Read Our Lips
The tax revolt lives.
The most significant election result from Super Tuesday this year was not the primary returns for George Bush or Bill Clinton. Not by a long shot. The most important news was that Oklahoma voters overwhelmingly approved a little-noticed ballot initiative requiring a three-fourths vote of the legislature to enact any subsequent tax increase. This is the most restrictive antitax measure ever passed in any state.
The vote constituted a major victory for the underdog Oklahoma Taxpayers Union, which overcame fierce opposition and big dollars from virtually all of the power brokers of the state: the governor, the legislators, the Oklahoma Chamber of Commerce, the unions, the education establishment, and the media. This may be the biggest win for state taxpayer groups since Proposition 13 was approved by Californians 14 years ago.
The tax rebellion is not brewing only in Oklahoma. In the latest two November elections, taxpayers have dumped nine tax-raising governors—Republicans and Democrats alike. Last year, nearly two-thirds of Oregon citizens voted in favor of a ballot initiative that is slashing property taxes by 40 percent over five years. In the fall, Michigan will vote on an initiative cutting property taxes by 30 percent. Gov. William Weld in Massachusetts has introduced legislation this year requiring a two-thirds vote of the legislature to enact any tax hike.
Nowhere is the antitax sentiment more evident than in Connecticut and New Jersey, where state lawmakers have been under siege from enraged armies of middle-class taxpayers. These two states have become showcases of the modern-day tax revolt in action.
At the center of the turmoil are the two states' self-described "progressive liberal" governors: Connecticut's Lowell P. Weicker and New Jersey's James Florio. When elected, Weicker and Florio were said to be the torchbearers for the left. Both men fashioned themselves as the populist alternatives to the greed and selfishness of the Reagan era. Both vowed to erase the errors of the 1980s and implement a program of reverse Reaganomics in their states. They would soak the rich and recapture the middle class with bigger but better government. The left watched with eager anticipation. No one then fathomed the extent to which tax-and-spend progressive populism would bomb.
When Lowell Weicker was a senator, David Stockman called him "the biggest spender to bother calling himself a Republican in this century." Weicker flaunted his contempt for the policies of Ronald Reagan and reveled in his self-appointed role as the Republican party's consummate anticonservative. On election night 1988, Republican National Committee staffers openly cheered when Weicker was unseated by the more conservative candidate, Democrat Joe Lieberman.
For lesser politicians, such an ignominious defeat would have proved fatal. But in November 1990, Weicker won a razor-thin victory in the contest for the state house by running as an anti-establishment, third-party candidate. In the last week of the election, as the race tightened, Weicker saved his candidacy by airing television ads with a popular message: no state income tax for Connecticut.
Once in office, Weicker abided by this pledge for nearly a month, roughly until the time of his first budget. That budget called for a 4.5-percent flat-rate income tax, combined with a reduction of the sales tax from 8 percent to 6 percent, as the only "fair" way to close a $1-billion budget shortfall inherited from former Gov. William O'Neill.
But proposing an income tax was one thing, getting it through the legislature quite another. Weicker vetoed three successive budgets and vowed to hold the state capital hostage to fiscal paralysis until the legislature sent him a budget containing his tax plan. In late August, the governor won by the slimmest of margins: a single vote in each chamber.
Almost immediately legislators realized they had made a catastrophic miscalculation of the intensity of public opposition to the income tax. In October, a crowd of 50,000-plus—the largest political gathering in the history of Connecticut—marched on the state capital to protest the Weicker tax hike.
A University of Connecticut survey found that the protesters were almost a perfect cross section of the people of the state. McDonald's burger flippers, housewives, grandparents, and factory workers protested alongside Wall Street traders. The Teamsters sent 25 buses full of truckers to the rally; the United Steel Workers came in a 200-truck caravan; and the United Food Distributors union contributed $10,000 to pay for the rally.
