Archive for the ‘Taxes’ Category

Unintended Consequences

Friday, October 22nd, 2010

This will be a somewhat abbreviated post because the News Guy moderated a debate among Northeast Kingdom legislative candidates last evening and there is only so much one fellow can do in one day.

Oh, all right. Full disclosure. In addition to this public duty, the News Guy herewith admits another factor. As revealed in an earlier post (the one about Centennial Field and the Lake Monsters Take Us Out To the Ball Game? July 3, 2009)  among the News Guy’s private passions is that exotic past-time known as baseball, to which he devoted the latter part of the evening.

So for today, just a correction or two, a little mopping up, and then a tale, a true story that may or not be cautionary.

Wednesday’s post reported news of an “inter-active map showing poverty rates by state and county in 2009 when the poverty reached its highest levels in 51 No big surprises.”

Obviously that should have been the poverty rate which reached its highest levels in 51 years, period, end of sentence.

A few paragraphs later, the post listed the poverty rates for Vermont’s counties, but left out two of them. Thanks to the reader who pointed out the omission, and for those who read the post early, scroll down. All 14 counties are in there now.

And to the reader who asked what the under-five-year-old poverty rate is by county, stay tuned. The search is on.

Another reader had a good point on that post, and this time it was not just any reader but Doug Hoffer, the Democratic candidate for Auditor. Read Hoffer’s full comment (just go down to the bottom of Wednesday’s post and click on “3 comments,”) but his main point was that it isn’t good enough for Vermont’s poverty rate to be lower than in most other states; ten percent in poverty still too high and we’re all too willing to accept that state of affairs.

An interesting comment which deserves a full treatment soon.

Later in that same post was the report of a poll showing that “45 supported the idea, 36 percent opposed it, and 19 percent were undecided.”

No doubt you all figured this out for yourselves, but just for the record, that’s 45 percent.

The October 11 post, Ethical Quandary, reported that Lt. Gov. Brian Dubie was once a member and chairman of the school board in Essex. It was Essex Junction. Apologies to both municipalities and to Dubie.

OK, now to the tale, in which the names shall be changed to protect the innocent. So let’s call them Mr. and Mrs. Jones. They live in Charlotte, in the same house they had built more than 40 years ago. It isn’t a big house. Fifteen hundred square feet, Mr. Jones said.

The Joneses are not young. He’s 81. She’s 75. They’re not rich either. Last year, they said – and emailed tax records to back it up – their taxable income was $44,000. Because they own their home free and clear, they no longer have to make mortgage payments. They just have to pay their utility bills, buy food and fuel, whatever clothing they might need, and some incidentals.

Oh, and of course property taxes on their house. This year, their property tax bill is $11,252.

No, that’s not a typographical error. The Jones pay more than $11,000 – one quarter of their taxable income – for property tax.

Wait a minute. Doesn’t Vermont’s property tax system include an “income sensitivity” provision that protects middle-income homeowners from sky-high property taxes?

Yes, but earlier this year the Legislature passed a bill (H 783) effectively abolishing income sensitivity  when “the equalized value of a housesite (is) in excess of $500,000.”

That covers the Jones’s 1,500-square-foot house that they had built in 1967 for $22,000. It is now assessed at $1.4 million

No, neither of those was a typo, either.

The Joneses have made some improvements to their house over the years. But that’s not why its assessment shot up. It was, said Mrs. Jones, the much larger houses built all around them over the last several years that raised the assessed value of all the homes in the neighborhood.

The Legislature acted after some news stories in the Burlington Free Press and the Valley News (for some reason unavailable on its web site) that some residents of opulent homes were paying modest property tax bills based on their incomes.

The Legislature acted out of a combination of opportunism and controlled panic. The lawmakers were scrounging for all the revenue they could find. And they worried about being attacked for coddling the “wealthy,” even if these supposedly wealthy people earned average incomes.

It was not an unreasonable decision. Like the others so targeted, the Joneses will not suffer economically. They can sell their home, probably not for $1.4 million in the Recession, but for several hundred thousand dollars, which will allow them to live out their lives in comfort.

But they don’t want to move.

“This is our home,” Mrs. Jones said. “It’s where we raised our three boys. At my husbands age, moving will be hard on him.”

Surely this is not what the Legislature intended. But nobody has repealed the law of unintended consequences. And legislating on the basis of a few “horror stories” is a good way to activate that law.

