The talk about how adopting an income tax is the answer to the state's budget woes must be news to states like California that already have high income taxes and large budget deficits.
Despite this fact you can bet that you'll hear that argument made at the hearing later this week to enact a state income tax.
I wonder what the income tax advocates think about this news coming out of Missouri. According to the Tax Foundation:
Missouri lawmakers are considering a drastic change to their tax system. A bill recently passed by the state’s House of Representatives would allow residents to vote on a Constitutional amendment that would eliminate corporate and individual income taxes in the state and replace them with a broad based sale!
s tax. The plan is essentially a state version of the national FairTax proposal popular with some grassroots groups that would replace the federal income tax with a national sales tax. If the Senate passes the bill Missouri residents would be voting on the amendment in November of 2010.
Missouri currently has a sales tax, a corporate income tax, and a personal income tax. The sales tax rate is 4.225%, and the top corporate and personal tax rates are 6.25% and 6%, respectively. The plan put forth would replace all those taxes with a single sales tax levied at a rate of 5.11%. Accompanying the sales tax rate hike would be a substantially broadened sales tax base that would include all purchases. Currently most services are tax exempt and certain goods, most notably groceries, are taxed at a reduced rate of 1.225%. These exemptions would not exist under the new tax structure.
The overhaul of the tax system is meant to be revenue neutral. In other words, t!
he revenue from the sales tax increase and broadening of the t!
ax base is meant to exactly offset the elimination of income taxes.
Regardless of how you slice up a state's taxes, there is no such thing as a recession proof tax structure. For budget peace of mind states need to use a “three-legged stool” of sound budgeting:
Meaningful spending limit;
Protected 10% reserve account (so you don’t have to resort to tax increases or deep spending cuts in the bad times); and
Limiting base expenditures to core functions within the revenue forecast when in the good times.
Each year on Earth Day, politicians announce new efforts they promise will help the environment, often at no cost or even with the promise of "green jobs." Past promises, however, have consistently fallen short. Those failures are quickly forgotten and new promises are made.
Politicians claimed corn ethanol would be the answer for transportation fuels. That didn't pan out, so they now hope wood waste will be the savior. They argued that "green" buildings would dramatically cut energy costs. When that turned out not to be true their answer has been more green buildings. And after 20 years promoting electric and hydrogen cars failed, they turned to the technology that emerged from the marketplace -- hybrids. But who knows what auto technology will be the standard ten years from now, and picking hybrids today may look as foolish then as picking hydrogen cars looks today.
Many of these technologies may have promise. The government, however, repeatedly falls for ecofads, picking and choosing individual technologies, often to the detriment of more promising technologies and, ironically, the environment. Technology is the greatest hope to improve energy efficiency and use resources sustainably and efficiently. The best decisions are made by millions of creative entrepreneurs, engineers and others who risk their own funding and time on these ideas, not politicians who care more about political credit than actual environmental sustainability.
Here are a few of the promises made today and some of the results of similar promises made in the past.
