New GOP Wave Pushes Pro-business Agenda in States

Thursday, 23 Dec 2010 03:41 PM

 

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Having won big in the fall elections, Republicans preparing to take over statehouses around the country are proposing to cut corporate taxes, weaken union clout and rewrite laws on discrimination, whistleblowers and injured workers to the benefit of employers.

In short, they intend to push through a business lobbyist's wish list. In some cases, these priorities may even take preference over their short-term costs to state governments, many of which will start the year billions of dollars short.

"It's going to be a good year for businesses," said Missouri Sen. Brad Lager, the commerce committee chairman in a state where Republicans won historic legislative majorities.

When a new wave of politicians takes office in January, Republicans will hold a majority of governorships and their greatest number of state legislative seats since 1928 — giving them the muscle to enact the pro-business agenda they promised to voters concerned about high unemployment and an economy that has yet to make its big rebound following the Great Recession.

But those pro-business policies are in some cases theories — not yet clearly proven to create jobs. Next year could initiate a historic test of these ideas. And if they do work, the measures could take some time to produce the kind of growth that results in higher tax revenue for cash-strapped states.

In the meantime, each new business tax break enacted could add to what the National Conference of State Legislatures forecasts to be an $83 billion shortfall for the upcoming budget year in about two-thirds of the states.

Advocates for education and social services fear that will only deepen the short-term spending cuts coming their way.

"We question if that pool of proposals are really business-friendly or not," said Amy Blouin, executive director of the Missouri Budget Project, a nonprofit group that analyzes how fiscal policies affect low- and middle-income families. "We're at the point where the result would actually be reductions in education, and businesses tend to care at least as much about the quality of education and communities and services as they do about the tax structure."

One of the first places to test the new pro-business push will be Wisconsin, where Republican Gov.-elect Scott Walker has promised to call the new GOP-led Legislature into an emergency session on his first day in office Jan. 3.

Walker wants to lower taxes on businesses with fewer than 50 employees, impose new business-friendly limits on liability lawsuits and transform the state Commerce Department into a public-private partnership to lure companies to the state.

"I think it's basically put-up-or-shut-up time," Walker said after his November election. "We have a mandate from the voters of the state, and it's one we don't take lightly."

In Michigan, voters elected the former chief operating officer of computer manufacturer Gateway Inc. to turn around a state that has consistently had one of the highest unemployment rates in the nation. Republican Gov.-elect Rick Snyder immediately chose the former president of the Michigan Economic Development Corp. to lead his transition team.

"The business people we represent across the state are very excited about this change of leadership," said Rich Studley, president and CEO of the Michigan Chamber of Commerce.

Snyder wants to eliminate the Michigan Business Tax, which generates about $2.2 billion annually, and replace it with a lower corporate income tax projected to produce about $700 million for the state. Advocates for social services fear that could nearly double Michigan's projected budget shortfall to more than $3 billion in the 2012 fiscal year.

"Without any additional revenues, it's hard to imagine filling that gap and not having just a devastating effect on social services and human services," said Karen Holcomb-Merrill, the state fiscal policy director for the Michigan League for Human Services.

In Iowa, Republican Gov.-elect Terry Branstad has said his plan to cut commercial property tax rates could cost the state up to $500 million over four years.

The theory behind cutting corporate tax rates is that businesses will be more likely to locate or expand in a state if they can keep more of their profits.

But the Congressional Budget Office has cast doubt on how much corporate tax cuts actually help stimulate the economy. A January 2008 report by the office said "increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more," because decisions on whether to increase production depends on their ability to sell the product.

Such cuts haven't helped yet in California, where outgoing GOP Gov. Arnold Schwarzenegger forced Democrats two years ago to accept corporate tax cuts that cost the state an estimated $2.5 billion a year in revenue. So far, there is little evidence the cuts created jobs — unemployment has remained a steady 12 percent since the summer of 2009 — or boosted revenue: The state's lawmakers will again wrestle with a huge budget gap in 2011.

The pro-business efforts extend beyond policies that will affect a state's budget. In Oklahoma, where Republicans seized the governor's office and increased their legislative majorities, incoming leaders such as Gov.-elect Mary Fallin want to lower workers' compensation costs for businesses and overhaul the civil justice system to reduce liability insurance costs for doctors and businesses.

In Missouri, GOP legislative leaders — who must work with a Democratic governor — want to rewrite laws governing lawsuits by alleged whistleblowers and victims of discrimination and workplace injuries. They contend the current laws are unfair to businesses. And Missouri Sen. Rob Mayer — the likely next Senate leader — wants a "right to work" law that would prohibit union membership and fees from being a condition of employment.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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