Gov. Kenny Guinn's biography reads like an archetypal Republican profile: A millionaire banker and corporate CEO, he got into politics "to bring private sector discipline to the business of governance." And yet this solid Republican conservative is calling for a billion dollars in new state taxes this year "so that government can provide the services people deserve."
In nearby New Mexico, Gov. Bill Richardson's resume is the classic career pattern of a modern-day Democratic politician: Hispanic activist, congressman, member of Bill Clinton's Cabinet. And yet this reliably liberal Democrat has pushed through a package of Bush-style tax cuts this year because "reducing taxes puts us on the road to economic growth."
As the tale of these two states suggest, governors desperate to balance their budgets in sour economic times are sometimes abandoning traditional philosophies and turning political orthodoxies on their ear.
Tax revenue is declining and Washington is focused on war and offering little help. Across the nation, states are laying off workers, releasing prison inmates, cutting Medicaid benefits, delaying paydays, even closing schools one day a week, according to the National Conference of State Legislatures. President Bush predicts his proposed federal tax cuts will stimulate the economy, but the stimulus will be offset by proposed tax increases in half the states, together with big hikes in tuition, tolls and other fees.
With the federal government projecting the largest deficit ever in the coming fiscal year, states have little hope for financial assistance from Washington. "There were a lot of promises," says John P. Comeaux, Nevada's director of administration. "There was supposed to be economic stimulus, homeland security funds, da da da da. But we haven't seen a dime."
The diversity in approaches to the fiscal crisis is evident in the contrasting strategies adopted by Nevada and New Mexico, western states that both have snow-capped mountains, vast brown deserts, and battered economies.
Nevada has been the fastest-growing state in the union for several decades; the population, 2.2 million, is 50 percent bigger than it was 10 years ago. It has been apparent for years, says Guinn, that the traditional revenue source, casino gambling -- the business known euphemistically here as "gaming" -- can no longer produce enough money to sustain state programs.
In his first four-year term, the 66-year-old governor said: "I did everything a good Republican is supposed to do. We privatized. We cut 1,300 government jobs. We spent almost all of our rainy day fund."
But after his easy reelection last year, the term-limited governor changed directions for his last term. "I looked at my budget for this year," Guinn explains, "and I said, 'I'm just not going to cut anymore.' Some people say that makes me a bad Republican. Well, I would be a worse Republican, and a worse grandfather, and a worse citizen, if I didn't find enough money to educate our children and fund our Medicaid program and provide decent prenatal care."
Accordingly, Guinn has asked his legislature to approve the biggest tax increase in Nevada's history. The package includes higher taxes on cigarettes, liquor and some slot machines. But the real shocker -- in a state that has always promoted its aversion to business taxes -- is a new levy on corporate "receipts"; it was styled that way to get around the state constitution's ban on "income" taxes.
The plan has sparked a furious anti-Guinn response in the letters columns, on talk shows, from the Chamber of Commerce and much of the Republican Party. But politicians and pundits say most of the billion-dollar tax package will probably get through the Republican-controlled state Senate and Democratic-controlled House, because the state's budget shortfall is obvious, and nobody has proposed an alternative.
Still, the governor's program goes down hard with much of his own party. "This billion-dollar baby is all about expanding government's mandate," says Assemblyman Bob Beers, a Las Vegas Republican. "I thought growing the government and raising taxes was something Democrats are supposed to do."
If that's what Democrats are supposed to do, the message has clearly not gotten through to Bill Richardson, the 55-year-old political veteran who went home to Santa Fe at the end of the Clinton administration and breezed to victory in the gubernatorial election last fall.
New Mexico, Richardson said: "had the highest state income tax in the region, but we ranked lowest in wages, in manufacturing, in attracting new industry. And I ran for election on a platform to bring good jobs into this state."
To do that, Richardson's plan reduces New Mexico's income tax rate by 40 percent, from the current 8.2 percent to 4.9 percent by 2008. It cuts the state capital gains tax in half, to 10 percent. It offers tax credits to companies opening new facilities in the state.
Richardson agrees that his plan sounds "sort of like" Bush's tax-cutting agenda. And he argues that Democrats nationwide should consider tax-cutting a viable strategy. "We need to stop talking about class warfare and the distribution of wealth," he said. "We need to start talking about economic growth," and "reducing taxes puts us on the road to economic growth."
But the Democrat has firmly rejected complaints at home that he's following the president's example.
"This is not a trickle-down plan to hand out money to the rich," he said. "I'm doing this to make our state more competitive. The idea is, you can attract executives to set up shop in New Mexico if you can tell them their taxes will be lower here."
Still, Richardson said he is concerned about "keeping my Democratic credentials." Accordingly, the new corporate tax incentives are available only to companies that pay more than the prevailing wage. "I'm looking out for labor, and the Demos are happy with that."
Richardson has faced less flak in Santa Fe than Guinn is getting in Carson City, in part because he detailed his tax-cutting plan during the election campaign last fall. Indeed, the Richardson tax program passed the Democratic legislature last month without a dissenting vote.
Guinn's plan is facing a tougher reception, because the size and scope of the tax increases he set out in his State of the State address surprised the political community. During his reelection campaign last year, Guinn concedes: "I told the voters that we needed to do something about the budget shortfall. But I didn't tell them exactly what."
"I think Governor Guinn's biggest problem," said Pete Ernaut, a Carson City lobbyist and former Guinn aide, "is that he sounded so enthusiastic about raising more money for government. Republicans are supposed to apologize when they raise taxes. But the governor just said, 'Our state is in a desperate economic bind, and that changes the rules, even for Republicans.' "