Gov. Chris Gregoire today signed House Bill 2165 to help the Washington State Department of Natural Resources (DNR) create energy from wood waste in our state’s forests. “It is fitting that Washington State takes this step forward to create clean, renewable energy and green jobs on Earth Day,” said Commissioner of Public Lands Peter Goldmark. “Turning wood waste into electricity or liquid fuels will create both energy and jobs while improving the health of our forests.” - Department of Natural Resources release, April 22, 2009
"By requiring a growing percentage of our fuel supply to be renewable biofuel that meets appropriate fuel quality standards, we will reduce our dependence on imports of foreign oil, improve the health and quality of life for Washingtonians, and stimulate the creation of a new industry in Washington that benefits our farmers and rural communities." - Preamble, Washington State ESSB 6508, 2006
"California regulators, trying to assess the true environmental cost of corn ethanol, are poised to declare that the biofuel cannot help the state reduce global warming. As they see it, corn is no better – and might be worse – than petroleum when total greenhouse gas emissions are considered." -Scientific American, April 20, 2009
"The news that biodieselmaker Imperium will be cutting 24 employees (or more than half of the staff) from its Grays Harbor plant, announced Thursday night, won’t be a big shocker to anyone who has followed the company’s yearlong downward spiral. The Seattle-based biofuel firm, which has raised more than $200 million over its lifetime, withdrew an IPO that could have raised an additional $345 million, back in January 2008, and soon after reduced staff from a high of 107 employees." - Earth2Tech, March 13, 2009
"Green" Building Promises
"The legislature finds that public buildings can be built and renovated using high-performance methods that save money, improve school performance, and make workers more productive. High-performance public buildings are proven to increase student test scores, reduce worker absenteeism, and cut energy and utility costs." - Washington State SB 5509, Passed 2005
"Green" Building Reality
"When the “green” schools law was passed four years ago, supporters argued the standards would pay for themselves, reducing energy use by up to 50 percent. Supporters claimed one school in Tacoma was already saving more than 30 percent in energy use. The data showed something different. Giaudrone Middle School, built with the “green” elements, uses about 30 percent more energy than a middle school built in the same district in the same year, but without those “green” elements. ... Adding insult to injury, buildings cost more to build than was promised. Advocates told the Legislature that green buildings would cost an additional 2 percent. Interviews with facilities directors indicate the real number is 6 percent, which is not trivial. Each year, the state and school districts spend about $450 million on school construction. A 6 percent increase is about $27 million." - Washington Policy Center Op-Ed, Spokesman-Review, February 28, 200!
Electric Car Promises
"As a necessary and desirable step to expedite the transition to transportation technologies and infrastructure with reduced emissions, the department shall implement an electric vehicle and alternative fuel vehicle infrastructure program that accelerates planning and allocation of funding for pilot projects to demonstrate the feasibility of large scale deployment of charging and alternative fuels distribution infrastructure." - Washington State SB 5735, Passed April 14, 2009
Electric Car Reality
"California air regulators on Thursday gutted rules seeking to place tens of thousands of zero-emission vehicles on the road, instead ordering automakers to produce a fleet of cleaner-burning hybrids. The decision is expected to affect 12 other states -- including Washington -- that had adopted California's target for zero-emission vehicles, defined as those powered solely by batteries or hydrogen fuel cells. ... The rules have been modified four times since they were introduced. The biggest change came in 2003, when the Air Resources Board significantly scaled back the mandate and ruled that hydrogen cars, hybrids and cleaner-burning gasoline vehicles could meet the state's goals." - Associated Press, March 27, 2008
Today's promises build upon a shoddy record of using tax dollars to pick and choose technologies politicians touted as the environmental savior of tomorrow. Why will these promises be any different than the many made in the past.
On Earth Day, we commonly hear dark predictions about the looming horrors of global warming (a typical example, “What is at stake [is] our ability to live on planet Earth,” Al Gore).
Yet not so long ago the news media issued dire warnings about global cooling and a coming Ice Age. Consider these headlines:
• “The Earth’s Cooling Climate,” Science News, November 15, 1969.
• “Colder Winters Held Dawn of New Ice Age,” Washington Post, January 11, 1970.
• “Science: Another Ice Age?” Time Magazine, June 24, 1974.
• “The Ice Age Cometh!” Science News, March 1, 1975.
• “The Cooling World,” Newsweek, April 28, 1975.
• “Scientists Ask Why World Climate is Changing; Major Cooling May Be Ahead,” New York Times, May 21, 1975.
• “In the Grip of a New Ice Age?” International Wildlife July-August, 1975.
• “A Major Cooling Widely Considered to Be Inevitable,” New York Times, September 14, 1975.
• “Variations in the Earth’s Orbit, Pacemaker of the Ice Ages,” Science magazine, December 10, 1976.
Reporters told the public about global cooling in the same confident tone used in today’s coverage about global warming, creating the strong impression that no reasonable person could disagree. Here are some examples:
“The evidence in support of these predictions [global cooling] has now begun to accumulate so massively that meteorologists are hard-pressed to keep up with it.” The Cooling World
“A study release last month by two NOAA scientists that the amount of sunshine reaching the ground in the continental U.S. diminished by 1.3% between 1964 and 1972.” The Cooling World
“Telltale signs are everywhere...the thickness of the pack ice...the southward migration of warmth-loving creatures like the armadillo...” Another Ice Age?
