Wednesday, February 22, 2012

Too soon to cut state tax rates

After helping wield the axe that slashed Idaho's budget last year and left schools and human services hemorrhaging from the blows, Gov. Butch Otter is calling for the state to reduce individual and corporate taxes by up to $45 million.

He's been joined by House Majority Leader Mike Moyle, R-Star, and Revenue and Taxation Committee Chair Dennis Lake, R-Blackfoot, who're calling for reduced tax rates that would benefit a few individuals and businesses to the tune of $35 million—money the state can ill afford to give up.

Recent upticks in state revenues have emboldened the tax cutters. They're operating on the assumption that lowering taxes is always good and always leads to greater investment and economic expansion and ultimately higher tax receipts because of improved economic activity. They claim that Idaho's taxes are too high compared to other states and cripple its ability to attract new businesses and create new jobs.

What if they're wrong?

Too little public investment is likely to have an even greater crippling effect on a still-fragile economy than taxes that are just a smidgen higher than those in a couple of bordering states and far from the nation's highest as a percentage of Idaho's gross domestic product.

Individuals and businesses need top-ranked universities to generate highly skilled employees. They need good local schools for the children of the employees they hope to attract. They need safe highways to haul goods to market. They need healthy and attractive communities. They need safety nets for people in need.

Meeting these needs takes public investment that only government, not private companies and not private individuals, can make.

Economic recovery is still a day-to-day thing, and tax-cutting ideologues shouldn't be too eager to risk it on an ideological experiment. It's too soon to cut taxes when the state is still playing catch-up on the severe revenue drops it experienced as the economy crashed.

Cutting taxes will only make matters worse in a state where per-pupil expenditures already rank near the bottom of the 50 states, college students are shouldering higher tuition, highways are crumbling and the public safety net is full of holes.

Republicans like to say that public budgets are like family budgets and must be balanced the same way. But just when things are looking up, would any sensible family insist that its wage earners take jobs that pay less? That's absurd and so are the proposed tax cuts.

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