The memory-challenged GOP longs for the 1950s when “See the USA in your Chevrolet” was a popular advertising jingle. But ever since Reagan promised to never raise taxes, then quietly raised Social Security taxes twice along with many income-related taxes eleven times, Republicans have embraced the “supply-side” theory that tax cuts, more than anything else, help to spur economic growth through savings and investment and that raising taxes – except under the most dire of circumstances – hurts jobs and the economy. Pure horse pies. For Pete’s sake, nobody likes to pay taxes. Nobody likes to take cough syrup either, but it beats choking on your own mucus!
To see the USA today, with no taxes to repair roads, bridges, third world airports, etc., you’ll need one of the unwanted, unused thousands of Abrams M-1 tanks sitting idle since 2012 that Congress ordered despite the Pentagon’s objections that they were neither needed nor wanted.
To try to shore up their no-tax image, the GOP-controlled Congress in early May approved a long-term budget plan that would wipe out the deficit over the next decade without raising taxes, although it only works using “dynamic-scoring” which the GOP ordered to be used and is all smoke-and-mirrors with no basis in fact. Now, the Republicans’ long-standing distaste to tax increases is coming back to haunt them, both on Capitol Hill and throughout the country.
While tax policy likely will be a conspicuous issue in the 2016 presidential campaign, many of the GOP candidates appear to be stepping gingerly (or just lying) in this area – careful not to promise absolute cuts in taxes.
Just when the construction industry appeared to be getting its footing again, the threat of a government highway funding crisis this summer has city and state officials and industry leaders on high alert.
Many states have already blown their budgets for this year just trying to fill all the potholes created by one of the worst winters in memory. Texas, whose Governor spent months claiming the U.S. Army was about to invade Texas, is now beging for the Army and U.S. tax dollars to help pay for flood damage repair to washed out major roads that couldn’t even withstand flooding.
To see the USA today, with no taxes to repair roads or bridges, you’ll need one of the unused thousands of Abrams M-1 tanks sitting idle since 2012 that Congress ordered despite the Pentagon’s objections that they were neither needed nor wanted. “It doesn’t matter how many big projects you have planned when your citizens are driving through potholes,” said Leslie Wollack, the National League of Cities’ program director for federal relations. “That is what people tend to focus on. But I think cities aere worried quite a bit about what the future holds.”
In the olden days of a sane Congress, the federal highway trust fund financed more than $50 billion of highway and bridge construction annually. Now, as the summer months (read: hurriacane season) approach, the fund will run out of money unless the Republican Congress can devise a way to fund new transportation legislation without cutting dollars from their sacred cow–defense.
Those federal funds constitute nearly two thirds of all government highway transportation spending and are the lifeblood of:
- Tens of thousands of construction companies
- Hundreds of thousands of government-funded contracts
- And the nearly 600,000 workers across the country whose jobs come with them
- Not to mention the suppliers and those thousands of jobs, according to construction industry estimates.
But noooo, government doesn’t create jobs does it Republicans? Let’s build that Keystone Pipeline that will provide 200 full-time U.S. jobs and thousands of CANADIAN jobs. Jeez.
Unless Congress finds a way to avert a looming bankruptcy of the highway trust fund, “We could see construction projects stop in their tracks, machines sitting idle, workers off the job,” according to Road Building Associations from Alabama to Virginia, Pennsylvania to Maine, and Florida to Texas.
“We’re looking at a crisis and it’s coming sooner than most people realize,” said Ken Simonson, chief economist for the Associated General Contractors, which represents 26,000 companies.
The Gas Tax
The most urgent problem facing GOP leaders in Congress is what to do to avert a crisis in the federal Highway Trust Fund this summer — one that threatens the possible shutdown of some state highway construction projects beginning in August. So far, the Republican Congress has passed several short-term spending “patches” to keep the federal highway and infrastructure program afloat until a long-term, comprehensive plan can be ironed out—or should I say IF one can be ironed out.