“Since the 1940s the mean global temperature has dropped about 2.7 degrees.” Another Ice Age?
“The threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind,” The Ice Age Cometh!
Critics will say there was no scientific consensus in the 1970s that the world was cooling, but that’s not how the media reported it to the public. Similarly, today some scientists want to debate global warming and its possible causes, but the media presents global warming as a settled issue, not to be questioned. Since the reporting today about world climate is the opposite of what it was 30 years ago, it’s ok to be skeptical about the worst predictions surrounding global warming.
"As states and school districts across American begin drawing down the first $44 billion in education funds under the American Recovery and Reinvestment Act, they should bear in mind the core levers of change under the law. In order to drive reform, we will require an honest assessment by states of key issues like teacher quality, student performance, college-readiness and the number of charter schools."
Arne, let me tell you something you already know: the number of charter schools in Washington State is ZERO. Only eight other states have banned charter schools from their borders.
And let me also tell you that the big new education reform plan which just passed by the legislature, HB 2261, is not a charter school bill, but just the opposite. It adopts a one-size-fits all prototype school model and promises that work groups formed by the bill will address issues of teacher quality and student performance at some future time.
The only way to get charter schools in Washington State, Arne, is to withhold federal funding. Then, perhaps, the legislature will sit up and enact real reform.
If you care about reducing traffic, then you may question how Washington policymakers propose to spend our portion of the $5 billion in stimulus funding.
In order for the various state and local agencies to receive funds, the governor must "certify" the project. In the process, the governor says each project "has received the full review and vetting required by law and that [she] accept[s] responsibility that such investment is an appropriate use of taxpayer dollars."
We could argue all day long about the appropriateness of some of these projects. But ever since the governor's Blue Ribbon Commission on Transportation identified about $150 bill!
ion in unmet transportation infrastructure needs, some of these certified projects may raise your eyebrows.
Island Co Bicycle Touring Enhancement Produce a map identifying bicycle touring routes on both Whidbey and Camano Islands. Improve shoulders along approximately 1400' of Crescent Harbor Road in front of Crescent Harbor Elementary School. Sign the route from Deception Pass Bridge to the City of Oak Harbor as a "Bike Route". $53,329
Lummi Nation Pedestrian Path Construct approximately 9000 LF of a shared bicycle pedestrian trail between Kwina road and Slater road east of Haxton way. $250,000
West Dayton Street Beautification This enhancement project will add vegetation and an irrigation system to the West entrance into the City of Dayton along US 12. $149,000!
Beards Hollow Overlook Design an!
d construct beach/ocean overlook at Beards Hollow on SR Loop 100. $100,000
LINK Transit Upgrade shop lighting Upgrade shop lighting. $50,000
In fact, I went through the list and found about $9.8 million dedicated to sidewalks, $4.7 million for trails, and whopping $77.7 million earmarked for vehicle replacement. Funding is the single largest obstacle in building/maintaining transportation projects, especially at the local level. With population projections expected to reach an additional 1.2 million people and traffic congestion expected to double over the next twenty years, could we not have found more important projects?
The Department of Revenue will have to dedicate 44 full-time equivalent employees to implement the policies.
General Fund B&O tax receipts will be REDUCED by $3 million and the Performance Audit account will be REDUCED by $67,000 due to reduced sales.
"The decrease in the Business and Occupation Tax, Performance Audit Account and Local Government Revenues is due to reduction in taxable sales due to the higher tax rate (elasticity). Elasticities were calculated based on Department of Revenue data."
"As a result of elasticity this bill will decrease local government revenues by $12.4 million in the 2010-2011 Biennium and $15.4 million in the 2012-2013 Biennium. In addition there may be negative impacts to local lodging taxes if their combined state and local tax rates will be above their statutory limits."
"The Department assumes, based on IRS information that approximately 370,000 persons in Washington who file for the Earned Income Tax Credit (EITC) will apply for a rebate under this legislation in Fiscal Year 2010."
"After consultation with the Department of Social and Health Services, the Department assumes that a high proportion of claimants will not have English as their primary language. This requires additional advertising outreach, forms translation, and additional language scripts for the automated phone application system to work most efficiently."
