Antitax credo hits huge state deficits

Many state legislators adamantly oppose tax hikes, but face their biggest challenge yet in massive budget gaps.

A decade ago, the grip of recession launched a new breed of politician who claimed that raising taxes would never again be the answer to states' budget shortfalls. This year, these legislators are facing the first true test of their new doctrine - and are showing few signs of backing down.

Since the Boston Tea Party, tax hikes have been seen as an unpopular necessity. But with states' total spending gap at $25.7 billion - 5.2 percent of their total budgets - and most deadlines only weeks away, many state lawmakers remain opposed to new taxes.

Already, Idaho and Arkansas have gone past their deadlines because of tax stalemates - a scene that could repeat itself nationwide during the coming months. The outcome, experts say, will, in large part, determine whether the antitax revolt of the past decade will fade out or whether the country is moving toward more libertarian roots.

"The general mood has changed," says Arturo Perez, an analyst at the National Conference of State Legislatures in Denver. "The concept of resorting to tax increases to pull out of a budget hole is no longer viewed as a ready alternative."

He points to Arkansas, where a 94-day legislative session was closed in mid-April to prevent the advance of a proposed tobacco tax. Now, with the government on the verge of shutting down parts of Medicaid, the governor has called a special session to find a solution.

In Idaho, the legislative session stretched into May for the first time in history as lawmakers squawked over plans for a cigarette-tax increase and a 1.5-cent hike in sales tax.

It was an atmosphere that Gary Moncrief had never seen. As a political scientist at Boise State University in Idaho, he has long been acquainted with his state's libertarian and antitax history. But this was new.

"It used to be that you had very fiscally conservative lawmakers, but they realized when to raise taxes," he says. "But these new guys were saying they were never going to raise taxes."

Raised on Reaganomics

The same is true across the country, as a new generation of tax hawks, weaned on Reagan-omics and carried into office after the last recession, eye historic deficits as an opportunity to cut further, not spend more. Many of their careers are founded on that very notion.

Riding the backlash that generated the 1994 "Republican revolution", these tax hawks ousted many of the politicians who had raised taxes to survive the recession. At the same time, they changed the political dialogue of state races nationwide. Latching onto an issue that resonated with middle-class voters, they placed taxes at the forefront of campaign issues over the past decade.

"Others derived a political lesson from [1994]," says Nicholas Jenny of the Rockefeller Institute of Government in Albany, N.Y. "It was perceived as a way of winning elections, and until someone can come up with another strategy that works, that's how you're going to be elected."

In Kentucky, for one, this recession hasn't dampened candidates' thirst for the issue. For the November gubernatorial election, "all six candidates are making very, very strong no-new-tax pledges," says Paul Blanchard, a political scientist at Eastern Kentucky University. "Gains in education are being threatened [by the deficit], but the candidates are trying to outflank each other as being more antitax."

And in California, where the budget is estimated at $35 billion over the next two years, Republican Assembly leader David Cox doesn't want to even discuss taxes. "Our answer is no new taxes," he says.

Certainly, such messages strike a populist chord. Yet an indication as to whether the public will still back these politicians when faced with severe budget cuts will not emerge until budget debates in most states near their June 30 deadline.

According to tax-hike opponents like Mr. Cox, Americans are waking up to the fact that their government spends too much. During the past five years, for example, state and local spending has grown by 31 percent. Another estimate suggests that Americans now spend a greater percentage of their income on state and local services than at any time since the Bureau of Economic Analysis first gathered the statistics in 1929.

"Government can't be all things to all people, and people are realizing that," says Cox.

Tax hikes may be inevitable

But while the tax debates might draw out sessions to historic lengths, many analysts suspect that opponents of tax hikes will eventually crumble amid early-morning negotiations. In Idaho, after all, even the Republican-led Legislature agreed on Saturday to a higher cigarette tax and a sales tax increase of 1 cent. Republican leaders in Arkansas have also hinted that the depth of the problem has forced them to consider new taxes.

"The budget deficits are of such size that states have very limited options," says Mr. Perez. "When you've put off the tough decisions until this late, you're much more restricted in what you can do."

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