A proposal to create a state-owned bank is gaining momentum in Washington State, where a bill modeled after the successful Bank of North Dakota was introduced in January with 44 co-sponsors in the House. In a speech at the outset of the legislative session, Speaker of the House Frank Chopp called it one of the caucuses’ key priorities this year.
Many states are finally taking a more balanced approach to their budget troubles by looking to raise revenue to avoid further deep cuts to education and health care, including New York who recently restructured their tax structure to generate more revenue from millionaires and California who is considering the same. These kinds of reforms will help states shore up their immediate revenue shortages, but will also bring long-term stability and flexibility as they look to rebuild their economies in the years to come. However, there are a handful of states that don’t currently have the option of generating revenue this year by taxing wealth because they lack a state income tax, making them more vulnerable to lagging revenues in a prolonged downturn like we’re experiencing now. This is certainly the case for a state like Washington, which has experienced some of the most severe budget deficits over the past three years, because they are too dependent on the state sales tax as a revenue stream. That’s why the Washington State Budget & Policy Center is building support for a proposal to tax the capital gains of the state’s wealthiest residents.
Facing another round of deep cuts to health care and education as a result of ongoing revenue shortages caused by the slow economic recovery, and on the heels of a new national survey reporting that most state budgets have now seen spending fall below pre-recession levels, some states are signaling that they will be pursuing more balanced approaches to their budget troubles in 2012 than they have in previous years.
As the Occupy Wall Street movement continues to raise awareness about growing economic inequality and unchecked corporate influence over our political system, a new report released last week by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy found that almost 80 of the country’s most profitable companies paid no federal income tax in at least one of the last three years.
As the Occupy Wall Street movement spreads across the nation and occupations promise to continue into the winter months, the physical presence of the protesters and their effective communication of the widely shared concerns of “the 99%” about the consolidation of wealth and political power is already having a significant impact on the public debate. Reeling from Occupy-inspired criticism and watching as hundreds of thousands of their customers move their money to smaller banks and credit unions, big banks like Bank of America this week backtracked on their plans to institute yet another proposed fee for debit card use. With gridlock in Congress continuing, the most significant political impact of the Occupy protests may ultimately be felt in statehouses, where the renewed national focus on the consequences of historic levels of inequality are showing signs of revitalizing prospects for a host of progressive economic policies, including one key demand of the protests: asking the 1% to pay their fair share.
Most states have hundreds of tax expenditures on their books, ranging from tax credits to reduce poverty to exemptions benefiting homeowners to business subsidies. Some of these expenditures, like a sales tax exemption on groceries, have a broad social benefit and enjoy widespread public support. Yet the benefits of others, which are often created for specific companies or industry sectors while purportedly incentivizing local economic growth or job creation, are less clear. Many states have exemptions and credits that are decades old and in some cases outdated or underperforming, with no laws in place to review them and assess their actual impact in local communities. However, another year of severe revenue shortages and deep budget cuts now has many states scrutinizing the true value of these preferential tax treatments.