In this second part of the halftime report for Tax Foundation Forum: Making Sense of Profit Shifting, we discuss the key takeaways from the first half of our series on profit shifting (read part I here). In this post, we...
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Delaware, Bad Tax Policy, and the "Slippery Slope" as a Rhetorical Device
Milton Friedman once said that “nothing is so permanent as a temporary government measure.” I’ve elsewhere modified that statement to say there’s nothing so permanent as a temporary tax increase. While snarky, I’ll admit that my idiom doesn’t always hold true, and I was happy to be proven wrong last year when Arizonans voted against a teacher’s union-sponsored initiative that would have continued a sales tax hike that was originally sold to voters as a temporary measure.
Delaware might be a different story this year though. Governor Markell has recently proposed making permanent the 2009 increases in the state’s income tax (the top bracket rose from 5.95 percent to 6.95 percent), franchise tax, and gross receipts tax (perhaps the most destructive tax in creation).
The problem of course is that these tax hikes were sold to taxpayers as temporary solutions to economic crisis. In fact, 30 states enacted tax increases in 2009, which some hailed as a “reasonable response to shortfalls.” But now, these temporary measures are the status quo, and the narrative has become that these taxes are already in place, so the state must look to “stabilizing [its] revenue situation.”
I’m generally not a fan of slippery slope arguments, but I think giving in to temporary tax hikes today almost necessarily means you’ll have to engage in a tax battle in the near future to keep them from becoming permanent. The status quo is a powerful argument. The speeches almost write themselves.
More on Delaware.
Follow Scott Drenkard on Twitter @ScottDrenkard.
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