by
broadening the tax base of goods and services covered, especially with an eye
to taxing legal and financial services used more heavily by richer consumers.
58% of consumer consumption is for services rather than goods. The fact
that most sales taxes do not cover services skews the tax burden towards those,
often the poorest consumers, who spend more on physical goods rather than
services. Broadening the base of services taxes can allow a state to lower the overall sales tax rate. For example, Hawaii and New Mexico, which
have relatively low state sales tax rates of 4% and 5% respectively, tax more
of the 168 services surveyed by the Federation of Tax Administrators than any
other states (160 and 156 respectively).
Such a broadening of the sales tax can also raise significant revenue. According to a report by the Center for Budget and Policy
Priorities, sales taxes on services could bring states tens of billions of
dollars in new income.