Category: tax policy

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initiative, referendum, and recall tax policy too much government

Prop 13 Declared Innocent

You hear it all the time: California’s in such a mess “because of Proposition 13.”

You probably wonder how that initiative, passed way back in the ‘70s, could be so key.

Well, it was the first of a long line of voter-​instigated tax limitation measures, and it made politicians ache with frustration. Politicians LIKE spending money; Proposition 13 limited, somewhat, their greedy quest for ever more money to spend.

But did it really unbalance California fiscal policy?

Chris Reed, writing in the San Diego Union-​Tribune, explains how nutty this charge really is:

[S]ince shortly after Prop. 13’s adoption, property tax revenue increased by 579 percent. That is not a typo. It went up 579 percent.

During the same span, population went from 24 million to 38 million — an increase of 58 percent.

Reed checked his numbers against the inflation rate, and found that “property tax revenue has increased by more than triple the combined rate of inflation and population growth.”

He did a little more checking and learned that property tax revenues went up faster than any other major revenue source!

So Prop 13 simply cannot be the reason for California’s impending bankruptcy. Though the measure limited tax rate growth, and helped homeowners, it did not unbalance the budgets. 

Humungous increases in spending did. Politicians need look no further than their own projects.

This is Common Sense. I’m Paul Jacob.

Categories
local leaders tax policy

Hope for the Hopeless

Illinois is hopeless. When John Tillman hears people say that about government in the Land of Lincoln, he gets pretty peeved.

Tillman, head of the Illinois Policy Institute — a think tank offering what it calls “liberty-​based public policy initiatives” — doesn’t think battling big government is hopeless at all. For instance, the Institute helped generate support for transparency legislation that passed. 

And last week, as the state’s legislative session closed, Governor Pat Quinn’s proposed 50 percent income tax hike was soundly defeated … by the state’s very blue legislature.

How did that happen?

Well, the first step is always to believe enough in your fellow citizens to wage a fight for their “hearts and minds.” Hope helps.

Next step? Getting the facts out.

The argument for huge tax increases is always that government can’t survive without the additional money. In a series of media appearances and grassroots events, Tillman and the Institute kept talking about sensible ways to cut spending.

Governor Quinn talked about the painful consequences if government didn’t have more money. Tillman spoke about the painful consequences if working families, already paying high taxes, had to fork over still more dough.

Kristina Rasmussen, the Institute’s Executive Vice President, published a report entitled, “Would My Family Pay Higher Taxes Under Governor Quinn’s Plan?” The answer for the average Illinois family was: Yes — 17 percent more.

Hope wins again. Helped by hard work.

This is Common Sense. I’m Paul Jacob.

Categories
responsibility tax policy too much government

March to Bankruptcy

I have warned, before, about the upcoming double-​barrel crisis aimed at the U.S. financial system: The insolvency of the U.S. government itself, as entitlement debt can no longer be kept afloat by FICA withholding, and as Treasury debt can no longer be maintained on a monthly basis simply because it has grown too big.

Last week our entitlement system’s trustees said that the current recession is so undermining Medicare Part A that payments for elderly care will fail in eight years, with Social Security itself imploding in less than 28.

That is, if the economy doesn’t get worse.

Medicare Part B, covering doctors’ visits and outpatient care, and Part D, covering prescriptions, are right now insolvent, sucking money from general revenues.

This crisis rushes closer, even as our president insists on reforming health care in ways that will almost certainly add new entitlements — which will also have to be paid for. 

President Obama says that more government will do the opposite of what it’s done in the past. Until now, government involvement in medicine has increased costs and prices. Now he says what he’ll do will make for more “efficiency.”

Why do politicians believe in the magic of their new programs rather than the history of their old ones?

Why is it that, in politics, irresponsibility rises to the top? 

However you answer that, the march to bankruptcy is picking up pace.

This is Common Sense. I’m Paul Jacob.

Categories
initiative, referendum, and recall tax policy

Golden State Voters

California voters are said to be in big trouble. You see, they didn’t vote the way their newspapers and politicians told them to vote on the six ballot measures on the May 19th ballot. 

The first five measures — a combination of tax-​raising and spending shifts to cover a $21 billion budget hole — were defeated by voters by a whopping two-​to-​one margin.

Only the sixth proposition passed — and it cuts the salaries of legislators and state officials.

The lessons are obvious, but not likely to be learned by the political elite, who now argue that the ballot initiative process should be restricted if not abolished altogether because the people didn’t vote according to their wishes.

Lesson One: Raising taxes isn’t terribly popular even in a blue state. Voters seem to think legislators should find ways to cut back spending without gutting essential services. In every county, and even in very liberal Los Angeles and San Francisco, these ballot measures went down hard.

Lesson Two: It’s good when politicians have to ask us before raising taxes. While some bemoan that voters aren’t minding their governors, I’m of the school that believes that those who govern are supposed to mind the voters.

Golden state voters are fortunate that politicians had to seek their approval to raise taxes — and smart not to have given it. 

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

Taxing Charity

The federal government allows people to give money to non-​profit organizations and then deduct the money they give from their taxable income. If you donate to a hospital, a homeless shelter, the Salvation Army or an educational foundation, you don’t have to pay federal income tax on that money.

But President Barack Obama wants to change that longstanding provision, at least for higher income taxpayers — you know those newly suspicious folks who make $250,000 or more a year. These “wealthy people” wouldn’t get to fully deduct their charitable contributions.

Obama insists this won’t matter to donors or to the charities they support. Regarding the hurt this might put on charities, who have already been hit by the economic downturn — and I quote — “It’s not going to cripple them.”

