During one of our “we need more tax money” drills recently, the proponents dusted off an old report that suggests that single family home owners do not pay their fair share in property taxes. How one goes about determining such matters is quite tricky. Exactly who benefits from government expenditures and who pays them. I will explore the first of these questions here- the second is deferred to another blog.
What the report did is to assume that each of us benefited equally from our city’s expenditures. On the surface that would seem quite accurate when it comes to services such as police, fire, roads and the like. But that hardly accounts for all our expenditures. There are services where assigning benefits is more problematic. Not everyone uses our recreations facilities. Not everyone agrees with our public assistance approach. Some funds come with specific earmarks for certain groups or areas of the city. Claiming that we all benefit equally from these expenditures is quite a stretch.
In fact it tantamount to telling people who strongly believe in limited government services that they are beneficiaries from the very services they do not use or want. That would seem to be a self fulfilling justification for endless services. It is just plain wrong and smells of a politically dictated conclusion. A more reasoned and thorough examination would likely reveal that a significant amount of our city’s expenditures are focused on a more limited subset of our citizens.
The report basically assumes away the very difficult challenge of determining beneficiaries of public expenditures with a broad brush pronouncement of a broadly defined “common good! No rational public policy decisions can possibly be made based on that document – it simply assumes away the challenge!
I had the good fortune to attend the presentation on energy policy by Mrs. Eisenhower at the Dole Center today. She had a simple set of messages. First, we as a nation need to be thinking more strategically (20 years out). Second, when we think out there for Electrical Energy the priority is a national grid. She likened that program to the interstate highway system. She saw two impediments 1.) regulation (site acquisition) and 2.) leadership.
We then shifted to Q&As. My neighbors then did wander a bit. Many questions were in fact representations that a specific technology under development at KU was the imminent answer to some aspect of our problems. Such remonstrations are not unusual from an academic audience although a great departure from the strategic vision suggested. Then we moved to pronouncements. Kansas only wants clean energy.
You know, we in Lawrence may favor that outcome but Kansans in general are not as committed. Specifically, there is a serious lessening of that commitment when money and time are discussed. What is more frustrating is offering that notion in response to a call for a national effort. We are part of a collective and we must address our energy issues collectively. That means that we Kansans just might have to rely on something other than “clean” energy in the foreseeable future.
We may be 37 square mile of rational thought surrounded by idiots but we are still part of that larger group. We cannot go it alone! We need to work with people and not act as if we alone know what is “right”!
When I was young (seems like a long-long time ago) the term “common good” was broadly understood and we did not need admonitions from our “law givers” to remind us of our obligations. It meant succinctly something that benefited the majority directly and that as a consequence was supported broadly.Today that term seems to have morphed. Now the common good is served by giving in to every small group demanding largesse and then arguing the “common good” is served by the aggregate of all that pork (we all get a little piece). In the end everything is now for the “common good” with a resultant runaway recourse need. Why should our “law-givers” have to make choices and anger anyone – give in to everybody and call the result “the common good”!If we step back and think about it there are a couple of important points that get left out in the unceasing and vociferous calls for more. Are we all really benefiting or are the benefits focused on only a few? Are all the things we are doing of relative equal merit or are there a bunch of “dogs” in the mix? I know, we don’t like to judge! Baloney!Ever time my wife and I eat out we hear conversations proclaiming the war was criminal or that welfare recipients are abusing our largesse. Those are judgments. We need more not less! When our local “law givers” are busily adding new “goodies” to our budget every Tuesday night we should be paying attention and making clear our concerns. The LJW should be making those choices clearer for us. It is too late when you get to the annual budget cycle and our “law-givers” feed us false choices (cutting social services to address a less than 1% cut).In my opinion this whole process is a sophisticated and perpetual reelection campaign. It allows our elected officials to proffer public funds in return for political support. We think we are sophisticated here in Lawrence. In fact, we have progressed very little from the days of the “free” ham sandwich at the saloon down the street from the polls for when you vote the right way.
