Tag Archives: taxes

Did Not! Did So!

Ah, budget battles.

This morning’s Star detailed the back and forth political arguments about whether the Ballard Administration actually made the budget cuts the mayor promised during his campaign. Their independent analysis amounted to: who knows? That’s not a criticism of the reporters–it’s a reflection of the games public managers play.

This actually began back during the Goldsmith Administration. In fact, it could argued that the City’s dicey finances actually began there; I know Ballard blamed Peterson because he inherited significant budget problems, but Peterson himself inherited a true “smoke and mirrors” budget from Goldsmith. (That doesn’t mean he shouldn’t have done more to fix it.)

Goldsmith’s clever game was to change the way in which the budget was reported from the relatively straightforward system employed during the Hudnut Administration. When you change budget categories, it becomes virtually impossible to compare apples to apples. (He also touted savings from his own exaggerated “estimated growth” figures–as in “we project that expenditures would have reached X if we hadn’t done Y. What good managers we are!)

In this case, Ballard’s folks excluded federal and other grants and some debt service from the budget calculation, and “voila”–they saved money.

I know I’m talking crazy, but what if we focused less on the relative amounts we spend, and more on what we get for our money? What if we focused less on the tax levy (the total amount raised) and more on how fairly we assess property and set rates? What if we rewarded good management rather than providing incentives to cut corners and push higher maintenance costs to the next guy?

What a dreamer I am…..

Comments

The Free Rider Problem

Yesterday I received my copy of PA Times–a publication that is admittedly unlikely to be on the bookshelves of those who read this blog. It’s issued by the Association for Public Administration, and it has articles that appeal primarily to geeks like me who study how governments work.

The article that caught my attention–and raised my ire–was all about “crowd-funding” government.

Crowd-funding, like crowd-sourcing, is a phenomenon of the internet. People wanting to raise funds for new businesses, or for charitable efforts, use the web to solicit many small investors or donors, rather than attempting to raise capital from banks (many would not be “bankable”) or large amounts from big donors. That’s creative, and I applaud the entrepreneurs and nonprofit organizations that are using that new tool.

But now, according to the article, the same approach is being taken by cash-strapped units of government to raise money for public projects. And I have a big problem with that.

Let me make one thing clear: I do not oppose efforts to trim government spending by revisiting what government does. Although citizens would passionately disagree over the propriety of having this or that task done by government, that is a discussion we should be having. (I would vote to discontinue the drug war in its current form, for example. Others might argue that local government ought not provide golf courses, or other recreational services.)

Once government at any level assumes responsibility for providing a service that benefits all its constituents, however, all of us need to pay our share to support those services. And let’s be honest about what constitutes “benefit.” My children aren’t in the public school system any more, but I benefit in numerous ways from living in a community where people are educated. I also share the disadvantages of a school system that is below par. A good school system adds value to my property, it helps my community attract good jobs, etc.

A government agency that inspects the chicken before my local Kroger can sell it, another that monitors air and water quality and yet another that keeps merchants from peddling unsafe devices all benefit me. I benefit from paved streets and traffic signals, from parks I can walk in, from zoning laws that keep someone from building a strip bar in my neighborhood…Well, you get the picture.

If these government functions are financed by contributions, rather than taxes, we have the classic “free rider” problem. The people who are unwilling to pay their fair share benefit equally with those who do pay. This is the dirty little secret that the rabidly anti-tax folks want to ignore.

In a sane world, citizens would decide by majority vote just what services government ought to provide. Then they would fund those services through a system of fair taxation. We can and should debate just what role government must play in our communities, and we can and should have robust arguments about the sort of tax system that is fair and equitable. We can and should demand efficient and businesslike management of our government agencies.

But when we reorder our common institutions to satisfy the selfish, when we burden those who care about their neighbors and neighborhoods in order that others can enjoy the benefits of government without bearing their fair share of the costs, we’ve truly lost any sense of what it means to build communities.

I don’t know about anyone else, but the last thing I want on my tombstone is the epitaph “free rider.”

Comments

Learning from Experience

I know I have harped on the dismaying extent to which our policymakers legislate on the basis of ideology rather than evidence, but I want  to revisit that theme again today.

Several people have commented on my recent post/IBJ column about the drug war–and the enormous sums we continue to spend (in a time of austerity, no less) on a policy that everyone sentient knows has not only failed miserably, but in many ways has been counterproductive.

As a civil libertarian, I would have great qualms about the drug war even if it HAD been effective. But let me suggest another policy area where ideology has trumped experience.

It always seemed to me that the argument against confiscatory tax rates having a negative effect on job creation made sense. (Leave aside the question of what constitutes a “confiscatory” rate for now.) If I am a wealthy person, and I know that even a successful investment in a new factory or other job-creating enterprise will yield a minimal after-tax return, why should I take that risk? And even if lower tax rates leave me with more dollars in my pocket that I DON’T invest, filling my order for that fur coat and yacht creates jobs, too.

Unfortunately, experience has not supported that eminently logical proposition. As a number of economists have documented, job creation has actually IMPROVED after tax increases. Again, actual performance depends on how much of an increase, on what, and how steep the rate is following the increase. But increases in the general income tax rates have demonstrably NOT harmed job creation-quite the contrary.