The protesters demonstrated their anger in a variety of ways. They brought wooden replicas of military tanks and aimed them at the Capitol; hanged Weicker in effigy; carried banners that read "DUMP WEICKER THE TAX HIKER" and "CUT GOVT FAT, START WITH LOWELL WEICKER"; shouted profanities at Weicker when he made a brief, ill-advised appearance; and erected a "wall of shame" with the names of every legislator who voted for the income tax. Many brought October pay stubs, pointing in anger at the $50 or $70 now withheld each pay period thanks to Weicker.
That night, Weicker escaped to the New London Opera House, where he had agreed to participate in a program by reciting the poem "Ode to the Working Man." When his limousine pulled up in front of the concert hall, a swirling mob of nearly 1,000 tax protesters greeted him. At the sight of Weicker, the crowd erupted, breaking through the police barricades and chasing their governor into the safety of the building. After the concert, Weicker again narrowly eluded the picketers by sneaking out the back exit. As Weicker was whisked away in his limousine, hundreds of his furious constituents chased him down the street. "It was like watching a scene from the French Revolution," observed Joe Markley, executive director of the Connecticut Taxpayers Committee.
Because of such public hostility, Weicker now fears that taxpayers pose a serious threat to his health and safety. Between September and December of last year, the state spent more than $80,000 of the new income-tax revenue to provide the governor with extra bodyguards and police protection.
Weicker has vowed not to back down. In a speech at Gallaudet University a week after the antitax rally, he attacked the Connecticut voters as "apathetic Rip Van Winkles." He declared, "The 1980s brought selfishness to new heights. Today we're picking up the refuse of that philosophy." But the people of Connecticut don't want an income tax, period. They are as passionately against it as Weicker is for it.
Legislators who voted for the tax have been pummeled with complaints from their constituents, and many have already renounced their support for the idea. In December, the Connecticut legislature convened a special session and voted by a wide margin to repeal the Weicker taxes. Weicker, however, vetoed the repeal bill, and the legislature fell a handful of votes short on the override attempt.
For now, Weicker holds a winning hand. In his inimitable patrician style, he has insisted that even if every resident of the state were to sign a petition urging repeal—and taxpayer groups have come damned close—only one vote counts, and that's his. He will continue to veto a repeal bill.
As a long-term strategy, Weicker and his liberal co-conspirators in the legislature plan to shave off support for repeal by calling for "repair." One of the approaches favored by the Democrats is to raise the rates on the rich and lower them on low-income families. Tax protesters say they will have none of this.
"Weicker's repair is unacceptable," huffs Tom Scott, chairman of the Connecticut Taxpayers Committee and probably the most influential leader of the taxpayer movement. "It's like asking Dr. Frankenstein to perform plastic surgery on his monster."
Still, Weicker has recruited influential allies. The Connecticut media regularly trumpet his tax plan, arguing that it has brought the state's tax system out of the ice age. The state's largest newspaper, The Hartford Courant, displays growing impatience with the public's "mighty and mindless tirade" against the tax. And a New York Times Magazine cover article glorified Weicker's budget performance ("this is the price you pay for being right") and congratulated the governor for being "a man muscle-bound by morality."
Weicker's best ally, though, has been big business. Aetna, CIGNA, and United Technologies are among the dozens of influential corporations endorsing Weicker's tax hike. The Connecticut Business and Industry Association, the lobbying arm of the state's major corporations, has infuriated taxpayers by assuming the role of cheerleader for the Weicker budget with fraudulent claims about the economic benefits of an income tax. CBIA regularly runs radio advertisements reassuring listeners that Weicker's "tax reforms" will create new jobs for Connecticut and that the budget package contains "powerful tools for controlling future state spending." "Big business signed a pact with the devil," charges taxpayer leader Scott.
In their defense, the corporate groups note that Connecticut's tax system has always been skewed against business. Although it never had a personal income tax, the state imposed a 13.5-percent corporate income tax—by far the highest in the nation. Weicker bought the support of business groups for a personal income tax by promising to cut the corporate-tax rate to 11.5 percent.
It was a woefully bad deal. The budget pact has been anything but a boon to the state's business climate. In the first five months that the income tax was in effect, the state lost more than 20,000 jobs. Connecticut's business-bankruptcy rate has surged to an all-time high. Its overall business-barometer index is now the third worst in the nation.
