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DEL.ICIO.USThe coming battle over tax cuts
The Atlanta Journal-Constitution
Georgia’s top two Republican leaders clashed last week, and no one noticed. Perhaps not even the participants.
Obviously, we’re not talking about the deeply personal feud between Gov. Sonny Perdue and House Speaker Glenn Richardson.
Last Tuesday, the governor clearly identified Richardson as the uncooperative villain who caused him to “un-veto” the $700 million budget bill, kill the $142 million property tax rebate, and abandon plans for a special session of the Legislature.
We’re talking about the other confrontation. Between the governor and his now-indispensable ally, Lt. Gov. Casey Cagle.
Hours after Perdue withdrew his veto, Cagle had this to say to reporters: “We’ll come back next year and be talking about how we can pass meaningful tax cuts for the citizens of Georgia. I’ve never seen a tax cut I didn’t like, including this one. But under the financial circumstances that exist, it was difficult for the governor to agree to it.”
Cagle was giving voice to a Republican politician’s natural instinct. Having backed Perdue’s decision to extinguish one tax break, the lieutenant governor must now prove to the base that he’ll support another, perhaps larger one. We’ve heard GOP senators and House members say the same thing. They’re not allowed to forget that, for them if not for Cagle or the governor, ’08 is an election year.
The problem is that Cagle’s remarks contradicted, at least in spirit, the man he was defending.
In announcing his decision to apply a line-item veto to the property tax rebate, Perdue said he was motivated in part by a slight dip in the latest revenue figures. But the weight of the governor’s argument was this: the state of Georgia has underfunded its pensions and other benefits for retired workers by $17 billion.
To pay it down, like a house mortgage, will require an additional $1 billion a year in state revenues for the next 30 years. Each payment would amount to 5 percent of the current state annual budget.
“When we shirk that responsibility, we simply are enjoying a so-called tax cut for ourselves — to consume it upon ourselves and put the obligation onto our children and grandchildren,” Perdue said. “That’s essentially what we’re saying — ‘We want it now and let them pay for it.’”
This doesn’t sound like a man who’ll be ready to participate in an orgy of tax-cutting in January. The same financial pressures that Perdue cited last Tuesday will still be there next year.
This news will no doubt make the governor uncomfortable, but one of Perdue’s biggest defenders last week was Alan Essig, executive director of the Georgia Budget and Police Institute. Essig has ties to the past administration of Roy Barnes, the Democratic governor unseated by Perdue in 2002.
Essig sees a divide building between Republicans who have accepted their new roles as stewards of a $20 billion-a-year operation, and those who cling to the rhetoric that got them there.
“That’s the clash. There are those who ideologically think tax cuts are the answer for everything, and are ignoring what state government’s needs are,” Essig said. “And then there are the responsible conservative Republicans who say, ‘We have to govern this state. How do we develop a tax structure that allows us to govern?’
“And I think the governor is in the responsible governing camp,” Essig said.
No conversion has taken place. Essig doesn’t think the governor perfect. Perdue’s proposed income tax cut for wealthier retirees is poor policy “and utterly political,” the budget analyst said. But Essig also called it an anomaly.
Even the corporate tax cut backed by Perdue in 2005 - $1 billion over 10 years - closed several huge loopholes for business, Essig said.
Next year’s session of the Legislature could be a defining one for Republicans, he said.
“Obviously, there’s going to be lots of pressure on [Perdue]. But if the Republican base - the bloggers and all that - force the Republican leadership into tax-cut fever, and if the governor and the lieutenant governor and the Speaker all get caught up in that, in the next six, 12, or 18 months, they’re going to drive the state into a brick wall,” Essig said.
“Because we don’t have the money to do that.
Comments
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By Harry
May 13, 2007 8:32 PM | Link to this
We have an unfunded pension liability because we have not addressed pension reform. State pensions need to become more modest, and we need to move from defined benefit plans to defined contribution plans. Perdue should tie pension reform into his comments.