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Mean Regression

The Tea Party is turning states into little Ayn Rand laboratories.

The last few months of 2010 have been illuminating when it comes to the priorities of the Republican Party. By jumping at the Obama-McConnell tax deal, Republicans underscored the fact that protecting the marginal tax rates of high earners—not reducing the federal deficit, and not even denying Obama legislative success—is their party’s primary focus at the federal level. It says something that most conservatives who opposed the tax deal did so on the grounds that it was not permanent, or that it did not completely eliminate the estate tax. As ever, to paraphrase Dick Cheney, Republicans seem to think deficits don’t matter.

Yet that’s not the half of it. For a true litmus test of the lengths Republicans will and will not go to in order defend the incomes of the very rich, you have to look to the states, where budget deficits are generally not allowed. There, a new crop of Republican governors and lawmakers—huge numbers of which rode to power on the Tea Party wave—are focused not just on preserving upper-income tax cuts, but actually cutting taxes for the rich while slashing services and raising taxes on the poor and middle class. All this is happening at a crucial time, since the most dire fiscal conditions in decades are about get vastly worse, as federal stimulus dollars run out.

One of the GOP’s biggest 2010 rock stars, Governor-elect Nikki Haley of South Carolina, is an especially instructive example: During the campaign, Haley came out for abolition of the state corporate-income tax. Facing an enormous and chronic state budget shortfall, she breezily suggested that her tax cut might be paid for by eliminating a recently enacted state sales-tax exemption for food purchases, because the exemption “didn’t create one job.” This statement, which seems to imply that eating is an economically useless activity, takes conservative disdain for consumption as a growth generator to new heights. Instead of trying to keep food on South Carolinians’ tables and consumer demand high, Haley is betting on a tax code tilted to “producers” and “job creators.” As Haley spokesman Rob Godfrey recently explained:

We are a right-to-work state. We keep the unions out. And if we become a no-­corporate-income-tax state as well, we will become a magnet for businesses to come to South Carolina. And that means more jobs for our citizens, more con­tracts for our small busi­nesses, and more growth for our economy.

It’s hard to imagine a more enthusiastic endorsement of the old moonlight-and-magnolias approach of making lower business costs—including taxes, wages, and all those inconvenient regulations aimed at protecting the workforce or the environment—the sole strategy for economic development, at the expense of other public and private goods.

A similar thing is happening next door in Georgia, where outgoing Republican Governor Sonny Perdue created a heavily loaded fiscal commission tasked with addressing the state’s massive budget gap. (Incoming Republican Governor Nathan Deal is expected to embrace the report.) It suggests “redirecting the state’s taxing emphasis to what people buy and the services they use rather than the income they earn,” meaning adoption of a higher sales tax, paired with corporate and upper-income tax cuts and cuts in government services, and speaks somewhat dismissively of “advocates for the poor and elderly [who] stress that those groups spend a higher percentage of their income on goods and services that would be taxed under the Republicans’ scenario.” And Florida’s state budget situation may be even worse than South Carolina’s and Georgia’s—education costs for Haitian refugees are a major new problem—but Governor-elect Rick Scott is committed to both the elimination of corporate taxes and major reductions in property taxes that support local schools.

This trend is by no means confined to the South. Newly elected Michigan Governor Rick Snyder is insistently pushing for reductions in business taxes, which would double the state’s current $1.5 billion budget shortfall. In Pennsylvania, Governor-elect Tom Corbett is determined to cut corporate taxes by nearly one-third while increasing business deductions. Wisconsin Governor-elect Scott Walker, who made headlines by turning down $810 million in federal money for a high-speed rail connection between Milwaukee and Madison, has pledged to cut corporate taxes for smaller employers, and also wants to give a state tax break that will encourage people to snap up those hardy conservative pet rocks, health savings accounts. Walker is facing a two-year, $3 billion budget shortfall. Ohio Governor-elect John Kasich, who, like Walker, turned down federal high-speed rail money, is pushing to restore a previously delayed state income-tax cut, even though his two-year budget shortfall is about $8 billion.

This is what Americans got when they voted for the Tea Party. When the last comparable wave of state-level Republicans took office, in 1994, it happened to coincide with the beginning of the long boom of the ‘90s, which allowed GOP officeholders to make popular tax cuts without reducing popular spending. Not this time: Across the country, Republicans are assuring that budget adjustments will be real and painful for everybody but the rich.  

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