A liberal think tank based in Mount Vernon and a conservative one based in Mount Pleasant offer starkly different views of Governor Tom Vilsack’s call for raising the state tax on cigarettes and expanding the sales tax to services like accounting and landscaping. David Hogberg of the Iowa Public Interest Institute in Mount Pleasant says raising taxes is the wrong answer. Hogberg says Vilsack had an emphasis last year on making the state more business friendly, but this year’s call for placing taxes on services that businesses use will have the opposite effect. Hogberg says Vilsack, who is an attorney, is not proposing that lawyers start charging their clients sales tax. Hogberg says trial lawyers tend to be one of Vilsack’s biggest bases of support in the state. Hogberg says Vilsack’s call for a 60-cent-per-pack increase in the sales tax will drive more Iowans to try to buy on the black market, or in bordering states where the tax is lower. Hogberg says raising the cigarette tax will hurt convenience stores in areas that border other states. On the flip side, Peter Fisher of the Iowa Public Policy Project says the extra money raised will help keep state workers employed, at a time when the state’s job picture is bleak. Fisher says there are some very prominent, Nobel-Prize-winning economists who have argued that during a recession raising state spending, by raising taxes, is a better economic policy because state workers’ salaries pump money into the economy.Fisher says increasing taxes and spending by the same amount will stimulate the state’s economy. Fisher says raising taxes is the state’s lone option if it wants to avoid significant layoffs. Fisher says the state, unlike the federal government, can’t run a deficit and that’s why taxes are the only way to address the dilemma.
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