Tax Analysts Blog

Advice for the New Republican Legislative Majorities

Posted on Dec 3, 2014

Republicans now control 69 of the 99 legislative chambers in the states. It may be the greatest Republican dominance since Reconstruction. Democrats control both houses in only seven states. Republicans managed to capture 11 chambers in this past election, including several in decidedly blue states.

I have some advice for the tax leadership in the new Republican majorities. The advice is consistent with both their conservative philosophical leanings and sound tax policy. I have offered this advice before. But given the election results, it bears repeating.

First, no matter your views on the size and role of government, citizens want a certain level of public services. No amount of bluster and hyperbole about government being the problem will change that. Citizens will demand and receive services, whether they are roads, schools, or police officers. The new GOP majorities should embrace that fact. But in doing so, they should demand that citizens pay for those services with real, broad-based taxes. Conservatives have too often proclaimed their opposition to taxes. But they let the government grow by acquiescing to gambling, excise taxes, and other gimmicks. If you are going to have government -- and we will -- then pay for it. Don't pledge never to raise taxes and then foist the costs of government onto a small subset of people who are usually poor, addicted, or unaware. Besides, if we as a people were actually paying for government with real taxes, we might want a little less.

Second, conservatives should recognize that good tax policy is consistent with their belief system. Republicans should become the party of virtue, courage, and honesty when it comes to taxes. They should fight crony capitalism, as there is nothing more abhorrent to the free market than the government picking winners and losers. Yet state governments do just that all the time. The proliferation of tax incentives represents horrible tax policy. That politicians can decide economic policy through tax incentives is more akin to a Soviet five-year plan than to Adam Smith's invisible hand. True conservatives should fight attempts to use tax policy to further economic objectives. Broad-based taxes and low rates will always serve the conservative cause better than the existing nonsensical tax laws. Standing on principle to ensure a broad tax base is hard -- and neither party has been able to do it. But it is a stand worth taking.

Third, Republicans should take an aggressive role in reforming state tax systems. For example, everybody agrees that business inputs should generally be exempt from sales tax. Liberals will never fight for repeal or reform because of their misguided belief that "business" should be paying taxes. This is the perfect issue to use in order to advance a conservative objective. Taxing business inputs results in hidden taxes on consumers. Transparency is and should be a conservative virtue. Similarly, Republicans should take advantage of their new power and lead the repeal of state corporate income taxes. The corporate income tax is a terrible way to raise revenue. Its true beneficiaries are the lawyers and accountants who assist corporate America in avoiding the tax. This tax can't be fixed, and Republicans can prove that we are merely pretending the tax matters when it doesn't.

And conservatives should lead the fight against special excise taxes on fatty foods, sugary drinks, violent video games, e-cigarettes, guns, and other such nonsense. Attempts to tax those products, which have no discernible unique externalities, are wrong. They are grounded in the beliefs that (1) it is OK to persecute minorities, and (2) it is OK to use the power of government to impose your views on people. If Republicans really want to be the party of freedom and limited government, they should start here.

Finally, conservatives should give some serious thought to greater reliance on the property tax. Yes, I know people hate the tax. I also know that politicians find it advantageous to attack it. But the property tax revolts of the late 1970s and 1980s have done much damage to the fiscal structure of state and local governments. There was a time when schools and most public safety services were funded locally through the property tax. The property tax revolts and the ensuing limitations shifted that funding to the states. But state government responsibilities for healthcare and transportation were growing. Now the states have a greater role in financing education but cannot afford to do so. A stronger property tax would alleviate pressure on state finances -- and more importantly, return greater autonomy to local governments. That is a conservative value.

A version of this post first ran in State Tax Notes magazine.

Read Comments (3)

average joeDec 2, 2014

what great ideas!! would be wonderful if it actually happened. Ever consider
running for office David?

emsig beobachterDec 2, 2014


If David ran for office; and, was elected. the first thing he should do is
demand a recount. It matters not whether one is "liberal" or "conservative,"
politicians will reward friends and punish enemies -- sound tax policies be

edmund dantesDec 2, 2014

You had me cheering until you called for raising property taxes, the very worst
of all taxes. Good taxes are imposed when money is changing hands and the
government wants to take a piece--income taxes, sales taxes, capital gains
taxes, employment taxes. The transaction is objective, between unrelated
parties, and so the amount of the tax is inherently fair.

Bad taxes happen when there is no transaction and so the values underlying the
tax are speculative--property taxes, imposed not on the last sale price but on
an "assessment." One can plan for good taxes--I stopped buying new cars because
I couldn't afford the sales tax. One is helpless when it comes to property
taxes, short of selling the property.

There was a very good reason for the property tax revolts--all earlier attempts
at reining in local spending had failed in face of determined special
interests. Property taxes were out of control, and were forcing long-time
homeowners out of their homes. Although property tax revolts worked on the
revenue side, they failed on the spending side, because, as you note, the
states stepped in to fill the holes.

Until the power of the special interests is broken, beleaguered taxpayers need
all the protection they can get from property taxes. I consider a 1% annual
property tax to be reasonable. I'm presently being charged over 3%, and it
goes up every year. Over a 30-year mortgage, that means one pays 100% or more
of the value of the home to the local government. That's just not reasonable.

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