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    States Turn to Tax Cuts as Inflation Stays Hot

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    WASHINGTON — In Kansas, the Democratic governor has been pushing to slash the state’s grocery sales tax. Last month, New Mexico lawmakers provided $1,000 tax rebates to households hobbled by high gas prices. Legislatures in Iowa, Indiana and Idaho have all cut state income taxes this year.A combination of flush state budget coffers and rapid inflation has lawmakers across the country looking for ways to ease the pain of rising prices, with nearly three dozen states enacting or considering some form of tax relief, according to the Tax Foundation, a right-leaning think tank.The efforts are blurring typical party lines when it comes to tax policy. In many cases, Democrats are joining Republicans in supporting permanently lower taxes or temporary cuts, including for high earners.But while the policies are aimed at helping Americans weather the fastest pace of inflation in 40 years, economists warn that, paradoxically, cutting taxes could exacerbate the very problem lawmakers are trying to address. By putting more money in people’s pockets, policymakers risk further stimulating already rampant consumer demand, pushing prices higher nationally.Jason Furman, an economist at Harvard University who was an economic adviser under the Obama administration, said that the United States economy was producing at full capacity right now and that any additional spending power would only drive up demand and prices. But when it comes to cutting taxes, he acknowledged, the incentives for states do not always appear to be aligned with what is best for the national economy.“I think all these tax cuts in states are adding to inflation,” Mr. Furman said. “The problem is, from any governor’s perspective, a lot of the inflation it is adding is nationwide and a lot of the benefits of the tax cuts are to the states.”States are awash in cash after a faster-than-expected economic rebound in 2021 and a $350 billion infusion of stimulus funds that Congress allocated to states and cities last year. While the Biden administration has restricted states from using relief money to directly subsidize tax cuts, many governments have been able to find budgetary workarounds to do just that without violating the rules.Last week, Gov. Ron DeSantis of Florida signed a $1.2 billion tax cut that was made possible by budget surpluses. The state’s coffers were bolstered by $8.8 billion in federal pandemic relief money. Mr. DeSantis, a Republican, hailed the tax cuts as the largest in the state’s history.“Florida’s economy has consistently outpaced the nation, but we are still fighting against inflationary policies imposed on us by the Biden administration,” he said.Adding to the urgency is the political calendar: Many governors and state legislators face elections in November, and voters have made clear they are concerned about rising prices for gas, food and rent.“It’s very difficult for policymakers to see the inflationary pressures that taxpayers are burdened by right now while sitting on significant cash reserves without some desire to return that,” said Jared Walczak, vice president of state projects with the Center for State Tax Policy at the Tax Foundation. “The challenge for policymakers is that simply cutting checks to taxpayers can feed the inflationary environment rather than offsetting it.”The tax cuts are coming in a variety of forms and sizes. According to the Tax Foundation, which has been tracking proposals this year, some would be phased in, some would be permanent and others would be temporary “holidays.”Next month, New York will suspend some of its state gas taxes through the end of the year, a move that Gov. Kathy Hochul, a Democrat, said would save families and businesses an estimated $585 million.In Pennsylvania, Gov. Tom Wolf, a Democrat, has called for gradually lowering the state’s corporate tax rate to 5 percent from 10 percent — taking a decidedly different stance from many of his political peers in Congress, who have called for raising corporate taxes. Mr. Wolf said in April that the proposal was intended to make Pennsylvania more business friendly.States are acting on a fresh appetite for tax cuts as inflation is running at a 40-year high.OK McCausland for The New York TimesMr. Furman pointed to the budget surpluses as evidence that the $1.9 trillion pandemic relief package handed too much money to local governments. “The problem was there was just too much money for states and localities.”A new report from the Tax Policy Center, a left-leaning think tank, said total state revenues rose by about 17.6 percent last year. State rainy day funds — money that is set aside to cover unexpected costs — have reached “new record