Our new President has been very clear that he feels we all need to ante-up. I did a quick look. We provide over 600 billon dollars a year in income transfers (does not include SS or Medicare). That amounts to about $7,500 a year per tax payer. We all know that taxes are heavily concentrated on the middle class where that number may be as much as $15,000 per year per tax-payer. Sorry Mr. President we are already pitching in – big time! The real problem is not in the middle. The problem is at the two ends. There are many people receiving public assistance who could be contributing more to their own upkeep. The amount acknowledged varies depending on political philosophy but we all know anecdotally those who could do so. It should also be noted that these payments are usually not included in income when we talk about income distribution. The bottom cohort is not as neglected as frequently depicted.At the top too many are avoiding a just contribution to our tax system. We are frequently shown data by cohort (20% increments). It is emphasized that the top 20 % provides a very substantial portion of our tax take. True, but that top cohort is composed mostly of middle class tax-payers. The really rich (above a million dollar income by my definition) are really in the top 5 - 10%, give or take). This group hides behind in-kind income, tax expenditures, tax breaks, preferential treatment on income and the like so as to pay considerably less than a “just share”. I defined such a share as the amount of tax reflecting a progressive increase proportional to the tax increase imposed on the middle class when compared to those who pay little of no federal income tax. (i.e.: if the marginal tax rate doubles between $50K and $100K then it should double again every $50 K thereafter). Any other solution punishes the middle class at the expense of the really rich.Mr. Obama seems to be trying to throw money at the first group and hold harmless the second. That leaves only you and me to pay the bill. Boy, aren’t we lucky!
I found an interesting article in the LJW this morning concerning the Family Promise endeavor. I know from experience that we have an increasing challenge with homeless families. Family Promise serves such families. They came to the city and requested whatever the city claimed to be its due. After a year, we are still studying the problem while winter has threatened the homeless! Couldn’t we provide provisional authority for Family Promise to proceed pending whatever outcome the study might produce? If we do not have authority to regulate religious activities than Family Promise is free to proceed anyway. If we do have such authority, the ordinance is pretty much completed and should be implemented. What is the difficulty with moving ahead?We zipped through the ordinance on snow removal despite legitimate concerns about impacts on the elderly, the infirmed and the handicapped. We may even be in violation of Federal Law concerning some of these groups. It didn’t matter. Somebody wanted an ordinance and we have one – one of the more demanding requirements in Kansas.Could our lawgivers have some form of prejudice with respect to the faith-based community and efforts they undertake that some might consider the purview of the city – despite the fact that the city is not addressing the problem. I guess our lawgivers would rather raise our taxes to meet this need then let a non-city entity provide needed service to our less fortunate citizens! I hope I am wrong because if they were so inclined their bias would be despicable!
The Governor has proposed her budget. She is meeting her fiscal obligations on the backs of our college students, the handicapped and our local governments. It is fascinating that our Democratic Governor and our mostly Democratic local delegation are not even attempting to raise taxes. I guess they feel that the local governments can do that for them. Great – our local taxes have not been raised enough already! I think I remember our state delegation lamenting the ever-increasing local property tax levy. They our right, we cannot afford more taxes on the middle. Of course, increased property taxes are a tax increase – on the middle. Guess they missed that?Kansas is not a high tax state at the state level – we are in the middle of the 50. We are, however, among the set that have a relatively regressive state income tax structure. We also deviate from the recommended good governance balance of income taxes, sales taxes and property taxes. We rely disproportionately on the property tax.What would be so hard about making our income tax more progressive? We do not have to impact the middle class. With little effort, we could establish one or two additional income tax rates for citizens that are more affluent. Maybe the first step increase could be at an income level of $100.000. Maybe we could have a second step at about $250,000. The income from such an action would not solve the shortfall, but it sure would create the perception of a more “just” tax structure. California and New York, among other states, are examples.I find it hard to believe that our society can not prosper if we increase taxes on the”rich”. They still will have the means to invest and if we reduce the tax take on the middle, so will they. Perhaps the real problem is that the “rich” give a lot of money to our elected elites and they run in the same social circles. Maybe our elites are just biased against us - the “lumpenproletariat”.Maybe our Democrats (and Moderate Republicans) can get a handle around such an initiative and move it forward. It sure would mitigate the pain on our college students, the handicapped and our local governments! They could certainly answer the question as to why they seem so reluctant to raise taxes on the “rich”. Let us make our state income tax more progressive while holding the ravaged middle harmless.
Well, we are going to spend the second 350 Billon dollar bail out package on something. It sounds like this time we are planning to bail out defaulting homeowners. I am not sure how they came up the highest priority of all those hurt by this financial mess.I am having trouble figuring out just what this entails. Are we focused on those who lost their jobs? If so, for how long will we foot the bill? Do we fill in for a few months while they find another job or are we in this for the long haul? Are we helping those deceived by unscrupulous lenders? If so, are we pursuing those unscrupulous lenders or just helping the victims. Why help these victims as opposed to any other victims? How do we know they were deceived – because they say so?Are we helping those who have not really been impacted financially by the meltdown but who are defaulting because they knew or should have known there was no way they could service the debt? Does this really help the financial meltdown? It sure does not sound like we are helping the lenders. It sounds like we are making the lenders write down the loan. Are the rest of us going to pay for that in our own loans?Are we going to help those who were greedy and flipping houses for fun and profit. They were caught! Are we now going to make them whole? Are we going to help them make a profit? Isn’t this group concentrated in places like Las Vegas, San Francisco, Washington DC and other formerly major hot real estate markets? Isn’t our senior political leadership from these locals?I can’t seem to find answers to these questions. If somebody knows, could you enlighten the rest of us? If nobody knows how can we be throwing 350 billion dollars at something nobody knows much about? I just hope we will be spending this money on deserving homeowners. It would be a shame if we rewarded deceitful and deceptive behavior. That would be a slap in the face of the vast majority of Americans who bought homes they could afford. Of course, the old adage “no good deed goes unpunished” has ample historical underpinning.
