By Frank Donatelli | The Washington Times
As the budget season rolls on, a remark- able trend is emerging: States with Republican governors and legislative majorities are balancing their budgets and reforming key programs without raising taxes. Conversely, states with Democratic governors and legislatures are content to raise taxes without basic program reforms. This philosophical and partisan divide focuses on the age-old question of the proper size and scope of government, and Republicans and Democrats are providing starkly different answers.
Republican-led states that have enacted budgets without tax increases include Ohio, Wisconsin, Pennsylvania, Indiana, Maine, Texas and Florida. Pennsylvania, Texas and Florida reduced spending in absolute terms. In addition, virtually all of these states offered some tax reductions for business investment designed to generate more job growth. Indiana cut its corporate tax rate. Maine cut its top marginal individual rate at a time when Democratic governors are trying to raise theirs. Pennsylvania phased out the business-franchise tax for thousands of small businesses. New Jersey put a cap on local property tax increases, and Ohio phased out the “death tax.” Republican leaders in those states realize that while the spending side must remain in check, growing revenue and generating new jobs is the long-term answer to their states’ fiscal health and financial future.
One long-term reform pushed by many states involves public pensions and health benefits. In too many states, the state employees pay very little toward their own retirement and health care. These plan benefits are far more generous than those available to workers in the private sector. States that have reformed public pension and health programs by requiring greater employee contributions include Wisconsin, Ohio and New Jersey. Maine strengthened its program by capping cost-of-living increases. An allied reform enacted in some of these states limits the ability of public-employee unions to bargain for overly restrictive work rules. State and local officials must have the flexibility to use employee talents in the most effective and efficient manner possible.