Every state or municipal government will eventually face the question of whether to raise taxes.
Every state or municipal government will eventually face the question of whether to raise taxes. Since the era of George H.W. Bush, officials answer increasingly "No."
"It’s politically hard to make a case for tax increases, and particularly at a time when people have less money in their pockets," said Lucy Dadayan, a senior policy analyst with the Nelson A. Rockefeller Institute of Government.
The nation’s reluctance to talk taxes has resulted in a drop in borrowing for needed infrastructure as well as missed opportunities to take advantage of historically low interest rates to finance long-term projects. The political response to rebuilding the Washington D.C. Metro, the nation’s second-largest subway system, has been, don’t expect a bailout.
States increased taxes by $33 billion in response to the Great Recession, 38 percent less than the $54 billion raised after the 1990 recession, according to a 2015 study by the Rockefeller institute.
Meanwhile, some states still haven’t recovered completely from the 2008- 2009 financial crisis. At some point, something will have to give. Sooner or later they’ll have to raise taxes.
"It’s inevitable," Dadayan said. "Otherwise, the fiscal systems are not going to be sustainable over a long period of time."
George H.W. Bush’s famous 1988 mantra, "Read my lips: No new taxes," has stuck with state and local government officials to this day, said Emily Evans, a former Nashville councilwoman who is now a managing director at investment research firm Hedgeye Risk Management.
"We are not past that point at all," said Evans. It varies, "depending where you are. If you’re in a really deep red state like Tennessee, we’re really not past it. If you’re in the purple and blue states, there’s a whole lot more open mindedness about it."
While Bush’s promise had an impact, so did what happened afterwards, she said. The president eventually raised taxes and didn’t win a second term. "That stands in the minds of most elected officials as a serious problem," Evans said. "If I raise taxes, I won’t get reelected. That’s the equation. That still is a big part of the thinking that goes into those decisions to vote ’yes’ or ’no’ on new tax projects."