Small business owners understand the economic effects of the income tax. A survey by the Connecticut chapter of the National Federation of Independent Businesses found 68 percent of the members oppose the income tax as a solution to the Connecticut budget crisis. "Our members flat out hate the idea," says Dan Kiley, president of the Connecticut NFIB. "It takes money out of their payrolls and it has caused a general erosion in consumer confidence."
Murray Gerber, president of Prototype & Plastic Mold Co., a $6-million-a-year firm employing 65 toolmakers, says the imposition of an income tax may be the last straw for him. He is looking to relocate in Virginia.
Gerber is scornful of the idea that the income tax will create jobs in Connecticut: "The income tax has not only slowed down the economy here," he says, "it will make a recovery impossible." Thanks to the economic contraction in the wake of the income tax, the state's tax receipts over the last several months are already crawling in at $175 million below projections. Weicker is discovering what fellow pledge breaker George Bush did last year: You can't reduce a budget deficit if the economy isn't growing.
Meanwhile, the taxpayer groups of Connecticut—literally dozens of them have sprouted since Weicker's election—are demanding unconditional surrender. And they brim with confidence that they will win. Tax activist Scott says that taxpayers have a simple but effective strategy: "Either the legislators vote for repeal this summer or the public will vote to repeal their political careers in November."
Anyone who believes this is an idle threat hasn't witnessed the recent political upheaval in New Jersey.
The tale of Jim Florio's meteoric fall from grace is even more remarkable than Weicker's—if only because Florio had so much farther to fall. During his decade-long service in the U.S. Congress, Florio was one of the glamour boys of the left. His voting record and his self-appointed role as Reagan basher earned him impeccable liberal credentials. His political stock soared.
Almost from day one of his 1989 gubernatorial campaign, Florio had the look of a winner. He spouted a slick populist message—promising to chop New Jersey's skyrocketing auto-insurance rates, reinvest in the public schools, clean up the beaches, and provide relief from high property taxes. Meanwhile, his politically inept Republican opponent, Jim Courter, spent most of the campaign flip-flopping on abortion.
Florio skillfully deflected the only real issue that might have wounded him—the "tax-and-spend liberal" label—by declaring repeatedly during the race, "I see no reason to raise taxes in New Jersey." This was reassurance enough for the voters. In November, Florio won in a cake walk, capturing two-thirds of the vote.
Clearly emboldened by the size of his victory, once in office Florio no longer saw any reason not to raise taxes. With the support of the Democrat-controlled legislature, within 100 days Florio had expertly rammed through a $2.8-billion tax package—at that time, the largest tax hike in the history of any state. Roughly half of the money would be devoted to a school finance bill, and the other half would close a budget deficit inherited from former Gov. Tom Kean, a Republican. The centerpiece of the tax proposal was a soak-the-rich doubling of the state income-tax rates from 3.5 percent to 7 percent. The bill also raised the state sales tax from 6 percent to 7 percent.
Around the nation, the liberal establishment toasted Florio and his tax program. New York Times columnist Tom Wicker called Florio's agenda "liberalism for the 1990s." Others described Florio as a "cutting edge Democrat." The Washington Post began to ask why, if Florio could overcome the tyranny of "no new taxes," congressional Democrats could not summon the courage to do the same.
The political calculus that lay behind the Florio tax plan was disarmingly simple: Tax the very rich, and pass out the goodies to the grateful poor and working class. It was precisely the kind of can't-miss redistributionist political game plan outlined in Kevin Phillips's left-wing manifesto, The Politics of Rich and Poor.
But while the media fawned over the Florio taxes, the New Jersey middle class was erupting in rage. For weeks on end, radio talk show hosts spoke of nothing but the Florio betrayal—and their lines were jammed nonstop with calls from like-minded citizens. The outrage vented on these shows prompted two callers—John Budzash, a postal worker, and Pat Ralston, a real-estate agent who says, "Taxes were driving me out of my home"—to band together and create an antitax organization called Hands Across New Jersey. Within three weeks, the group had recruited more than 70,000 members, and within two months, it had gathered 800,000 signatures calling for a complete repeal of the taxes and a recall of Florio.