"Review of IRS information indicates that there is a higher than average error rate for EITC claims. This higher error rate will require added collection effort for claims paid in error. The Department has assumed that denied claims can be settled with minimal formal appeals. Should experience show otherwise, additional FTEs may be added in later fiscal years to handle the appeals caseload."
"It is estimated that costs of approximately $1,515,000 may be incurred in Fiscal Year 2012 as the Department continues to respond to taxpayers questions and submission of applications. No costs have been included in the fiscal note to administer the Working Families' Tax Rebate after Fiscal Year 2011. Current law requires specific legislative appropriations in each biennial budget for the program to continue beyond the 2009-2011 biennium."
US Transportation Secretary Ray LaHood sent a letter to all fifty governors today, reminding them that any federal stimulus money that is saved from lower than expected costs can remain in the state, but must continue to be spent on other eligible transportation projects.
Across the country, bids are 10-20 percent less than the engineer's estimates....Any Federal dollars that are not used for that particular project must be used for other projects consistent with the Recovery Act appropriation.
LaHood goes on to say:
Money saved from Recovery Act-funded highway projects, for example, may be used for transit and rail.
Compare and contrast the following quotes about the health care priorities of the proposed House budget. Both quotes are from the same lawmaker.
The first is from the March 31 House budget release press conference:
“I really am very proud that the decisions that we made as difficult as they were, were definitely responsible cuts and also again allowed us a body to rise to the occasion to make those difficult decisions.”
The second quote is from the April 17 hearing on a proposed sales tax increase and what might happen if voters don't approve the tax increase to supplement the proposed House budget:
“Make no doubt about it, people will die . . . If this is not in the voters' interest to pass this (tax) piece, people will die."
As for the proposed tax increase, according to these economists raising taxes during a recession will damage Washington’s economy and hamper economic recovery.
HB 2261, the big education reform plan which may pass the legislature soon, would increase the definition of Basic Education by adding 80 instructional hours, 24 high school credits, five more than the 19 currently funded by the state, all day kindergarten, early education for at-risk children, and other reforms.
Even if we had the funds to pay for HB 2261, none of these very expensive programs will improve student achievement in Washington State, unfortunately. The bill would support additional centralized, bureaucratic mandates which do not address or correct the reason for Washington's failing schools---that principals are not in charge of their budgets or staff. See the Washington Policy Center Education Reform Plan: "Eight Practical Ways to Reverse the Decline of Public Education."
Think about it: if we raise the $7-8 billion to pay for these programs, will principals have the power to allocate resources to the classroom to raise the effectiveness of the teachers? (Less than 59 cents of every public education dollar actually reaches the classroom and only 45% of public school employees are classroom teachers.) Will principals be able to give bonuses to hard-working teachers so as to create cultures of excellence to replace cultures of mediocrity? Will principals be able to replace ineffective teachers?
The answer to all these questions is NO. We'll have a much more expensive system and achieve the same abysmal results. More money is not the answer---the way we spend current education dollars must be improved. And decentralizing authority, not more unfunded mandates from Olympia, is what is needed in Washington State. Principals should be given the tools they need to reallocate resources to the classroom, improve the culture of their schools and raise the effectiveness of teachers.
HB 2261, the bill which passed the Senate last night, resembles Initiatives 728 (smaller class sizes and other reforms) and Initiative 732 (teacher pay increases). Here we have yet another expensive, unfocused education spending program without a revenue source.
This time, however, legislators stand poised to expand the definition of basic education to include a variety of additional programs, costing perhaps as much as $7 to 8 billion. The legislation provides no fiscal breakdown of the cost categories for this 50% increase to state spending on education.
Why would we expand the definition of basic education, when we can't even get basic education right?
HB 2261 sets the stage for shifting the blame for our failing schools to the taxpayer, even though the blame lies squarely with the legislature and with the schools themselves.
I can hear it now: the schools are failing because you (the taxpayer) won’t agree to an increase of 30-40% to your property taxes.
The astronomical $787 billion federal “recovery” package was back in the news this week as thousands of Washingtonians took to the streets across the state to protest among other things taxes, spending, and the federal bailout packages. According to the Washington State Patrol, the tax and spending protest was 5,000 strong in just Olympia – the largest rally by far of the year.
