July 11, 2011


Federal budget can be balanced with spending cuts: Republican-led states already have succeeded with no new taxes (Frank Donatelli, 7/08/11, The Washington Times)

As the budget season rolls on, a remark- able trend is emerging: States with Republican governors and legislative majorities are balancing their budgets and reforming key programs without raising taxes. Conversely, states with Democratic governors and legislatures are content to raise taxes without basic program reforms. This philosophical and partisan divide focuses on the age-old question of the proper size and scope of government, and Republicans and Democrats are providing starkly different answers.

Republican-led states that have enacted budgets without tax increases include Ohio, Wisconsin, Pennsylvania, Indiana, Maine, Texas and Florida. Pennsylvania, Texas and Florida reduced spending in absolute terms. In addition, virtually all of these states offered some tax reductions for business investment designed to generate more job growth. Indiana cut its corporate tax rate. Maine cut its top marginal individual rate at a time when Democratic governors are trying to raise theirs. Pennsylvania phased out the business-franchise tax for thousands of small businesses. New Jersey put a cap on local property tax increases, and Ohio phased out the “death tax.” Republican leaders in those states realize that while the spending side must remain in check, growing revenue and generating new jobs is the long-term answer to their states’ fiscal health and financial future. [...]

Every rule has an exception, and the exception here is Democratic Gov. Andrew Cuomo of New York. He pressed his legislature to close New York’s budget gap without new taxes, and he succeeded. Good for him. One wonders how much pressure he felt to remain economically competitive with the neighboring states of New Jersey and Pennsylvania, both of which pursued a similar strategy.

...is why not reform the tax code too?

Obama Leans on G.O.P. for a Deal on Debt Ceiling (MARK LANDLER, 7/10/11, NY Times)

Privately, some in Congress expressed regret at Mr. Boehner’s decision on Saturday to walk away from an agreement that they said would have been a rare opportunity for Republicans and Democrats to radically restructure the government’s finances, rewrite the tax code and fix longstanding problems with Medicare and Medicaid.

In the end, officials briefed on the talks said, ideological differences over a tax overhaul bogged down the bigger agreement. Mr. Boehner, they said, was open to letting Bush-era tax cuts for wealthy people expire, while maintaining the cuts for middle-income wage-earners. But Democrats briefed on the talks said he made that contingent on rewriting the tax code by the end of this year, so that the loss of the cuts would be offset by lower overall tax rates.

The White House, officials said, was willing to put a deadline on a tax overhaul. But it rejected Mr. Boehner’s formula, arguing that it would place too much of a burden on the middle class while protecting the rich.

A Republican official familiar with the negotiations said Mr. Boehner “would only discuss new revenues if they came from economic growth and tax reform instead of tax increases.” And he insisted on a “trigger” that would set off deep spending cuts and other measures if the tax changes were not implemented before the end of 2011.

Posted by at July 11, 2011 5:45 AM

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