Indiana Gov. Mitch Daniels (R) has a history of embarrassing failures and debacles. Remember the Iran-Contra scandal? Daniels was Reagan’s political director and helped direct the White House damage-control effort. The Enron scandal? Ken Lay personally helped choose Daniels to head Bush’s Office of Management and Budget.
But Daniels most spectacular mistake was crafting and pushing Bush’s 2001 tax-cut scheme. As the president’s budget director, Daniels personally shaped a plan that lavished the wealthy with overly generous tax breaks, embraced massive deficits, and most importantly for this blog post, cut federal aid to states, which ultimately caused the worst state budget crises in generations. By one estimate, the policies Daniels helped write increased state deficits by $175 billion in Bush’s first term alone.
Shortly after this fiasco, Daniels, whom Bush nicknamed “The Blade,” ran for governor of Indiana and, inexplicably, won. Upon being sworn in, the governor discovered that the state is facing a $600 million deficit, which, ironically, he helped create before even getting elected.
So, what’s a former Bush budget director to do? At the federal level, Daniels believed the answer was to cut taxes for millionaires, create record-high deficits, and let someone else figure out what to do sometime down the line. As governor, that’s not an option — so this time he’s embraced tax increases on the wealthy.
[Daniels] proposed a tax increase for people who have $100,000 or more in taxable income — 1 in 20 Hoosiers. The one-year income tax increase of 1 percent would bring in $300 million and would apply to individuals, joint filers and some small businesses on their 2005 earnings.
Well, what do you know. The Republican architect of the most fiscally irresponsible budget policies in American history wants to raise taxes on his constituents and small businesses, after literally decades of rhetoric that insisted government always do the exact opposite. It’s the difference between recklessness in Washington, which came too easily to Daniels, and actually trying to lead a state with fiscal constraints.
It’s also entertaining to see Daniels get slammed by those who used to think he was a genius.
In Indiana, Republican lawmakers are despondent about their champion tax-cutter getting elected and immediately launching a drive to raise taxes. The hyper-conservative Wall Street Journal editorial page, meanwhile, blasted Daniels for his “political lust for ever-more tax revenue.”
This pocketbook raid comes courtesy of Mitch Daniels, the former White House budget director whose victory last November also brought in GOP control of the Indiana house. (The party already controlled the senate.) He’s now helping to define Republicanism in the Hoosier state by proposing a 29% tax increase, levied largely on anyone making $100,000 or more — including married couples filing jointly and small business owners.
Mr. Daniels says the tax hike, which raises the top marginal income tax rate to 4.4% from 3.4%, will last only one year, but the new Governor is also opening the door for county and city governments to levy their own income taxes. As for “temporary” tax increases, we’ve heard that one before — most recently in North Carolina, where a “two-year” sales and income tax increase is now in its fourth year.
Mr. Daniels’ official excuse, as ever, is that raising taxes is the only way to balance the state’s $250 million budget shortfall. This will surprise taxpayers who didn’t hear Mr. Daniels mention it during last year’s campaign…. In Washington, President Bush called Mr. Daniels “The Blade” for his budget carving. It’s a shame that the people he’s giving the knife to in Indianapolis are his own voters.
Ah, bitterness and division between Mitch Daniels and the Wall Street Journal. I never thought I’d see the day.