Published: Wednesday, November 16, 2011
Voters still skeptical about taxes
Last week state economist Arun Raha issued his monthly economic and revenue update. He confirmed, again, what requires little confirmation. Whatever corner recovery waits behind, it's not one we'll be turning soon.
Of the U.S. economy, he notes that things have not deteriorated, though risks remain high. To the extent there has been encouraging economic news, it's "only because expectations were so low."
Consider this: "Real GDP is now back up to its pre-recession peak, but it is being produced with 6.8 million fewer jobs."
That's the jobless recovery, with all its personal, political and social ramifications. Until people return to work -- employment with prospects, security, a future -- we'll remain a nation conflicted and anxious. Job creation is further depressed by current and prospective federal regulatory and tax policies.
Raha reduced his projections for growth in 2012 and 2013. The European debt crisis and gridlock in D.C. remain the major risks to the state's recovery. There's little joy there. Most analysts expect protracted global uncertainty. And no one anticipates an end to the congressional stalemate before the next election.
The official revenue forecast will be released Thursday. Last week's report foreshadows a small reduction in projected receipts. Not only is there no pot of gold, there's no rainbow. The governor and Legislature have to solve a $2 billion budget problem in the next few months. The longer they wait, the worse it gets.
It's clear that lawmakers will be looking for voters to authorize a tax increase. The three statewide initiatives on the ballot last week did not directly test receptivity to new taxes. Nonetheless, they provide some insight into voter attitudes.
The liquor privatization measure passed handily, showing voters' willingness to rethink the role of state government. This year's initiative successfully responded to concerns raised about a similar proposal defeated in 2010.
In rejecting the anti-tolling initiative, voters preserved an important existing revenue source for transportation projects. It was an ill-conceived measure, opposed by an organized coalition including business, labor and environment groups. That it came close suggests deep voter skepticism.
Voters again supported a union-backed initiative mandating training for homecare workers. It was a "feel good at no apparent cost" vote. No funding source was attached to the mandate. Supporters likely had polling telling them the initiative would not do well if it came coupled with a new tax.
Where new taxes appeared on the ballot, voters tilted against them. The major statewide test came in Colorado, where voters rejected a proposed a five-year, $3 billion increase in sales and income taxes by a 2-1 margin. The money was slated to go to public schools and colleges.
In liberal San Francisco a proposed half-cent sales tax increase went down 54-46. The proposal, supported by the San Francisco Chamber of Commerce, would have raised $60 million annually for public safety and social services.
And in equally liberal Seattle voters turned down a $60 car tab fee for transportation even as they increased the Families and Education property tax levy for seven years. Car tab fees aren't popular and neither is the Seattle mayor, who was prominently associated with the issue. Property taxes are also unpopular, however. The levy boost shows that a properly crafted tax increase -- time limited, widely distributed, and targeted to high priority programs -- can prevail in a tough economy.
Union leaders tout their success in Ohio, where they spent heavily and convinced voters to repeal collective bargaining reforms passed by the Republican legislature, as evidence that the public has had enough of cutbacks. Yet, on the same day, Ohio voters rejected 78 percent of local school levies on the ballot, perversely preserving high personnel costs while denying districts the funds to pay for them. Clearly, reformers failed to make their case, but the problem has not gone away. Not in Ohio. Not here.
Hiking taxes while cutting spending poses a special challenge. There's no appetite for paying more for less. Legislators will have do two things: identify the tangible benefits gained from the revenue boost and demonstrate that they've accomplished substantive, enduring government reform. Before casting an affirmative vote -- an unlikely event at best -- a skeptical public will want proof.
Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His email address is rsdavis@simeonpartners.com.
Of the U.S. economy, he notes that things have not deteriorated, though risks remain high. To the extent there has been encouraging economic news, it's "only because expectations were so low."
Consider this: "Real GDP is now back up to its pre-recession peak, but it is being produced with 6.8 million fewer jobs."
That's the jobless recovery, with all its personal, political and social ramifications. Until people return to work -- employment with prospects, security, a future -- we'll remain a nation conflicted and anxious. Job creation is further depressed by current and prospective federal regulatory and tax policies.
Raha reduced his projections for growth in 2012 and 2013. The European debt crisis and gridlock in D.C. remain the major risks to the state's recovery. There's little joy there. Most analysts expect protracted global uncertainty. And no one anticipates an end to the congressional stalemate before the next election.
The official revenue forecast will be released Thursday. Last week's report foreshadows a small reduction in projected receipts. Not only is there no pot of gold, there's no rainbow. The governor and Legislature have to solve a $2 billion budget problem in the next few months. The longer they wait, the worse it gets.
It's clear that lawmakers will be looking for voters to authorize a tax increase. The three statewide initiatives on the ballot last week did not directly test receptivity to new taxes. Nonetheless, they provide some insight into voter attitudes.
The liquor privatization measure passed handily, showing voters' willingness to rethink the role of state government. This year's initiative successfully responded to concerns raised about a similar proposal defeated in 2010.
In rejecting the anti-tolling initiative, voters preserved an important existing revenue source for transportation projects. It was an ill-conceived measure, opposed by an organized coalition including business, labor and environment groups. That it came close suggests deep voter skepticism.
Voters again supported a union-backed initiative mandating training for homecare workers. It was a "feel good at no apparent cost" vote. No funding source was attached to the mandate. Supporters likely had polling telling them the initiative would not do well if it came coupled with a new tax.
Where new taxes appeared on the ballot, voters tilted against them. The major statewide test came in Colorado, where voters rejected a proposed a five-year, $3 billion increase in sales and income taxes by a 2-1 margin. The money was slated to go to public schools and colleges.
In liberal San Francisco a proposed half-cent sales tax increase went down 54-46. The proposal, supported by the San Francisco Chamber of Commerce, would have raised $60 million annually for public safety and social services.
And in equally liberal Seattle voters turned down a $60 car tab fee for transportation even as they increased the Families and Education property tax levy for seven years. Car tab fees aren't popular and neither is the Seattle mayor, who was prominently associated with the issue. Property taxes are also unpopular, however. The levy boost shows that a properly crafted tax increase -- time limited, widely distributed, and targeted to high priority programs -- can prevail in a tough economy.
Union leaders tout their success in Ohio, where they spent heavily and convinced voters to repeal collective bargaining reforms passed by the Republican legislature, as evidence that the public has had enough of cutbacks. Yet, on the same day, Ohio voters rejected 78 percent of local school levies on the ballot, perversely preserving high personnel costs while denying districts the funds to pay for them. Clearly, reformers failed to make their case, but the problem has not gone away. Not in Ohio. Not here.
Hiking taxes while cutting spending poses a special challenge. There's no appetite for paying more for less. Legislators will have do two things: identify the tangible benefits gained from the revenue boost and demonstrate that they've accomplished substantive, enduring government reform. Before casting an affirmative vote -- an unlikely event at best -- a skeptical public will want proof.
Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His email address is rsdavis@simeonpartners.com.
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