Earlier this month, Gov. Tim Pawlenty (R-MN) vetoed a tax increase on the wealthiest Minnesotans that had been passed by the state legislature, preferring to push thorough a budget that was balanced only due to accounting gimmicks and significant cuts to education and health service programs. On the same day, Gov. Mark Sanford (R-SC) vetoed a bill raising the state’s lowest-in-the-nation cigarette tax. (Fortunately, the state senate overrode his veto.)
These two governors, even when their states were staring at deficits in the wake of the Great Recession, refused to accept common sense tax increases that would at least mitigate the debilitating effects of budget cuts. And today, they have a new member of their team — Gov. Chris Christie (R-NJ), who has promised to veto the state legislature’s attempt to implement a new tax bracket for those making more than $1 million. The legislature plans to approve the increase today.
New Jersey is facing a $10.7 billion budget deficit, and has the second highest average personal income in the country, yet Christie derided the tax as a “cute idea” that “doesn’t work.” For a household making $1.2 million annually, the tax would amount to an additional $11,598, according to projections from the the state’s nonpartisan Office of Legislative Services.
That’s not an insignificant amount of money, by any stretch, but raising taxes on the wealthy is one of the only options for states facing huge budget holes, and it’s better than slashing social services and education funding to bits. As the Center on Budget Policy and Priorities pointed out, tax increases on the very wealthy “can yield a significant amount of money from small rate increases that involve a relatively low number of taxpayers — those that are best able to afford the cost”:
This is because wealth in the United States has become concentrated among the nation’s richest households to an extent not seen since the late 1920s…If every state with an income tax increased its rates by 1 percentage point on incomes above $500,000, it would raise about $8 billion nationwide — funds that could be used as an alternative to some of the deep cuts in education, health care, and other important services being made in many states and considered in others.
Since 2008, 18 states have increased income taxes on their wealthiest residents, including New York, North Carolina, Oregon, and Connecticut. Proponents of an income tax increase in Washington state are currently gathering signatures, hoping to put the issue on the ballot in November.
“Progressive taxation is a state’s most effective antirecessionary tool. It gets money moving through the economy again, jump-starting the economic recovery that is the principal engine of state fiscal health,” explained Karen Kraut, director of the Tax Fairness Organizing Collaborative. But Christie and Pawlenty prefer to push the brunt of the recession onto their state’s most vulnerable residents.