There I was sitting at my desk processing our bills. Off in the corner the TV was showing an interview with Mayor Bloomberg of New York. Something he said caught my attention. His take, paraphrased, was that we are all equally responsible for the financial melt down. We have all been greedy and now we all have to pay the piper.I almost lost my breakfast. Where did that spin come from? With a little research on the web one can find all sorts of data on various government web sites. It tells a very different story.Between 85 and 90% of us that own homes are paying our mortgages as agreed. Yes, there are some people (a million or more, who have lost their jobs) who are victims of what has happened. None of these people contributed to the generation of the mortgage backed securities that became the catalyst for the melt down. So where is the mayor coming from?He mentioned credit card debt. Well the web sites reflect that about the same percentages as above are managing their credit responsibly. On average they have about $2K in debt and seem to be holding it stable. There are a few, wonder if they are the same ones with the mortgage problems, who have substantial outstanding credit, say maybe $20K, and who are having trouble servicing that debt.The matter of savings was mentioned. Yes, we are not the biggest savers in the world. Of course, for most of us just meeting our obligations consumes most of our resources. For the more affluent among us our homes have been our major investment. If we are such poor savers then how could we be demanding the high investment returns that were part of the problem that led to the melt down?Maybe someone out there can help me understand the mayor’s point. Could the mayor be mixing notions of overconsumption that are heralded by some because they are focused on our depredation to the environment? I do not discount the view that we are over-consuming but it does not support the realities of the meltdown. In fact, our consumption drawback may be aggravating it.Could we be once again looking at our leadership elite trying to fractionate the middle class to avoid the significant responsibility they have for what happened? If that is the case it is a clear example of the big “Lie” as we have come to know it. What makes this lie even more despicable is the fact that the middle class is losing the jobs and has seen what savings they have accumulated ravaged by the melt down. The leadership elites, on the other hand, are getting large multi-million dollar severance packages, major pay raises and significant income tax preferences. I would even bet that most of them got out of the market early and avoided major losses to their not inconsequential investments.What am I missing?
A topic of note lately is the notion of “bailing out” the auto industry. The numbers vary but might be as much as 100 billon dollars. Just what does that get us?Much has been made this past week of the insensitivity of the management of the big three when they flew to Congressional Hearings in corporate jets. Management is portrayed as incompetent at best. How could they possibly have bet on the SUV as the future of their companies?There is another picture. There are legacy costs for labor contracts that provide a medical program better than most. There are retirement programs that are generous by any standard. SUVs were what the public wanted and I though that is what corporations were supposed to provide, even if some of us hated that product for ideological reasons.One can honestly ask if any management team can overcome the financial drag from those legacy costs no matter how innovative when competitors can rely on their governments to provide for the benefits covered by those costsIf we bail out the auto industries as they stand now we lock in these legacy costs. They will continue to make it difficult for the industry to compete. It will be highly likely that the current circumstance will be repeated in a relatively short time. Will we then “bail out” the industry again? Perhaps there is an alternative to dumping cash into a losing proposition. Maybe we should pick up the legacy costs of the medical and retirement programs and allow the industry to sink or swim in a more equitable competitive environment. There is, however, a matter of equity if the government commits to sustaining those programs. How about all the other industries on the wrong side of foreign competition because of costs that their competitors do not have. Should we not address their challenge?Then there are large numbers of Americans who do not enjoy medical or retirement programs anywhere near as attractive as those available to the employees of the big three. Can we commit to underwriting those costs without making similar benefits available to all?Maybe we just need to slow down a bit and think this through. Is this industry really too big to fail? Does failure really mean a disaster or will the industry survive as a leaner more competitive nucleus? Should autoworkers be protected from loss of employment when so many other Americans are experiencing it? Is this all really about payback to the auto unions by the Democratic Party – using our money?
I appreciate the opportunity to express my thoughts on the LJW blog structure. I plan to comment from time to time on subjects of contemporary interest. My intent is to take an opposing view from the "Common Wisdom" on the topic. I hope that in this way I might broaden perspectives or at least suggest controversy. I worry that at times our 24 – 7 media hangs up on a particular notion and does not really offer meaningful alternatives such that the reader can formulate an informed opinion.