levels,” according to the National Association of State Budget Officers.Yet those rosy budget balances may not last if the economy slows, as expected. The Federal Reserve has begun raising interest rates in an attempt to cool economic growth, and there are growing concerns about the potential for another recession. Stocks fell for another session on Monday, with the S&P 500 down 3.2 percent, as investors fretted about a slowdown in global growth, high inflation and other economic woes.Cutting taxes too deeply now could put states on weaker financial footing.The Tax Policy Center said its state tax revenue forecasts for the rest of this year and next year were “alarmingly weak” as states enacted tax cuts and spending plans. Fitch, the credit rating agency, said recently that immediate and permanent tax cuts could be risky in light of evolving economic conditions.“Substantial tax policy changes can negatively affect revenues and lead to long-term structural budget challenges, especially when enacted all at once in an uncertain economic environment,” Fitch said.The state tax cuts are taking place as the Biden administration struggles to respond to rising prices. So far, the White House has resisted calls for a gas tax holiday, though Jen Psaki, the White House press secretary, said in April that President Biden was open to the idea. The administration has responded by primarily trying to ease supply chain logjams that have created shortages of goods and cracking down on price gouging, but taming inflation falls largely to the Fed.The White House declined to assess the merits of states’ cutting taxes but pointed to the administration’s measures to expand fuel supplies and proposals for strengthening supply chains and lowering health and child care costs as evidence that Mr. Biden was taking inflation seriously.“President Biden is taking aggressive action to lower costs for American families and address inflation,” Emilie Simons, a White House spokeswoman, said.The degree to which state tax relief fuels inflation depends in large part on how quickly the moves go into effect.Gov. Laura Kelly backed a bill last month that would phase out the 6.5 percent grocery sales tax in Kansas, lowering it next January and bringing it to zero by 2025. Republicans in the state pushed for the gradual reduction despite calls from Democrats to cut the tax to zero by July.Inflation F.A.Q.Card 1 of 6What is inflation? More

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      Ahead of Midterms, Some Democrats Search for New Message on Virus

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      Democrats were cheered for strict lockdowns and pandemic precautions. Now many weary voters want to hear the party’s plan for living with the coronavirus.When the coronavirus pandemic first swept Pennsylvania, Gov. Tom Wolf closed stores and schools and ordered millions of citizens to stay home. Even four months into the crisis in 2020, all but “life-sustaining” businesses in much of the state were locked down.Today, the virus is ravaging Pennsylvania again, like much of the country, with hospitalization numbers nearing or exceeding those during the worst months of the pandemic.Yet Mr. Wolf, a Democrat whose party desperately wants to keep control of his seat in the midterm elections, has no intention of returning to the strict measures of two years ago. There are no plans for mask mandates or more virtual schooling. Pennsylvanians, the governor said, crave a return to normalcy.“I think everybody’s angry,” said Mr. Wolf, who is ineligible to run again this year. “It’s been two years now. We’re fatigued and ready to move on. I think a lot of the political vectors are reflecting that.”Around the country, Democratic elected officials who in the pandemic’s early phase shut down cities and states more aggressively than most Republicans did — and saw their popularity soar — are using a different playbook today. Despite the deadly wave fueled by the Omicron variant, Democratic officials are largely skipping mask mandates and are fighting to keep schools open, sometimes in opposition to health care workers and their traditional allies in teachers’ unions.The shift reflects a potential change in the nature of the threat now that millions of Americans are vaccinated and Omicron appears to be causing less serious disease. But it is also a political pivot. Democrats are keenly aware that Americans — including even some of the party’s loyal liberal voters — have changed their attitudes about the virus and that it could be perilous to let Republicans brand the Democrats the party of lockdowns and mandates.