Americans payng higher taxes under Bush tax plan?

Are Americans paying a higher rate of taxes under under the Bush tax plan due to higher state and local taxes and higher property taxes? Are Americans receiving less for their tax dollar?

Well, there are two questions here:

(1) Are higher state and local taxes and higher fees for services (e.g., tuition at state universities) due at least in part to increased costs to federal mandates and homeland security costs offsetting the federal income tax cuts?

(2) What about the long term effects?

The answer to the first question is that if you are rich then definitely not. The taxes that have been cut are the most progressive taxes we have and the taxes and fees that have been raised on generally the most regressive. So, the well-off will make out very well. For the poor and middle class, my wild-ass-guess is that the higher state and local taxes are offsetting some but generally not all of the tax cuts…although it may be more than offsetting the cuts already for some people (e.g., people with kids going to state schools). On the other hand, the tax cuts for these people are not generally that large a fraction of their total tax burden anyway.

On the second question, I think in the long term you would have to have a net transfer of money from the rich to the poor from the Bush tax cuts unless you completely undo the tax cuts in the way that they were implemented (i.e., by raising the taxes mainly on the wealthy) and undo the tax hikes and fee hikes that have occurred at the state and local level. After all, I can give you money by taking a cash advance on your credit card, keeping much of it for myself and my friends but giving you a part of it. Over the short term, you will come out ahead, but eventually you will have to pay the bill.

The assumptions made on the bushtax page are erroneous. They say that Bush is largely to blame for the fiscal crises in states that have forced them to raise taxes. That is completely untrue. States had to raise taxes because their tax revenue dropped due to the recession. These states had two choices – cut spending or raise taxes. Most states did a combination of both. This is purely state policy, however, and has nothing to do with federal budget or tax policy.

Contrary to what most people assume, Bush did not cut any funding for government services (and thus make states raise taxes to restore the lost federal revenue) and Bush has not passed on any unfunded federal mandates.

If it could be demonstrated that the slight increase in state unemployment insurance that’s being deducted from my paycheck is somehow a tax increase caused by Bush, then I can say ‘yes’.

Otherwise, I’d have to say ‘no.’ The only reason I pay more taxes now than I did in 2000 or 1999 is that I make a lot more money now than I did then.

No Child Left Behind?

The No Child Left Behind Act is not an unfunded mandate. At the root of this claim is a basic misunderstanding of how federal education funds work. The federal government offers funds to states and school districts, and in return, these states and school districts must meet certain standards. If states and school districts don’t want to meet these standards, they can simply refuse the money. The feds aren’t forcing anyone to do anything. They are saying, however, that if you are going to take their money, you had better produce results. If the new standards under NCLB were really taking more resources from school districts than they receive from the feds, as would be the case under an “unfunded mandate,” then it would make sense for them to simply refuse the money. Why would anyone take money if the strings attached to that money cost them more than the money they were being given? It makes no sense.

The NEA link provided little information to back up their contention that NCLB is an unfunded mandate. Here’s a much more scholarly paper from the Senate Republican Policy Committee on the falseness of calling NCLB an unfunded mandate. Sure, it’s a biased source, but it’s hard to argue with their facts.

Well, I would suggest two possible issues here:

(1) The question that is relevant is how much money they lose if they don’t comply. Do they lose just the additional funds allocated under NCLB or all federal funds? If they lose all federal funds (including those that came before NCLB) then it would indeed amount to a funding cut by the feds if they refused to comply and were denied these funds. It is not clear to me which is in fact the case.

(2) There might be a lot of political pressure on the states to adopt and meet the higher standards even if it meant they would have to throw in more money of their own to do so.

It is more than just the NEA that is claiming that it is an unfunded mandate. Your own source (which is indeed biased and presenting only one side of the story) itself mentions many scholarly papers (and even aspects of the GAO study) that they dispute. And, my guess is that if we read through them, it would be hard to argue their facts either. In other words, it would take a more careful assessment to arrive at the truth of the matter. Alas, I don’t have the time right now to do the research necessary.


(1) The additional security measures necessary after 9/11 have imposed lots of new costs on federal, state, and local governments. In fact, this is the excuse that Bush gives to justify how rapidly he has increased federal spending. So, the fact that Bush chose to force the state and local governments to pay for these increases themselves rather than providing money for them to do so is a choice that he made to put this burden onto the state and local governments and force them to raise taxes & fees or cut services. Basically, he chose to look like the good guy by lowering federal taxes while necessitating that the states and localities would have to raise their taxes so they would look like the bad guy. As I have already noted, besides passing the buck, this strategy also has important distributive implications since the federal income tax is the most progressive around and most state taxes are actually regressive.

