Print
Deficit-funded tax cuts are coming to haunt state budgets
AFT public employee locals are gearing up for legislative action in 2005, so on your mark, get set: Get involved in your union.
Revenue forecasts may suggest that the worst of the fiscal crisis is over. But members of the AFT Public Employees budget crisis task force know the numbers aren’t going to add up to be enough to restore cuts in programs and positions, much less accommodate the anticipated service demands of the nation’s aging population.
In November, the task force joined nearly 300 like-minded activists at the Center on Budget and Policy Priorities (CBPP) annual conference on funding state services. The focus: reinvigorating public services.
Deficit-Reduction Targets: Entitlements
“States have been experiencing a fiscal crisis of their own for the past few years, and the federal government has been making matters worse,” said Ellen Nissenbaum, CBPP’s legislative director. “If the federal deficit, fueled by tax cuts, were not rising at such an alarming rate, the federal government could afford to do more to help states meet the costs of providing healthcare, education, homeland security and other services.”
CBPP estimates that federal policies, including the Bush administration’s tax cuts, which disproportionately benefited wealthier taxpayers, unfunded mandates and the federal moratorium prohibiting states from taxing Internet services and Internet retail purchases have cost states and localities more than $175 billion from 2002 through 2005.
“We cannot run today’s government on these [federal] revenue levels—the lowest as a share of the economy since 1959,” said Nissenbaum. “Medicare, Medicaid, most federal aid to education and most childcare and environmental programs did not exist in 1959; nor did many key anti-poverty programs such as food stamps.”
Experts agreed that entitlement programs will be the deficit-reduction target—and Medicaid the bull’s eye. Specifically, the Bush administration will steadfastly attempt to “block grant” Medicaid, which would effectively cap federal spending to the lump- sum allotment. Under the current system, federal funding is open-ended and based on state expenditures.
“Medicaid is by far the largest single source of federal support to states,” said Vikki Wachino, CBPP’s health policy director, noting that a block grant “shifts risk of higher costs onto states and localities.”
In addition to a Medicaid block grant, Nissenbaum said entitlement program cuts will be achieved through circuitous legislative maneuvers that shield lawmakers from political fallout.
Capping federal spending for entitlements is “a major right-wing priority” that came up in 2004 and “will surely come up again in 2005,” said Nissenbaum. Under such a scheme, if Congress does not pass legislation cutting programs to meet the established cap, automatic across-the-board reductions take effect.
Nissenbaum said entitlement caps are the most direct cost shifting from the federal level to the state level. Budget process reform, such as a pay-as-you-go rule, is another mechanism lawmakers could use, she said.
Educating the Public: A Taxing Challenge
With enormous public and political pressure to reduce the $400 billion federal deficit, and President Bush’s determination to make permanent his tax cuts, budget and policy experts issued a call to action to stop the deficit-funded tax policy and systematic unraveling of government programs. Otherwise, state governments can bank on one thing in the coming years: less money from the federal government.
Pulitzer Prize-winning investigative journalist David Cay Johnston was among the chorus of speakers who said there are three keys to reinvigorating public services. The first is to educate the public about taxes so people make the connection between the quality of their lives, the quality of their communities and the money they give Uncle Sam. The second is to educate the public about how tax policy favors wealthier Americans. The third is legislative and political action at every level of government.
“We need to attack the notion that taxes are wasted money,” said Johnston, who has written a book, Perfectly Legal: The Covert Campaign to Rig our Tax System to Benefit the Super Rich—and Cheat Everybody Else, in hopes of inciting tax policy reform that moves the nation back toward one of the “fundamental principles of democracy: taxation based on ability to pay.”
We have created a redistribution system that overtaxes working Americans and undertaxes the wealthy, Johnston said. “Donald Trump, to this day, has a negative income. To the tax system, he is poor. It is how we define the rules.”
Reform Begins With You, Experts Say
Overcoming the stereotype that government shouldn’t take money from its citizens, which has been reinforced by President Bush, may not be as daunting a challenge as it sounds.
In more than a dozen states, including North Dakota and Wisconsin, proposals that would have required voter approval of all tax increases, in addition to limiting spending growth despite demand, were thwarted. (These proposals are misleadingly called taxpayer bill of rights or TABOR). And in a number of states and localities various tax initiatives were approved by voters on Election Day.
Kathy Bonk of the Commu-nications Consortium Media Center, said messages about budgets and taxes have to be based on core American values.
Advocates, she said, often address specific issues, proposals and details, yet the general public tends to digest information in broader terms. For example, she said, the term entitlement program contradicts the value of self-sufficiency. When entitlement programs, however, are described as vehicles to give people the tools they need to be self-sufficient, folks may interpret the term more positively.
“The budget battles in the years ahead will have profound consequences,” said Nissenbaum, who predicts that Americans will start feeling the impact of public service cuts in 2006. “Everything will be at stake, and nearly every valuable service that we provide as a society through our government will be at risk. The outcome will largely determine who we are and what we value as a society for decades to come.”
Johnston says it best in his book:
“Rather than hiding our heads in the sand because taxes are complex and unpleasant, we need to recognize the power and responsibility as a free and democratic people to solve our own problems.We need to exercise our right to vote. Talk about taxes and our government. Talk to your family, your co-workers, your neighbors. If enough of us start talking seriously about the issue, and listening as well, the hubbub will percolate up through the system and counter some of the access to politicians that the political donor class buys with its contributions .… Ultimately, we can create a tax system that actually promotes long-term prosperity.
“Reform begins with you.”