Gee, thanks for not absolutely “crippling” charities.

Studies suggest charitable donations could fall by 5 percent, however. That’s almost $4 billion that won’t go to feed the poor, help the sick, educate people or provide legal defense for citizens fighting for their rights.

As times get tough, now seems a bizarre time to undercut charitable giving. Instead of removing some tax-​deductibility from wealthier Americans, we ought to give extra deductibility to everyone.

Isn’t the goal to maximize help for those in need? 

Don’t tell me it’s to maximize government’s role, to the exclusion of private charity.

This is Common Sense. I’m Paul Jacob.

Categories
initiative, referendum, and recall tax policy

They Call It “De-​Brucing”

Colorado’s constitutional amendment dubbed the Taxpayer Bill of Rights, or TABOR, has made it difficult for politicians to tax and spend like they want. 

So politicians engage in all sorts of weird strategems.

Take “de-​Brucing.” TABOR’s author is Doug Bruce. TABOR allows voters to make exceptions to the law’s basic limits on spending increases and taxes. So all but four of Colorado’s 178 school districts have voted to “de-​Bruce” — that is, to allow more spending, more taxes, than TABOR’s formula would otherwise allow.

In this context, Gov. Bill Ritter worked hard promoting a 2007 law to freeze tax rates. This freeze was designed not to limit increasing tax revenues, but to shore up the pre-​TABOR rate of increase. It passed. 

What the freeze did was de-​Bruce the whole state, even those four school districts that had repeatedly and enthusiastically upheld tax rate reductions created by TABOR.

And now the state supreme court has decided that Ritter’s legal maneuver is just hunky dory.

In Colorado, voters engage in lawful constitutional revisions, and politicians react with obvious unconstitutional law … and are backed up by the highest court. So much for constitutionality.

If I lived in Colorado, I’d be voting not to “de-​Bruce,” but to “de-​Ritter” … and be thinking about term limits for judges.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

Howard Jarvis Must Be Growling In His Grave

The Howard Jarvis Taxpayers Association is getting a bum rap.

The organization is named after fiery tax-​cut advocate Howard Jarvis. Jarvis authored Proposition 13, the California tax limitation measure approved in 1978 by a two-​to-​one margin.

In recent months, like everywhere else, California has suffered economically. And now the Howard Jarvis Taxpayers Association is being angrily berated, for nevertheless still advocating lower taxes for besieged taxpayers.

The Sacramento Bee declares that there’s a “difference between protecting taxpayers and rigidly opposing all new tax increases, regardless of the state’s finances.” Watchdogs who commit the latter become “demagogues,” according to the editorial writers at the Bee. The Howard Jarvis folks are supposedly “charting a course to disaster.”

Oh, I don’t think so. I’m happy when foes of ever-​larger tax burdens stick to their guns.

The Bee blithely ignores the true culprit here, asserting that in recent years, tax revenues have “plunged” in California as “deficits have deepened.”

Recent tax receipts are down slightly compared to a year ago. But for years, state government spending has skyrocketed, which the Bee says nothing about. The state budget was $56 billion in 1998. In 2008, $131 billion.

Here’s a suggestion, one the late Howard Jarvis would have liked. Cut spending.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets national politics & policies tax policy

State Violence in Vladivostok

While our president was finagling his way to support two out of three of the Big Three automakers, folk in Vladivostak were protesting Vladimir Putin’s new high tariffs on foreign-​made used automobiles. As many as 6,000 protesters on Russia’s Pacific Coast took to the streets, some even calling for Putin’s ouster.

Used cars are a big deal on the eastern end of the Russian empire. Over 200,000 people in and around Vladivostok work on — or professionally trade — used cars. The used car business heavily undergirds the economy of the area … just across the East Sea from Japan. (I add this topographical note in case you forgot your grade school geography lessons.)

Not only did Putin insist on keeping the high tariffs, he sent in extra police to beat heads. The police attacked not only protesters, but journalists, too — without regard for nationality.

On the Sunday before Christmas, smaller protests were held around the vastness of Russia, including Moscow.

Don’t dismiss the tariff as “mere” economic policy — Putin sure doesn’t. One protester went on record, saying, “First, we have been deprived of our right to elect, now they are taking away our right to choose cars.”

An important lesson for America, too. Government policy skews our ability to choose. Favors to local business (whether by subsidy or tariff) decrease our ability to contract to get what we want. Which, often, includes imports.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

You Can’t “Give” Me What’s Already Mine

A mooching relative borrows $500 from you, wastes it all in a drunken spending spree, never pays you back.

Eventually, he loftily hands you a fiver.

He says, “I don’t even know why I give you this money, but I’m a nice guy. Use this gift to create jobs or something, okay?”

In response, do you a) Punch him in the nose; b) Punch him in the nose; c) Punch him in the nose; or d) Thank him for the gift.

We all know which three of these four options is the correct answer. Yet, again and again in tax cut discussions, people talk as if reducing the amount of money the IRS grabs from someone is tantamount to “giving” that person something.

Political commentator E.J. Dionne recently repeated this fallacy. “For years,” he wrote, “Republicans have argued that the way to help struggling working people is to give more money to the wealthy.” Dionne adds that Obama “is saying that we should cut out the middleman and help working people directly.” And Dionne thinks this a good idea.

So, why not just grab all the money the wealthiest people earn and divide it amongst the have-​nots? Sure, this would kill the economy. But at least the terrible “middlemen,” the producers who make a complex economy possible, will be cut out of the loop.

An accomplishment we can all cheer as we starve to death.

This is Common Sense. I’m Paul Jacob.