An Open Letter to My House Colleagues: The Progressive Income Tax Won’t Work

As we move into the new week and the prospect of considering the resolution to place the progressive income tax on the 2020 ballot, I’d like to add an additional objection to its passage.

 

It won’t work.

 

The Governor has said that the measure will add $3.25 billion to revenue in its first year. Based upon the bills we’ve passed just this term, that money’s already been spent.

 

But the big issue hanging over us is the same one that’s been plaguing us for years: Debt. Our backlog of bills is huge, but it pales in comparison to our pension debt. Just consider what the payment “ramp” requires us to do over the coming years:

Pension Ramp

When you start out by taking 25% or more from General Revenue and putting it into pensions, there’s no way that any change to the income tax structure will accommodate both that and the need to fund essential state programs. The cost as a percentage of General Revenue may drop as a result of the tax change, but the dollar amount is the same. Where’s that money supposed to come from? The Governor is on record as saying he’ll allocate $200 million per year of the tax increase toward the debt, but as you can see, that amount won’t even keep up with the annual increases that are called for under the ramp. It’s a rounding error.

 

Do we need tax reform? Absolutely. But this isn’t the way to do it. We need a global review of our entire tax structure with an eye toward creating a tax system that moves in the direction of our economy, which requires us to look at not only income taxes, but all sources of revenue: sales taxes, motor fuel taxes, user fees and property taxes. That doesn’t mean raising rates across the board, but looking at changing the mix, broadening bases and thus encouraging economic development, which is the real solution to our problem. Otherwise, the rates that we’re going to be asked to vote on as part of this package of bills will have to be raised, by a large amount and soon.

 

There’s an element of moral hazard at play here, as well, and that’s the real risk that people will think that by going to a progressive income tax, we’ll have solved our fiscal problems. We know that’s not the case. And when it doesn’t, we’re going to find ourselves back here with the same problems and fewer options to fix them.

 

We can start down a path of fixing this mess. But it begins by acknowledging the depth of our problem and making a bipartisan commitment to fixing it. The progressive income tax isn’t it, and may very well end up making things worse.

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Please vote “No”.

 

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