Trenton was soon under siege. In July 1990, Hands staged its first political rally. The event attracted a motorcade down Interstate 195 more than 10 miles long, with traffic so hopelessly congested that police were forced eventually to bar entry to the city. At overpasses on the interstate, spectators draped banners calling for Florio's impeachment. Amazingly, most of the protesters had voted for Florio just six months before.
Protesters of all stripes and colors hounded Florio everywhere he went in the summer and fall of 1990. In Camden, fifth-graders booed him off the school stage. In Princeton, at a speech to defend his budget plan, the audience drowned out Florio by blowing duck calls at him—to signify his lame-duck status. In Trenton, target photos of Florio plastered urinals in the State House. And in Cherry Hill, a women's-club gathering pelted him with rolls of toilet paper. This wasn't the populist uprising Florio and his cronies had envisioned.
One feature of Florio's tax bill was a new 7-percent excise tax on the sale of new trucks. The Trenton Times found that after the imposition of the tax, truck sales dropped by 90 percent in the state. The story concluded: "The new levy on heavy trucks was a complete failure. Expected to raise $44 million each fiscal year, the tax effectively killed off the truck sales industry in the state." The first repudiation of the Florio program came in early November 1990, when the legislature repealed the truck tax by a unanimous vote.
Next, the voters determined to exact a political price at the polls, and the first politician within their grasp was U.S. Sen. Bill Bradley. Never mind that Bradley had nothing to do with the passage of the Florio taxes. His transgression in the eyes of voters was wearing the same party label as Florio. For many New Jerseyites, this was sin enough: Bradley came within a hair of surrendering his "safe seat" to little-known Republican Christine Whitman, whom he had outspent by almost 10 to 1.
Florio swallowed hard and declared that he had received the voters' message—"their anger was directed at me." But instead of retreating, Florio, a former boxer reared on the streets of New York, instinctively went on the offensive. He barnstormed the state educating the public about the "fairness" of his program. He continually declared that 80 percent of the new taxes fall on the shoulders of New Jersey's super rich.
Florio is never more comfortable than when preaching the new-left gospel of greed and envy. He pummels his audiences these days with a blizzard of statistics from Kevin Phillips and other redistributionists. "Bear with me while I throw a few numbers at you," declared Florio at a recent Teamsters gathering in Atlantic City. "Top four-tenths of 1 percent, 7 percent of all gross income in 1980, but up to 10.4 percent in 1989. That means their share went up by 48 percent," he declared triumphantly as his listeners' eyes glazed over. At such gatherings, Florio seems genuinely puzzled as to why the New Jersey working class doesn't get that his program is in their best interest.
Sandy McClure, a reporter with the Trentonian who has covered the Florio administration for the last two years, seems to have the simple answer. "Florio's problem is that he has proven to be a lousy salesman with an unsalable product," she writes.
Last November, voters finally had the chance to vent their rage at the tax hikers in the legislature who contributed directly to this economic mess. They annihilated Florio's Democratic machine. The majorities once enjoyed by the Democrats in both chambers have been converted into veto-proof two-thirds majorities for Republicans. Across the state, in every election from state senator to municipal dog catcher, more than half the incumbent Democrats had their political careers involuntarily aborted.
This was the good news for tax-weary citizens. The bad news was that to rid themselves of the Florio Democrats the voters had to choose Republicans. Within 72 hours of their landmark victory, cowardly GOP politicians, most of whom had spent the better part of 18 months barnstorming throughout their districts trashing the Florio taxes, were backtracking from their repeal pledge. Once in the majority, the Republicans merely repealed the one-cent increase in the sales tax, eliminating only $600 million of the $2.8-billion tax increase. The hefty income-tax increases that have chased homeowners and businesses out of the state would remain intact.
