Gov. Perdue: Georgia Can’t Afford Supply-Side Economics During The Recession

During the debate over the economic stimulus — while most state budgets were deeply in the red — the House GOP unanimously opposed the recovery package, arguing in favor of more tax cuts for the wealthy. Highlighting a schism in the party, however, several GOP governors, such as Gov. Arnold Schwarzenegger, Gov. Charlie Crist (FL), and John Huntsman (UT), readily accepted the federal aid.

In a comment marking a break with the Reagan-embracing hard right, Georgia Gov. Sonny Perdue (R) raised skepticism about the GOP philosophy of using supply-side tax cuts to plug budget deficits:

In essence, Perdue said the economic theories espoused by Ronald Reagan and Jack Kemp — that lower taxes actually generate more government revenue — are a gamble that don’t have a place in Georgia. Not in hard times.

Here’s what Perdue said, as aired on Friday: “Georgia’s a balanced budget state. And it’s very difficult to do the stimulus-type bills in a state that’s starved for revenue and cash at the same time. So that kind of destroys a supply-side theory within a state government.”

Listen here:

Perdue was responding to pressure from Republican state legislators to sign the “Jobs, Opportunity, and Business Success Act of 2009,” a businesss tax cut-centered bill that would cost $340 million a year in lost revenue. True to conservative form, the legislation cuts the state capital gains tax in half. The bill would also be a “substantial tax increase on most low- and middleincome Georgians,” notes the Institute on Taxation and Economic Policy


Indeed, supply-side tax cuts tilted towards big business and the wealthy are anti-stimulative during a deep recession, and do not lead to appreciable gains in revenue for cash-starved budgets.

Perdue’s comments mark a stark departure from the rhetoric of the House GOP leadership, Govs. Bobby Jindal (R-LA) and Mark Sanford (R-SC), and Newt Gingrich — all of whom are resistant to anything other than tax cuts. In an interview with Time, Rep. Patrick McHenry (R-NC) said of the GOP, “Marginal tax rates are the lowest they’ve been in generations, and all we can talk about is tax cuts.”

It remains to be seen, of course, if Perdue will buckle to right-wing pressure and sign the supply-side legislation. Perdue signed significant business tax breaks just last week.