JACKSON — Last week, the New York Times sounded an alarm that as the nation’s economy falters, at least half of the states are already scrambling to plug gaps — big ones in most cases — in their budgets because of revenue shortfalls.
So far, we’ve heard nothing out of Gov. Haley Barbour about the budget shortfall Mississippi is doubtless facing and how he plans to deal with it.
For most of the past two years, Mississippi’s revenue intake has been living off the millions of dollars of federal money generated by Hurricane Katrina. A while back, that cash pump ran dry. Anticipated tax collections this fiscal year, however, haven’t yet declined sharply.
Some fiscally knowledgeable Mississippi lawmakers, however, say with the 2009 budget yet to be tackled, the state faces a $500 million revenue hole. Remember, during the last recession in 2003, Barbour got elected by blaming Ronnie Musgrove for causing what Barbour contended was a $720 million “deficit.”
Of course, there was no budget “deficit” under state law, which bars the Legislature from spending more than anticipated revenues. There was a stiff revenue shortfall in 2003 (not as much as $720 million) and though many (the writer one of them) advocated raising some taxes to prevent major damage to vital programs, Gov. Ronnie Musgrove, facing re-election, shied away from a tax hike.
Instead of raising some new revenue, Musgrove and legislators cobbled together a “balanced” budget by making severe cuts in state programs (higher education took a big hit) and emptying rainy day funds, as well as dipping into the tobacco health care trust fund. Obviously, Musgrove in his race with Barbour got no political credit for avoiding raising taxes.
As The Times’ story relates, some states are cutting major programs, while others are increasing taxes — even in such anti-tax states as Kentucky and Maryland.
Barbour, whose first term came amid national economic recovery (with state coffers boosted by Katrina money), now has no re-election pressure hanging over him. It’s an ideal spot to raise some taxes to keep vital services from being hurt, possibly irreparably.
How state administrations deal with recession-sparked revenue shortfalls is of critical public interest because citizens expect quality state services. Higher education, as well as public schools, according to The Times story, have been hit hardest so far in the states which are dealing with revenue shortfalls by cutting spending. Close behind are cuts in health care — Medicaid and SCHIP (children) programs.
Mississippi is already in at least a $90 million hole for Medicaid funding because the federal government wants back a Katrina bailout the state had received to sustain the program after the storm. Because Medicaid — with the feds matching state funds four to one — is the health care lifeline for at least a quarter of Mississippi’s population, failure of the Barbour administration to adequately fund Medicaid and SCHIP would doubtless resonate nationally this presidential election year as symbolic of Republicans’ disdain for the welfare of the nation’s poor.
Barbour, sticking to his “no new taxes” theme song, thus far has refused to yield to an increase in Mississippi’s ridiculously low (18 cents) cigarette tax pushed by a wide spectrum of health care and medical organizations in the state — and a majority of state legislators — as the obvious source to raise funds needed to save Medicaid.
What makes Barbour’s stand on the tobacco tax hike so ridiculous now is that Kentucky, one of the states where tobacco is a major crop, is in the process of raising its cigarette tax 70 cents a pack. Maryland has already raised its cigarette tax $1 (to $2) a pack. Beyond that Maryland increased the state sales tax from 5 to 6 cents, and (note this) hiked its corporate income tax top bracket from 7 to 8.25 percent.
Thus far Barbour’s only tax response is to create a 36-member commission to study the tax system. His commission,which held its first meeting on Monday, is made up mostly by his cronies in the business world. Outside of Derrick Johnson, president of the state NAACP, the working class isn’t represented.
It doesn’t take a blue-ribbon committee to find the two glaring inequities in the state tax code: the general sales tax is too high, and the income tax is too low. Mississippi depends too heavily on the 7 percent sales tax — paid disproportionately by low-income consumers — and too little on the income tax, which has a top adjusted income bracket of 5 percent, lower than what it was 30 years ago.
Something’s obviously wrong about an income tax system where individuals pay two-thirds of the taxes and corporations only one-third. Totally unlike other states, corporate income is taxed at the same rate as individuals.