The taxpayer groups in New Jersey are seething over the double cross. "We have been betrayed by the immeasurable egos of the Republicans who think they were elected on the basis of their character and charisma," bristles Pat Ralston of Hands. "We now know they are nothing more than political whores." Most of the Republican challengers received substantial donations from the teachers, state employee unions, and other constituencies with a financial incentive to preserve full funding of state programs. For such interest groups, the Republicans are proving to be outstanding investments.
Much more puzzling is why New Jersey business groups have joined the efforts to preserve Florio's taxing legacy. At recent state Senate hearings, James Coe, president of the 13,000-member New Jersey Association of Business and Industry, predicted that a tax repeal would create "economic chaos in the state." (Apparently the association does not consider a 154-percent rise in business failures sufficiently chaotic to warrant change.) James Morford, vice president of the New Jersey Chamber of Commerce, admonished members of the legislature who would "pursue a scorched earth policy on the budget."
Legislators, business groups, the unions, teachers, and the media have now all banded together in a full-scale propaganda campaign to convince the public of the havoc that would be created by a "scorched earth budget policy." Each day the press is full of new doomsday budget scenarios: furloughs for 65,000 government workers, 40 kids crammed into a classroom, disruptions in police and fire service, closing down public libraries, and other horrors.
Such apocalyptic claims are preposterous. After eight years of Kean and two years of Florio, New Jersey has the most bloated state budget in America. This is a state whose budget soared from $5.2 billion to $12.6 billion in just the last eight years. This is a state that spends $9,400 per student in the public schools—almost double the national average. This is a state with 600 school districts and more nonteachers on the public-education payroll than virtually any other state.
This is a state in which government employment mushroomed by 30 percent in the 1980s, while the population grew by only 6 percent. This is a state where the chairman of something called the Board of Regulatory Commissioners takes home a $95,000 government salary, the director of the New Jersey Sports and Exposition Authority makes $92,500, and the New Jersey Lottery Commissioner collects $82,500. And the scary thing is that there are literally hundreds of other such boards, commissions, and authorities with patronage jobs that pay salaries three to four times the state's median income. Is it really any surprise that New Jersey has a tax revolt going on among the working stiffs who pay the tab for this gravy train?
Ironically, the biggest winner in the Republican flip-flop on taxes has been Florio. "Florio's strategy," admits one of the governor's aides, "is to give the Republicans just enough rope to hang themselves." It would seem that already they have put the rope around their necks. Taxpayers now resent the Benedict Arnolds in the GOP as much as they do Florio.
But the Republican betrayal has only energized taxpayer groups. Aside from disposing of Florio in 1993—his approval ratings are still stuck in the mid 20s—they say they will not repeat the mistake they made in November and entrust reform to elected officials. Their latest efforts are directed toward amending the state constitution to allow ballot initiatives. This would enable citizens to bypass the legislature and enact significant tax relief unilaterally—as in California, Oklahoma, and Oregon.
But in both Connecticut and New Jersey, the nagging question remains: Can the taxpayer group succeed against the forces of Weicker, Florio, the media, big business, and the brigades of other well-funded special-interest groups dedicated to preserving the status quo? Or are the taxpayer groups, as their critics contend, merely a constituency of unorganized "mindless masses" lacking the requisite clout and savvy to serve as a force for fundamental change of the political culture?
In truth, it is too early to tell.
But in other states, lawmakers have observed the political wreckage in Connecticut and New Jersey and seem to have finally taken hold of the antitax message. This year, despite record state budget deficits, only four states—Florida, Maryland, New York, and Washington—are considering major tax increases. All the other states will eliminate the red ink through spending reductions.
Consider Florida. When Democratic Gov. Lawton Chiles recommended a $1.7-billion tax hike this year, his popularity plummeted and the legislators of his own party balked. The Wall Street Journal explained the lawmakers' cold feet this way: "With an eye to what happened in New Jersey, none wish to commit political suicide."
Indeed, the only politicians who seem to be ignoring the fury of the antitax movement in America today are George Bush and the Democratic leaders of Congress. Along with Florio and Weicker, they may be the next political casualties of the great tax revolt of the 1990s.
Stephen Moore is director of fiscal policy studies at the Cato Institute.