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Yet another taxing article, this one overlooked from Friday’s WSJ, “Taxes Divide National, State Republicans.”

The article observes that “even as President Bush and his national Republican Party boast of record tax cuts and vow to hold the line against future tax increases, Republicans here and elsewhere are undercutting the election-year message: They are for raising taxes.”

Unlike the Federal deficit, state and local goverments cannot run in the red. That leaves them with one of two unpalatable choices: Raise taxes or cut services. Cuts in local services such as schools or police are often felt more keenly than the budget cuts made distantly in Washington, D.C. (unless its something major, like a military base closing or an extension of unemployment benefits). Many states are worried about their bond ratings.

so_much_for_tax_cuts
click for larger chart

Surprisingly, “only six states resisted the urge to raise taxes last year, while 15 raised them by more than 2.6%.” Anecdotally, I’ve seen this forst hand, as my real estate taxes have nearly doubled. (Although I live in Nassau County, which is not yet over 4 decades of massive corruption).

“The upshot is that taxes are creating a new divide between Republicans at the national level and those in the states, one that transcends the more familiar ideological rift between ascendant antitaxers and traditional budget-balancers. The federal-state split is particularly awkward given that the party controls both the White House and Congress and, at the same time, more statehouses than ever before.

“At the national level, it’s a settled question: Republicans don’t raise taxes. Done,” says antitax activist Grover Norquist, head of the Washington-based Americans for Tax Reform and a close ally of senior Bush adviser Karl Rove. But the states, he says, are “full of old-line Republicans” and, especially in the recently converted South, former Democrats. Both types, he says, favor bigger government and balanced budgets over lower taxes.

So while we have been talking about the coming Federal tax increases over the next few years, on the state and local levels, the tax increases are already here.

Source:
Taxes Divide National, State Republicans
JACKIE CALMES
WALL STREET JOURNAL, February 20, 2004

http://online.wsj.com/article/0,,SB107724124060934820,00.html

Category: Finance

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