The Wall Street-fueled recession continues to wreak havoc on state budgets nationwide, forcing lawmakers to choose between unpopular tax hikes or deep cuts to much-needed public services. Just like in Illinois, our neighbors to the west are facing a major deficit as a result. With tax receipts in a free-fall, Iowa is grappling with a spending gap of close to $1 billion in Fiscal Year 2011. That's after the state implemented across-the-board cuts resulting in forced layoffs, employee furloughs, and cuts to social services. Democratic Governor Chet Culver, who has ruled out raising taxes, has proposed a series of small changes he argues would lift the state out of debt. But that's not the only idea out there. Taking a tip from the Showdown in Chicago last fall, liberal activists have a different plan to plug the hole: force the banks and corporate giants to pay.
At a rally in Des Moines yesterday, members of Iowa Citizens for Community Improvement (CCI) and Chicago activists from National People's Action stormed the statehouse demanding that lawmakers get tough on big banks and put the needs of Iowa citizens first. Their legislative agenda is broad, but it centers on a proposal requiring combined corporate reporting so that multi-state companies pay their fair share of state corporate income taxes -- rather than filing their taxes in state's with lower rates, as most currently do. Hugh Espey, CCI's executive director, says the reform could save the state $100 million annually.
After the rally at the statehouse, the crowd packed two local bank branches -- one Wells Fargo and one Bank of America location -- to demand that these bailed-out financial institutions lend a hand in staving off further budget cuts. This year alone, large financial firms dished out an estimated $140 billion in bonuses, which is enough to cover the estimated state budget shortfalls across the nation. At the same time, these banks are spending millions to lobby against federal housing and consumer reforms that could protect countless cash-strapped households. "These banks broke our economy and our state budgets," Epsey told us today. "We want those bonuses." Here's a clip from the rally:
In Oregon yesterday, frustration with the banking sector also animated votes on two crucial ballot initiatives. By a 54-46 margin, voters approved a slight increase in the personal income tax for individuals who earn more than $125,000 a year and households that earn more than $250,000. (That effects less than 3 percent of state's population.) They also raised the minimum corporate income tax from $10, which had been in place since 1931, to $150 and instituted a 0.1 percent tax on sales receipts of corporations whose in-state revenue exceeded $500,000.
The changes would raise about $727 million, about 5.5 percent of the state’s two-year general-fund budget, largely to help the state avoid more crippling cuts to schools and social services. The two initiatives were also bitterly opposed by the banking industry, which contributed heavily to the so-called "Oregonians Against Job-Killing Taxes" campaign. Interestingly enough, an organizer on the ground told the Los Angeles Times that Wall Street's involvement might have spurred a major voter backlash, actually tipping the scales in favor of the tax hikes:
Kevin Looper, who is running the campaign to ratify the ballot measures, said that "when we started doing focus groups, it was amazing to hear voters demanding to know where the banks were on these measures. Because they wanted to be on the opposite side."
Could the Oregon results serve as a harbinger for Illinois' upcoming tax reform fight? To be sure, the two states' have radically different tax structures. Oregon, whose income tax is progressive, now boasts the highest personal income tax rate, capital gains tax rate, and corporate minimum tax rate for businesses in the nation. In exchange, Oregonians pay no sales tax and only limited property taxes.
We'll have to wait and see. But the results yesterday underscore the general mood of voters everywhere: state employees, teachers, medical providers, and the people on whose services they depend should not suffer because the reckless banking sector ruined our economy.