(2) Of course, you have avoided the issue of the fact that the money he gave in tax cuts is just borrowed money…i.e., running a higher deficit…that will have to be paid back eventually.

It’s not a case of extra funds at all. There aren’t separate funds for NCLB activities. In order to get federal funds, school districts must comply with the NCLB law. NCLB funds aren’t separate from other federal funds going to elementary and secondary educational facilities. The No Child Left Behind Act was the renewal of the Elementary and Secondary Education Act, which authorizes all federal elementary and secondary education programs. All money going to states and school districts is covered under the NCLB Act(except funds for special education, which is covered under the Individuals with Disabilties Education Act). So if states renounce the “mandates,” they lose all federal funds, except special ed funds.

The federal government has essentially said that here is a pot of money for states, but in order for states to get that money, they must meet standard X, Y, and Z. There is no mandate in that. For me, it’s that simple. Any attempt to label NCLB as a mandate fails the basic definition of a mandate. No one is forced to do anything. Any state can opt out at any time.

Please tell me what programs Bush “forced” states to implement? I’ll agree that states beefed up security after 9/11, but they did so as a result of events, not a federal mandate. No federal law was passed that forced states to spend lots of money on security. In fact, Bush recognized that state were doing this, and as a result the feds started offering grants to states in order to help. Bush isn’t “forcing” anyone to do anything. He, in fact, is helping states fund initiatives to beef up their security. He did nothing to “necessitate” that states would have to raise taxes.

Yes, but if they opt out then the federal funds that they would receive get cut. So, they must either comply with a mandate or lose the federal funds that they used to get. In other words:

Choice #1: Don’t comply and lose the federal funds. In this case, they lose money that they used to get.

Choice #2: Comply and keep the funds. But, compliance may cost quite a bit. Let’s say, as an example, that a district receives $2 million from the Feds (both before and after the NCLB goes into effect) and that compliance would cost an additional $1.5 million. This means that, while it is still to their advantage to comply and receive the funds, they are going to be netting only $0.5 million from the feds when they used to get $2 million. Unless they have a magic wand, they will either have to cut programs (in a way that doesn’t impact compliance) or raise taxes.

Good God people. You are such literalists. Governing is about making choices. After 9/11, Bush made the following choices:

(1) Keep his tax cuts in place and propose further cuts.

(2) Raise federal spending because of the increased costs of security and defense for the federal government.

(3) Give only very little to the states and local municipalities in order to help them with their increased security costs. [Each time that the Feds raise the terror level, the responsible local and state agencies feel compelled to beef up security levels whether it is technically required by any laws or not. Isn’t that sort of the point of the terror levels?] I believe the Dems proposed giving the states and local government more money to deal with these issues.

As a result of these choices, states faced increased costs which they had to meet by either raising taxes and fees or cutting services.

If Bush had made different choices, such as not proposing further tax cuts or even rescinding some of the cuts to the wealthy and then given more generous aid to the states to meet security costs then the states would not have had to raise taxes.

If you favor cutting taxes mainly on the wealthy in a time when the states need more money to deal with security, thus causing the states to raise taxes mainly on the non=wealthy, then by all means, Bush is the man for you. That is the sort of choice it seems he’ll make every time.

Here from the liberal think-tank Center on Budget and Policy Priorities is more than you ever wanted to know about the ways in which the federal government is complicit in the fiscal crises affecting the states. I know that the Medicaid issue in particular is one that is causing particular problem at the state and local level here in New York.

See, in particular, Figure 3 in that report and the text around it discussing how the constraints on the federal budget imposed by the tax cuts are inevitably limiting what the federal government can and will do in regards to the states and local municipalities.

In the end, it really comes down to one thing: There ain’t no free lunch! What the Republicans discovered is that they could give huge tax breaks to the rich as long as they threw a few bones to everyone else, so that the average Joe would say, “Well, maybe it ain’t so fair that the big guys get much more than me in tax relief, but at least I am getting something which is better than nothing.” What people have to realize is that although it may not be exactly a zero-sum game, it ain’t a game with a hell of a lot of free money floating around either. And, if someone is getting huge tax cuts, you better believe that one way or another, you are going to pay for much of them!