Raising the 14.8-cents per gallon federal gasoline tax at a time of decades-low gas prices appears to be the most logical and direct approach to fixing the problem, according to many state officials, business leaders and highway advocates. But House Speaker John Boehner (R-OH) and other GOP leaders have ruled out an increase in the gas tax that was last increased in 1993 (that’s 22 years ago for the mathematically challenged).
The combination of the Tea Party rebellion and solid opposition from outside conservative groups likely struck the death knell for a tax increase to replenish a Highway Trust fund that’s been running on fumes for years.
State Tax Dilemmas
Kansas: Republican Kansas governor Sam Brownback and the GOP controlled state legislature are confronting the grim reality that their supply-side tax strategy of major cuts over the past three years is a huge flop – and that without a tax increase of some sort they will face a gigantic, untenable budget deficit this summer. Just several days after Brownback won a hard-fought reelection campaign last November, the Kansas budget office revealed that state revenue projections were off by more than $200 million. That boosted the overall budget gap to $600 million.
For a state, required to have a balanced budget each year, that size budget, relative to America’s, is a $24 Trillion deficit.
Not surprisingly, last weekend, when most local news is on extended siesta, Brownback did the once unthinkable: He called for:
- An increase in the sales tax to 6.65 percent.
- Elimination of itemized deductions.
- And a cigarette tax increase of 50 cents per pack.
But even those measures won’t come close to plugging the budget gap. Brownback claimed his plan would reduce the budget deficit to $81 million this year and $255 million next year. Economist, not on Brownback’s payroll, place the numbers at $125 million this year and $389 million the next year.
Michigan: Facing a dangerously deteriorating highway system and enormous shortcomings in the popular school system, Michigan’s Republican governor Rick Snyder turned to voters earlier this year with a proposal for increasing sales taxes to pay for schools and state gas taxes to generate $1.3 billion annually for road and bridge construction. Of course sales tax increases are inflation-generating job-killers, but who cares about details?
Snyder argued that the increase was essential because Michigan’s damaged roads are vastly inferior to those in neighboring Ohio and costly to motorists whose vehicles are damaged by potholes. Voters, realizing that the poor and middle-income populations would bear the brunt of sales tax increases, overwhelmingly rejected the plan in a referendum in early May.
Where the GOP Candidates Stand
Tax policy will be an important part of the presidential debate this year, but GOP election experts are desperately trying to devise plans for avoiding questions for major GOP candidates that will show their budget outlines would include a major tax cut that could add to the deficit, another primary concern for conservative voters.
Skinner notes that Republican candidates are still consulting with supply-side guru Arthur Laffer. “Since the late 1970s, deep “supply-side” tax cuts have become the party orthodoxy,” he wrote recently. “No matter the economic context or the lack of personal enthusiasm of the candidate, the GOP will back slashing marginal rates.”
Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, begs to differ. He wrote on the TaxVox blog that the large field of GOP presidential aspirants has been strangely silent until now on the need for major tax rate cuts. Rather, they at most have outlined support for major overhauls of the tax system – but changes that are “revenue neutral” and don’t add to the deficit.
For example, while Jeb Bush has embraced the supply-side tax philosophy, he has refused to sign an anti-tax pledge. Rubio has co-sponsored a tax plan that emphasizes a large child tax credit and cuts the corporate rate, but that proposal might increase rates for some upper-middle-class individuals. Former neurosurgeon and Tea Party favorite Ben Carson advocates a 10-percent flat tax, but he insists his approach would raise about the same of revenue as the existing tax code…a claim that has been debunked by Republican, Democrat, and non-partisan economists for decades.
“Even Sen. Ted Cruz, another flat taxer, isn’t saying Americans pay too much in taxes,” Gleckman wrote. “While he frequently vows to abolish the IRS, he doesn’t promise to cut taxes.”
Now that’s a claim any snake oil salesman could love.
Harvey A. Gold