Next Wednesday, April 22, is Earth Day and we are celebrating in proper style. Join us at Rachel Carson Elementary School in Sammamish at 6:30 to see "Not Evil Just Wrong: The True Cost of Global Warming Hysteria," an excellent film about the costs of thoughtless environmentalism.
The film is the second documentary by journalists Phelim McAleer and Ann McElhinney. Two years ago they joined us as keynote speakers for our environmental luncheon when they showed clips from their first film, "Mine Your Own Business."
The film highlights the high cost of the ban on DDT and the millions in Africa and Asia who have died from malaria as a result. Two years ago, the World Health Organization, saying they could no longer ignore the science, approved the use of DDT as a tool against malarial mosquitoes. The film combines interviews with scientists, environmental activists and average citizens to raise concerns about the current wave of regulations and taxes being proposed to fight global warming.
You can see clips of the film at the Not Evil Just Wrong Youtube site or watch the preview below.
The private screening is the first in the Seattle area and is free. Please RSVP by calling (206) 963-3409 or lleveque [at] washingtonpolicy [dot] org">lleveque [at] washingtonpolicy [dot] org.
Since it is all the rage these days to through out rankings based on what national magazines say (especially Forbes) about ourbusiness climate as justification for policies that usually make running a business in this state more expensive, I say, we might as well expand this trend to other areas.
Forbes says that the loss of the Sonics put Seattle over the edge to gain this year's award. But not to worry, the Seahawk's 2006 Super Bowl tragedy, the Mariners lack of a World Series appearance, and only one national championship to speak of (1979 - Sonics) also contributed. We even beat out Cleveland, which is saying something.
But once again, I must point out the shortcomings of the Forbes ranking. Seattle actually has another national championship to its name -- that of the 1917 Seattle Metropolitans' Stanley Cup victory. It was the first time an American team had won the St!
anley Cup. Of course, seven years later the team folded. Come !
to think of it, the Seattle Pilots baseball team also left town in 1970. Perhaps there's a pattern here.
It seems that Forbes got this ranking correct. (sigh)
Last night the Senate Ways & Means committee adopted numerous amendments to the proposed Senate budget. Since the amendments are not available online, here is a brief summary of some of those adopted:
Requiring a study by the Joint Legislative Audit and Review Committee (JLARC) of the state’s recreational boating programs. (This in contrast to our suggestion yesterday for JLARC to review how well the state is following the current performance-based budgeting requirements already in law.)
Suspending the Select Committee on Pension Policy (SCPP) during the 2009-11 biennium. (SCPP studies issues and policies affecting the state's public employee retirement systems and makes recommendations to the Legislature regarding changes. The base Senate budget proposal defers over $400 million in pension contributions.)
Directing the State Board of Education to develop a comprehensive accountability index and a “process for addressing performance challenges that will include the following features:
(A) An academic performance audit using peer review teams of educators that considers school and community factors in addition to other factors in developing recommend specific corrective actions that should be undertaken to improve student learning;
(B) a requirement for the local school board plan to develop and be responsible for implementation of corrective action plan taking into account the audit findings, which plan must be approved by the state board of education at which time the plan becomes binding upon the school district to implement; and
(C) monitoring of local district progress by the OSPI. The proposal shall take effect only if formally authorized by the legislature through the omnibus appropriation act or other enacted legislation.
In coordination with the OSPI, the state board of education shall seek approval from the United States Department of education for use of the accountabilit!
y index and the state system of support, assistance, and intervention, to replace the federal accountability system under . . . the no child left behind act of 2001.”
Authorizing a 14 percent per year tuition increase for four-year colleges and universities to increase “budgeted enrollment levels by 3,475 full-time equivalent students each year to account for the additional $83 million of tuition revenue resulting from the higher annual increases.” (The House Ways and Means last week adopted an amendment to remove the budgeted enrollment levels from its budget proposal.)
As for those amendments that failed, The Olympian has this story about "Senate Republicans unsuccessfully propos[ing] a 2 percent cut to the amount of money used to cover health insurance costs for state employees."