“You’ll see more Democratic elected officials say that this is our forever now and we can’t live our lives sitting rocking in a corner,” said Brian Stryker, a partner at the polling firm ALG Research, whose work on Virginia’s elections last year indicated that school closures hurt Democrats. “We’ve just got to live with this virus.”The warning signs for Democrats are manifest. For the first year of the pandemic, Democratic governors in politically divided states like Pennsylvania, Michigan and North Carolina responded aggressively to the pandemic and won high marks from voters of both parties. The issue was critical to President Biden’s victory in 2020.Today President Biden’s overall approval, which has fallen into dangerous territory for any party in a midterm election year, is being kept down in part because of disappointment over his performance on coronavirus. Fewer than half of Americans approved of his handling of the pandemic in a CBS News/YouGov survey last week, down from 66 percent who approved in July.Now that vaccines have been proven effective, Americans have lower tolerance for restrictions, strategists and elected officials said. While schools are largely open in the United States, many families are still dealing with the fallout of two years of classroom disruptions, including loss of learning, mental health problems and millions of parents who were driven out of the work force.A Look Ahead to the 2022 U.S. Midterm ElectionsIn the Senate: Democrats have a razor-thin margin that could be upended with a single loss. Here are 10 races to watch.In the House: Republicans are already poised to capture enough seats to take control, thanks to redistricting and gerrymandering alone.Governors’ Races: Georgia’s race will be at the center of the political universe this year, but there are several important contests across the country.Key Issues: Both parties are preparing for abortion rights and voting rights to be defining topics.A survey conducted this month by USA Today and Suffolk University found that while majorities of Democratic voters supported policies like vaccination mandates and masking, only 43 percent backed shifting schools to remote learning.Voters frequently complain of changing advice from the Centers for Disease Control and Prevention, as well as on-again, off-again mask orders in many places.Lynn Saragosa said that the changing advice from the Centers for Disease Control and Prevention and the on-again, off-again mask orders in many places were confusing.Jenna Schoenefeld for The New York Times“The rules are confusing,” said Lynn Saragosa, a resident of La Mirada, Calif., just along the border of Los Angeles and Orange Counties. “You go one place and see one thing, but it’s very different someplace else — it becomes very divided and we’re arguing over every single decision.”Ms. Saragosa, 58, a Democrat who voted for Mr. Biden in 2020, said she was unlikely to vote in the midterms, even though some of California’s most competitive congressional races will take place in Orange County.Ms. Saragosa represents one of Democrats’ biggest fears heading into the midterms, when control of Congress and key governors’ mansions are at stake. The Democrats already begin at a disadvantage, as the party that holds the White House often loses seats during the first midterm elections. If malaise over the pandemic further slackens turnout, it will add to Democrats’ headwinds.Some Democratic officeholders say they’re ready to defend their actions, noting that by closing businesses and schools they slowed the spread of the coronavirus and saved lives. But Republican candidates have vowed to make the shutdowns central in races from school board to governor to the Senate.“They will pay the price in the next election,” said Lou Barletta, a Republican candidate for governor in Pennsylvania who blames Democrats, rather than the virus, for damage to businesses and loss of learning. “Nobody’s going to forget businesses who couldn’t open again or people who lost their jobs. That doesn’t get erased from memory. Not to mention a year’s education was stolen away from our children.”In Virginia, Gov. Glenn Youngkin’s upset victory in November as a Republican was fueled in part by parents fed up with school closures and mask mandates for their children. Around the country, long-term school closures, which disproportionately occurred in Democratic-run states and cities, has turned off even some progressive voters.Kim McGair, a lawyer and a normally staunch Democrat in Portland, Ore., said she felt “utterly betrayed” by her party, which she believes abandoned parents and students. “I will not vote for a Democrat who was silent or complicit on school closures, which is the vast majority of them here,” Ms. McGair said. But she also cannot picture herself casting a ballot for a Republican, a situation she describes as being “politically homeless.”In Michigan, Gov. Gretchen Whitmer, a Democrat, imposed some of the nation’s strictest stay-at-home orders early