Republican governors of Kansas, Nebraska and Louisiana are pushing to eliminate personal and corporate income taxes, setting up a possible fight with the Obama administration, which has already vowed to reform the nation’s tax code this year. To make up the lost revenue, these governors would raise the state sales tax.
These proposals are “open, explicit reverse Robin Hoodism” writes Paul Krugman, The New York Times columnist and author of many books including End This Depression Now! The elimination of the income tax would result in a huge tax break for the rich, Krugman notes, and “substantial losses for the bottom 60%.” A higher sales tax disproportionately affects ordinary, working class families, he argues.
“It’s not something that you can easily justify in economic terms,” Krugman says in an interview with The Daily Ticker. “There’s no real justification for it except we like rich people.”
According to Krugman, middle and lower income people, not the rich, are already paying the highest marginal tax rates in the country. Furthermore, the higher sales tax would not beget benefits such as stronger safety nets or universal health care, programs that would be used by the majority of those states' residents.
In Kansas for example, the state's social programs are shrinking along with the general size of the government. Kansas Governor Sam Brownback has allowed private insurers to take over the state’s Medicaid system; he cut back the state’s welfare rolls and wants to reform state employees’ pensions in addition to merging government agencies. Brownback's office is reportedly eyeing more areas for consolidation.
Krugman says the Republican plan to hike state sales taxes could be modeled after Scandinavia (Denmark, Finland, Norway, Sweden). This region in Northern Europe has very high sales tax rates and a “less progressive tax system” than the U.S., according to Krugman, and the revenue generated by the high taxes are used to provide citizens with a “very good social safety net” and more financial security.
The income tax elimination proposals may very well be signed into law because there’s little political risk, Krugman says. The states that are pursuing such measures are heavily Republican and the governors would “face no retribution from the voters…and are obliged to cater to their Republican interest groups,” he argues. The Nobel prize-winning economist says these initiatives are proof that the Republican party has no interest in changing its image with voters and are helping to move the GOP more to the right.
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