As states face mounting deficits, corporate lobbyists have been promoting the idea that privatization of public services and assets is a free lunch -- services can be delivered more cheaply than by public employees and public assets like highways can be sold or leased for a hefty return to the taxpayer. As PSN has detailed in our December 2007 report Privatizing in the Dark: The Pitfalls of Privatization & Why Budget Disclosure is Needed, the promises of privatization too often yield to a reality of lost money and degraded services, weak oversight and lost expertise, assets sold off for short-term gains but long-term loss, lost democratic accountability, and the corruption of the political process.
For decades, property tax revolts have been a thorn in the
side of progressives. California's Proposition 13 remains
the highest profile example of the property tax revolt, but just about every
legislator in the country can attest to the level of frustration many Americans
feel about property taxes.
Progressives can begin to challenge property tax caps by simply
presenting research showing the regressive nature of property tax caps in a
They also need to fight the rightwing promoting one of the most disastrous
tax policies in recent decades, namely variations on Colorado'sso-called
Taxpayer Bill Of Rights (TABOR) which created a rigid cap on increases in
state spending tied to inflation and economic growth, decimating the state's
investments in education, health care, and social services.
One other dangerous form of tax limitation laws are
rules that require supermajorities to pass any tax increase. In such
cases, special interests may be able to enact a tax break for
themselves with a simple majority, but then can often block repeal of the
tax loophole as a "tax increase" that can be blocked by a
minority of legislators
While some lost tax revenue is due to loopholes and
manipulation, another tax drain is straight-up tax cheating by corporations and
individuals. States are responding with a variety of strategies for
catching these tax cheats and recovering this lost revenue:
Cracking Down on Abusive Tax Shelters: A
2001 Multistate Tax Commission report estimated
that tax shelters designed to illegally evade taxes cost states as much as $12
billion per year. Facing the largest losses in the nation, California pioneered
legislation requiring new reporting on the details of suspicious
shelters, enacting heavy fines for using illegal shelters, and creating an
amnesty program to promote voluntary compliance. The amnesty program
brought in a cascade of revenue: over $1.4 billion from 1,202 taxpayers, or an
average payment of over $1 million per taxpayer, reflecting
the widespread tax cheating among this wealthy population.
Other states are following suit.
Multi-State Collaboration: Going beyond the occasional
cooperation between state auditors, eight states, led by Massachusetts,
created a new
multi-state agreement to share data in a project
called the Clearinghouse, which will compare information on people who work in
one state and earn income in another in order to reveal tax cheating.
Shaming Tax Cheats: To encourage payment by
delinquent taxpayers or those caught violating the law, more than a dozen
states have begun publishing
lists of businesses and individuals owing taxes on the
Internet. Connecticut pioneered this
high-tech shaming strategy in its Top
100 list, which collected more than $161 million in overdue tax
debts over its first seven years. Other
states have been collecting similar amounts with their own programs.
By taxing corporate owners, an effective corporate income
tax has two large advantages for states: the majority of owners are in the
richest 1% of the population, and many are not state voters. Corporate
income taxes are often the main tax that
out-of-state corporations and their shareholders pay for the public benefits
enjoyed by their companies.
One reason social services face funding crises is that state
corporate income tax revenues have dropped from 9.7% of all state taxes in
1980 down to just 5.7% by 2000. States are increasingly using a variety of tools to have
corporations pay their share, including
Combined Reporting: States are increasingly
requiring companies to use combined
reporting, listing profit reports for all subsidiary companies
together on state tax forms to prevent shell games where companies hide profits
through phony transactions among different corporate entities.
Decoupling: States can save revenue by
refusing to automatically grant special interest tax breaks handed out by the
federal government --"decoupling"
their tax code from the feds.
In a debate too often dominated by rightwing tax cut
rhetoric, there is a real opening for progressives to demand a fairer, more accountable
tax and budget system. The public has a strong commitment to funding both
social services and the long-term investments needed for economic growth, but state
residents are frustrated by governments that they believe tax low- and
middle-income residents too much and upper-income residents and corporations
too little. Hidden economic giveaways to companies receiving tax breaks
and government contracts only add to voters' suspicion that state budgets serve
those with money, not the average taxpayer. In response, a range of
reforms at the state level are creating more transparent tax and budget
decisions and strengthening voters' trust that their tax money will actually go
towards the important public services that they do support. These approaches include:
On Monday, July 22nd, over one hundred and fifty
state legislators, labor leaders, and advocates participated in "Building
a Progressive Majority in the States," a joint annual meeting of the
Progressive States Network and the National Labor Caucus. Taking a cue from the opening plenary
policies for an economic downturn,
the conference focused on strategies for confronting the most
important issues facing America's working families, including
affordable health care, smart immigration policy, workers' rights,
green jobs, clean energy, and tax and budget reform. To address these
issues in more depth, PSN policy experts joined state legislative
leaders in smaller workshops that gave participants a chance to share
best practices and model legislation while developinglegislative
and winning strategies for 2009.
As states face another economic downturn and growing budget deficits,
expanding access to coverage may seem like an impossible goal.
However, there are steps states can take to generate revenue and
"stretch" health care dollars to ensure access to health care. These include using existing tobacco-settlement dollars dolely for health care, instituting employer pay-or-play requirements, improving prescription drug purchasing, improving chronic care management, and ending corporate tax loopholes.
on the top issues dominated Kansas’ legislative session and prevented
movement on most significant legislation. This generally played out to
progressives favor as the legislative majorities top priorities for the
session were misguided immigration policies and granting permits for
two coal-fired power plants that the executive branch had previously
Lawmakers made notable gains on several fronts, with new progressive
leadership elected in 2006 making good use of their positions:
Health Care: Lawmakers enacted the HealthFirst initiative (SB 540)
requiring insurers to offer a standard "wellness plan" to small
businesses with targets for premiums to be priced at 10% of the
previous year's state median wage, roughly $262 per month. The plan
a person's out-of-pocket medical expenses and seeks to achieve cost
savings by emphasizing preventive measures that are typically available
only to large businesses. The legislation also outlaws insurers from
developing competing plans designed to undercut the new program.
With a last minute deal to close a billion-dollar deficit, Minnesota had a good session that would have been a landmark one -- if the Governor had not vetoed more bills (34!) this session than in any other since World War II.