in the pandemic. Angry protesters who waved Tea Party flags at the State Capitol in April 2020, while former President Donald J. Trump tweeted “Liberate Michigan,” were one of the first signs of politicization of the pandemic.Ms. Whitmer, facing another deadly surge of the virus in her state and a tough re-election fight this fall, was pressed recently about why she hadn’t issued new statewide orders. Her response was defensive, but telling: “Like what?” she said to a Detroit TV interviewer. The existence of vaccines meant that the “blunt tools” used in 2020 to fight the pandemic were not needed, the governor said.Though broad shutdowns and mandates are off the table in many places — sometimes because of court decisions — Democrats have used other tools lately, including aggressively promoting vaccines, opening testing centers and deploying strike teams to beleaguered hospitals.One model of how Democrats might speak to the new mood of voters is in Colorado, where Gov. Jared Polis has been unusually blunt in saying that it is time to treat the coronavirus as a manageable disruption, more like the flu. Last month he told Coloradans that if they were unvaccinated and wound up in the hospital, it was their “own darn fault.” Regarding masks, he said that state health authorities had no business telling people “what to wear.”The coronavirus was now something “we live with,” Mr. Polis said in an interview. “We will be living with it in three years. We’ll be living with it in five years. We have to learn how to empower people to protect themselves.”He looks forward to a time soon when the virus is “endemic,” meaning that it will circulate in the population, but people will carry on without major disruptions to their lives.Scientists say it’s possible that Omicron, because of its lightning spread, is setting the stage for that return to normalcy, although they also warn that more variants — and more upheaval — could be ahead.Still, “live with it” is hardly the message Mr. Biden delivered on July 4, when cases were low. At the time, the president declared that the country was “closer than ever to declaring our independence” from the virus.Asked recently if the coronavirus was “here to stay,” Mr. Biden acknowledged that it would never be wiped out but said he believed Americans could control it.To merely battle the virus to a truce, rather than to defeat it triumphantly, might strike some voters as less of a victory than the president promised. Celinda Lake, a Democratic pollster who worked on Mr. Biden’s campaign, said that the president and his party were paying a political price for an unpredictable pandemic.“This up and down is really taking a toll, and it’s taking a toll on all elected officials,” she said. “Voters appreciate Biden’s style, they appreciate that he listens to the science, but people are just so frustrated that it’s always going to seem like too little too late.”“They wanted to believe if we all did the right thing we could make this better immediately,” she said. More

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      Why Democrats See 3 Governor’s Races as a Sea Wall for Fair Elections

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      Michigan, Wisconsin and Pennsylvania all have Democratic governors and G.O.P.-led legislatures. And in all three battlegrounds, Republicans are pushing hard to rewrite election laws.MADISON, Wis. — In three critical battleground states, Democratic governors have blocked efforts by Republican-controlled legislatures to restrict voting rights and undermine the 2020 election.Now, the 2022 races for governor in Michigan, Wisconsin and Pennsylvania — states that have long been vital to Democratic presidential victories, including Joseph R. Biden Jr.’s — are taking on major new significance.At stake are how easy it is to vote, who controls the electoral system and, some Democrats worry, whether the results of federal, state and local elections will be accepted no matter which party wins.That has left Govs. Tony Evers of Wisconsin, Gretchen Whitmer of Michigan and Tom Wolf of Pennsylvania standing alone, in what is already expected to be a difficult year for their party, as what Democrats view as a sea wall against a rising Republican tide of voting restrictions and far-reaching election laws.The question of who wins their seats in 2022 — Mr. Evers and Ms. Whitmer are running for re-election, while Mr. Wolf is term-limited — has become newly urgent in recent weeks as Republicans in all three states, spurred on by former President Donald J. Trump, make clearer than ever their intent to reshape elections should they take unified control.Republicans have aggressively pursued partisan reviews of the 2020 election in each state. In Pennsylvania, G.O.P. lawmakers sought the personal information of every