Starve the Budget Beast

To no one's surprise, the various "advocates" who have taken up permanent residence at the State House pleaded with lawmakers to accept their solution to the budget shortfall: either raise taxes or stop any scheduled tax cuts:

Freeze the so-called “tax-cut-for-the- rich” in its tracks before state government loses tens of millions of dollars.

Halt the phaseout of the capital gains tax before the state loses millions more.

And then extend the state’s sales tax to “luxury items,” such as airplanes; boat moorings; fitness, golf and country-club memberships; medical and legal services and any single article of food or clothing that costs more than $150. And slap a new tax on land speculators who make big money buying and quickly reselling real estate at inflated prices.

Ahhh yes, nothing like pulling the good ol' class warfare card. Unfortunately, it seems like--this time at least--the House rules have changed and that trump card has been devalued:

But the notion of raising taxes to plug a projected $354-million revenue-spending gap this year and next drew a cool reception from key Democratic lawmakers interviewed after yesterday’s news conference — and outright opposition from Republican Carcieri.

House Majority Leader Gordon D. Fox was non-committal, saying: “I recognize the need for long-term planning regarding budgetary matters. However, I will refrain from commenting on the specific proposals that were raised today because they all have to be viewed in the context of the overall state budget.”

House Finance Chairman Steven M. Costantino said he would consider proposals for reining in the state’s expensive historic tax-credit program, but would not look favorably on any proposal to halt the long-promised capital gains tax phase-out or revoke the new opportunity lawmakers gave the state’s wealthiest taxpayers last year to reduce their income taxes by paying an alternative flat tax...

The tax cut was not linked — as its predecessors had been — to the creation of a specific number of new jobs. But it was pitched to lawmakers — and enthusiastically embraced by House Democratic leaders — as a way to both keep and bring “major decision-makers” to Rhode Island who would produce jobs.

Given how concerned the legislature remains about jobs, Costantino, D-Providence, said he would be “afraid to touch that right now.”

The "advocates" are all about short-term thinking. They want "their" money--including an already-spent annual increase, of course--and they want it now, to heck with the long-term repercussions. For their part, it appears as if some State House Democrats are finally looking beyond meeting the short-term needs of one of their valuable constituencies. For his part, the Governor would not budge:

A statement issued late yesterday by [the Governor's] office said: “Fundamentally, Governor Carcieri believes we must cut spending so we can cut taxes. By contrast, this group’s only answer is to increase Rhode Island taxes so we can also continue to increase state spending. Unfortunately, the ‘Coalition to Raise Your Taxes’ continues to cling to the mistaken belief that we can tax and spend our way to good fiscal health.”

“Like every Rhode Island family,” spokesman Jeff Neal said, “state government must begin to live within its means. A family cannot increase its spending by 8 or 9 percent each year if their household income is only going up by 4 or 5 percent. Similarly, state government cannot continue to increase spending by 8 or 9 percent a year if our underlying revenues are only growing by 4 or 5 percent a year.”

According to the story, written by the ProJo's Katherine Gregg, the coalition "also proposed lifting the newly lowered cap on how much the cities and towns can raise their own taxes each year." But, as Gregg pointed out, "That too promised to be a hard sell." Indeed:

The state is firmly committed to enforcing the new 5.25-percent tax levy cap, but also acknowledges that some details have not been worked out. Senate Majority Leader M. Teresa Paiva Weed, one of the key sponsors of the tax cap, which passed last summer, called the tax relief act a work in progress and stressed that the state is committed to helping municipalities work through all their questions.

Despite that assurance, many local officials were left shaking their heads yesterday. They cited the burden of the new levy cap and said they think it was implemented too quickly and without addressing state aid to education and other key factors that affect municipal spending.

“Were my questions answered? No,” said Suzanne McGee-Cienki, chairwoman of the East Greenwich School Committee. “I applaud the state effort to try to control property taxes, which have increased so significantly, but I question as to whether they’ve really gotten to the root of why taxes have continued to go up, and I also don’t think that they studied all the implications the cap will have on school departments and communities.”

Perhaps the General Assembly has finally realized that they have to rein in the spending. One way to do this is by implementing laws that force they and others to do so. The property tax ceiling will be felt on the municipal level, for sure, and there seem to be some valid concerns regarding the acute issue of education spending. But, that aside, the limit on how much property taxes can increase will help limit the growth of local government. But it will take more than just starving these budgetary bear cubs. Rhode Island needs to starve the she-bear, too. Hopefully, the legislature agrees: it's time to starve the Beast. To do so, they need to follow the advice of McGee-Cienki and get "to the root of why taxes have continued to go up." Here's a hint: payroll.