There are many reasons why we have experienced this puzzling departure from theory. The most likely is that–contrary to the belief that people are  “rational actors,” humans are more complicated, and what constitutes a “reward” or “incentive” will vary widely from individual to individual. I can attest that many academics who could make much more money in the private sector work as hard for the recognition of their peers as many private-sector folks work for financial rewards. (As I so often tell my students, “it’s more complicated than that theory might suggest.”)

The real question, however, is not why a particular, perfectly reasonable, theory didn’t hold up. The real question is, why do so many people stubbornly cling to the theory and ignore the evidence provided by actual experience?

Comments

Of Debt and Taxes

I haven’t written about the congressional impasse (polite word for food fight) over the debt ceiling, because really, what could I say that hasn’t been said many times by many people? But being here in Split, surrounded by evidence that human efforts at civilization have persisted over thousands of years, I’ve grudgingly recognized that our species has persisted through many periods of collective craziness, many characterized by even more self-destructive psychosis than now.

In other words, humans will survive the current capture of Congress by unreflective fanatics who believe God has instructed them not to raise the debt ceiling. (To be honest, I’m less sanguine about our ability to survive the climate-change deniers….previous generations haven’t had the means to destroy the Earth.)

But even though my brain–such as it is–tells me we’ll get through this crazy time, I have a lot of trouble understanding the emergence of the Tea Party. Not their existence; we’ve always had strains of malcontents–anti-social or anti-intellectual or white supremacist or other odd movements–but their ability to make resentment of taxes a rallying cry and a focus for so many people’s anger. And not anger at a particular tax or tax policy, but at the very idea of taxes. They have somehow convinced otherwise reasonable citizens that taxes levied for the general welfare are somehow illegitimate.

During this trip, the things we’ve most enjoyed are the products of just such taxes–great public transportation, preservation of historically significant sites, museums…Do these troglodytes think such services are supported by magic? Let alone police and fire protection, garbage collection, etc.? Are they really willing to forego the very things that make us civilized–trade with other cultures, which depends upon confidence that we will pay our bills, the myriad services that make our common lives easier and more pleasant, any sense of common purpose–for gated communities and personal gun collections?

Everywhere we’ve been, we’ve met lovely people who are not remotely anti-American but who are mystified and worried by what is happening to our political system.

Me too.

We have another day and a half in Split, then two days in Rome before we head home. I wonder what we’ll find when we get there.

Comments

Thoughts for the Holiday Weekend

This is the 4th of July holiday weekend, and most of us are planning cookouts, fireworks celebrations and the like. In my house, we’ve been getting ready for a long-planned European trip–giving instructions to the graduate student who has graciously agreed to “house sit,” making sure our packing list is complete, etc.

But it is also an appropriate time to think about the state of our country and its government. So as this celebratory weekend gets off to a start, allow me to share some random concerns.

  • One of America’s great assets has been the fact that, as a nation, we’ve never been particularly ideological.  We’ve been one of the newest and most pragmatic of countries, and as a result we’ve escaped some of the worst results of hereditary privilege, class resentment, and zealotry. That seems to be changing.
  • Checks and balances were meant to ensure that no branch of government got too powerful; is it possible that we have gone too far toward “checking” and lost our “balance”? The founders didn’t have political parties, and I doubt they envisioned a time when a political party in the legislative branch would close ranks and simply refuse to co-operate or negotiate with the administration. Whether this is due to ideology or politics hardly matters–it makes governing virtually impossible. (The Democrats would undoubtedly love to do the same thing if the situations were reversed, but they lack the ideological consistency and organizational discipline to pull it off.) Structures matter more than current punditry might suggest, and when lawmaking is structured to require a measure of participation and compromise from all sides, the absence of that co-operation is a very serious problem.
  • This country has given so much to its citizens, yet some of those who have benefited the most seem least willing to acknowledge that debt, and least willing to pull their own weight. The other day, a wealthy man of my acquaintance told me that he’d made his money without help from anyone, and didn’t see why he should pay taxes to support people who hadn’t worked as hard and been as successful. No one gave me anything, he said. Of course, his parents were able to raise him in a stable society, and could send him and his siblings to good public schools. Public agencies made sure his food was safe to eat. When he graduated from his (public) university and started his business, he didn’t have to pay off the local authorities. He had access to public roads that allowed him to receive raw materials and ship his goods.  Municipal police and firefighters ensured the safety of his home and business. Impartial courts decided his disputes with customers or suppliers. The existence of a stable, regulated economy meant he could borrow necessary capital. And on and on…..These are assets that people in many other countries lack. Good governments create the conditions that make free enterprise possible. It constantly amazes me that so many people fail or refuse to understand that.
  • Our governments–state and federal–are far from perfect, and some of our policies are positively insane. (We may or may not agree on which ones those are.) But dammit, patriotism isn’t wearing a flag pin on your lapel. Patriotism is civic involvement in the nitty-gritty of politics and governance–voting, attending public meetings, writing letters to elected officials. And paying taxes–so that America can continue to provide a social and physical infrastructure that allows people to succeed.

Happy Fourth of July.