voter in the state last month. In Wisconsin, a conservative former State Supreme Court justice, who is investigating the 2020 election results on behalf of the State Assembly, issued subpoenas on Friday for voting-related documents from election officials. And in Michigan on Sunday night, Ms. Whitmer vetoed four election bills that she said “would have perpetuated the ‘big lie’ or made it harder for Michiganders to vote.”Republican candidates for governor in the three states have proposed additional cutbacks to voting access and measures that would give G.O.P. officials more power over how elections are run. And the party is pushing such efforts wherever it has the power to do so. This year, 19 Republican-controlled states have passed 33 laws restricting voting, one of the greatest contractions of access to the ballot since the Voting Rights Act was passed in 1965. Democrats in Congress have tried without success to pass federal voting laws to counteract the Republican push.The prospect that Mr. Trump may run again in 2024 only compounds what Democrats fear: that Republicans could gain full control over the three key Northern states in 2022 and, two years later, interfere with or overturn the outcome of a narrow Democratic presidential victory in 2024.“I would’ve never guessed that my job as governor when I ran a couple years ago was going to be mainly about making sure that our democracy is still intact in this state,” said Mr. Evers, a former Wisconsin schools superintendent. He was elected governor in the Democratic wave of 2018 on a platform of increasing education spending and expanding Medicaid.He and Ms. Whitmer are seeking re-election while vying to preserve the voting system, which was not built to withstand a sustained partisan assault, in the face of intensifying Republican challenges to the routine administration of elections. Mr. Wolf cannot seek a third term, but his Democratic heir apparent, Josh Shapiro, the Pennsylvania attorney general, has been on the forefront of legal efforts to defend the 2020 election results for nearly a year.The shift from focusing on traditional Democratic issues like health care and education to assuring fair elections is starkest for Mr. Evers, a man so aggressively staid that he’s partial to vanilla ice cream.Campaigning at the World Dairy Expo in Madison, Wis., Mr. Evers said that Wisconsin’s race for governor next year would be “about our democracy.”Lianne Milton for The New York TimesLast week, as he walked through a row of black-and-white Holstein cows at the World Dairy Expo, he predicted that if he were defeated next year, Republican legislators would have a direct path to reverse the results of the 2024 election.“The stakes are damn high,” Mr. Evers said above the din of mooing and milking at Madison’s annual dairy trade show. “This is about our democracy. It’s frightening.”The message that democracy itself is on the line is a potentially powerful campaign pitch for Mr. Evers and his fellow Democrats, one he has used in fund-raising appeals.Republicans dismiss the idea that they are undermining democracy and say that their various election reviews will increase, not decrease, voters’ trust in the system.“It’s full of hyperbole and exaggeration, which is what the Democrats do best on this election stuff,” Robin Vos, the speaker of the Wisconsin State Assembly, said in an interview last week at the State Capitol. “All we’re trying to do is make sure that people who were elected were elected legitimately.”Mr. Vos said he was still not sure if President Biden had legitimately won the state. (Mr. Biden carried it by more than 20,000 votes.) It would not take much to swing statewide elections in Michigan, Wisconsin and Pennsylvania. Four of the last six presidential contests in Wisconsin have been decided by fewer than 23,000 votes. Other than Barack Obama, no presidential nominee has won more than 51 percent of the vote in any of the three states since 1996.And as Mr. Trump and his allies chisel away at confidence in American elections by making baseless allegations of voter fraud, it is no longer a stretch to imagine governors loyal to the former president taking previously unthinkable steps to alter future results.Governors are required to submit to Congress a certificate of ascertainment of presidential electors. But what if a governor refused?Another scenario could also give a governor outsize power over the presidential election: A state could send competing slates of electors to Congress, and the House might accept one slate and the Senate the other. Then, the Electoral Count Act of 1887 — the guidelines for tallying Electoral College votes, which remained obscure until the violence of Jan. 6 — appears to give the state’s governor the tiebreaking vote.The National Task Force on Election Crises, a nonpartisan group of experts in various fields, warned about such a possibility in a September 2020 memo.“It wouldn’t be an overstatement to say that any one of those states falling to a Trump-aligned candidate would pose an existential threat to the survival of American democracy come the 2024 election,” said Ian Bassin, the executive director of Protect Democracy, a nonpartisan group dedicated to resisting authoritarianism, who convened the election crises task force before the 2020 election.Republicans have not been shy about their ambitions to change election laws in the three states.In Pennsylvania, Lou Barletta, a former congressman who recently announced a bid for governor, said that as he crossed the state last week, the top issue for voters was “election integrity.”“People talk to me about mandates, about vaccines, but they always bring up election integrity as well,” Mr. Barletta said in an interview. He said that he was waiting for the Republicans’ election review before committing to a full slate of election changes, but that he already had a few in mind, including stricter voter identification laws.Josh Shapiro, the Democratic attorney general of Pennsylvania who defended the results of the 2020 election in the state, is expected to announce his campaign for governor as soon as this month.Susan Walsh/Associated PressJames Craig, the leading Republican candidate for governor in Michigan, has backed bills that would forbid the mass mailing of absentee ballot applications to voters who do not request them and that would enact a strict voter ID requirement. He declined to comment.Those proposed laws are being pushed by Ed McBroom, a Republican state senator, even though he released a report in June debunking Trump-inspired claims of election fraud.“Somebody could pretty easily try to impersonate somebody they don’t know,” said Mr. McBroom, who leads the Michigan Senate’s elections committee.And in Wisconsin, Rebecca Kleefisch, a Republican who served as lieutenant governor under Gov. Scott Walker until 2019, is challenging Mr. Evers with a campaign platform that calls for shifting responsibility for the state’s elections from the bipartisan Wisconsin Elections Commission, which her and Mr. Walker’s administration created in 2016, to the G.O.P.-controlled Legislature. Ms. Kleefisch declined to comment. Perhaps no 2022 Democratic candidate for governor is as familiar with Republican attempts to dispute the 2020 outcome as Mr. Shapiro. As Pennsylvania’s attorney general, he defended the state in 43 lawsuits brought by Mr. Trump and his allies that challenged voting methods and the results.“There are new threats every single day on the right to vote, new efforts to disenfranchise voters, and I expect that this will be another huge test in 2022,” said Mr. Shapiro, who is planning to announce a campaign for governor as soon as this month.Last month, Mr. Shapiro filed a lawsuit to block Republicans in the Pennsylvania Senate after they sought the personal information of all seven million voters in the state as part of their election review, including driver’s license numbers and partial Social Security numbers.Gov. Gretchen Whitmer is running for re-election in Michigan, where Republican election officials tried to stall the certification of the results of the state’s 2020 presidential race.Sarahbeth Maney/The New York TimesIn Michigan, Ms. Whitmer, who has faced threats of an insurrection in her statehouse and a kidnapping plot, is now fighting a Republican attempt to work around her expected veto of a host of proposed voting restrictions.“The only thing that is preventing the rollback of voting rights in Michigan right now is the threat of my veto,” she said in an interview.Michigan was also home to one of the most forceful and arcane attempts at reversing the outcome in 2020, when Republican election officials, at Mr. Trump’s behest, tried to refuse to certify the results in Wayne County and stall the certification of the state’s overall results. That memory, combined with new voting bills and Republican attempts to review the state’s election results, makes Michigan’s election next year all the more important, Ms. Whitmer said.“If they make it harder or impossible for droves of people not to be able to participate in the election,” she said, “that doesn’t just impact Michigan elections, but elections for federal offices as well, like the U.S. Senate and certainly the White House.”Mr. Vos said he had not thought about the degree to which Wisconsin Republicans could change voting laws if the state had a Republican governor. But this year, the State Legislature passed a package of six bills that would have enacted a range of new voting restrictions.Mr. Evers vetoed them all.“I’ve learned to play goalie in this job,” he said. “And I’ll continue to do that.” More