Vermont’s Fine Whine

Friday, October 15th, 2010

Peter Shumlin wants to “put Vermont back to work,” because “thousands of Vermonters are struggling to find good paying jobs,” and “Vermont is facing the highest unemployment rate in 30 years.”

So they are and so it is. But Vermont is not alone. In the other 49 states, millions are struggling to find jobs and the unemployment rate is higher than it’s been in 30 years.

In fact, the unemployment rate is lower in Vermont than it is nationally or in most other states. In August, according to the Bureau of Labor Statistics, only four states had lower unemployment rate’s than Vermont’s 6.0 percent, which was more than a third less than the national rate.

Brian Dubie agrees that job creation is vital, and he says jobs are scarce because “it’s harder to start a small business here, harder to earn a good living here, harder for a small business to hire and grow…than in almost any other state in America.”

Dubie has some evidence to support his assertion, a 2009 survey by Forbes Magazine finding that Vermont had one of the least “business-friendly environments” in the country. As evidence goes, though, this survey was decidedly unimpressive, and there are no actual data supporting the claim that small businesses are less likely to succeed in Vermont than elsewhere. Until the Recession began, business start-ups outnumbered business failures in the state, and the success rate was comparable to the rate in other states.

Different though their outlooks may be, Dubie and Shumlin are both acting in accordance with what seems to be Vermont’s real – if unofficial – motto: “Woe is Us.”

Speaking of no data, there are none to prove that Vermonters tend to complain any more than Tennesseans, Kansans, or Oregonians. In recent years, whining has emerged as the national pastime as various regions, generations, and subcultures claim to be more put-upon than everyone else.

To be fair, there is plenty to…well, whining never did any good, but there is plenty to complain about and rail against these days. In many ways, the country is in bad shape. The current Recession is the worst since the Great Depression (unemployment went slightly higher in 1982, but it was a far more manageable downturn). In real money terms, many people earn no more than they did a decade or so ago even as the cost of necessities such as health care and education keep rising. Life in America is not easy these days.

But all these are national (and some cases global) troubles. There is nothing particularly Vermont-ish about them. In fact, for the most part, Vermont is getting through these troubled times better than most states. Depending on who is doing the counting and when, the home foreclosure rate in Vermont is either the lowest or the second lowest in the country. As mentioned, the jobless rate, while higher than before the Recession, is relatively low, as is the poverty rate, and even the much-discussed pending state government budget deficit pales in comparison with many other states.

One reason to suspect that Vermont is whinier than most other states is that Vermonters were kvetching well before the Recession. To some extent, this is one consequence of being a generally liberal state. Complaining – sometimes with good cause, sometimes not – is built into a liberal’s DNA.

But if anything, it has been the state’s conservatives who have voiced the loudest gripes. Led by Gov. Jim Douglas, Republicans and their allies have kept up a steady chorus caterwauling that Vermont’s tax structure and environmental regulations are stifling economic growth.

It’s not impossible that there is some basis to this critique. But it faces one problem at the outset: there really isn’t much evidence that Vermont’s economic growth has been stifled at all.

For the last half century, this state has gotten steadily bigger and richer. In 1960, the Census counted 389,881 Vermonters. That rose to about 445,000 in 1970, some 511,000 ten years later, almost 563,000 in 1990, almost 609,000 ten years ago, and an estimated 638,000 this year. Experts project the population to reach 678,000 by 2025.

As it has grown larger, Vermont has grown richer. One of the poorest states in the middle of the last century, it now has the 21st highest median household income. According to official federal figures from 2007 to 2008 (the latest figures available) Vermont’s Gross Domestic Product grew by 1.7, more than twice the nationwide rate of 0.7 percent.

Vermont does have economic problems, but the evidence suggests that these problems stem less from what Vermonters do (government policies) than with where they do it (on farms and in small towns) and who they are (white, Anglo, educated, relatively affluent).

Vermont is one of the most rural states in the country, with only one official metropolitan area (Burlington and environs). In today’s economy, the advantages go to concentration and consolidation. With rare exceptions, economic opportunity is found in the big cities and metro areas. That’s home to the big economic drivers – the big universities, the health care and research centers, high finance, the arts. That explains why Chittenden County is the most affluent part of the state. It has at least some of all of the above. Considering that the rest of the state has very little, its prosperity is impressive. Somebody is doing something right.

One thing Vermonters are not doing much is having children, so one real concern is that the average age of the state’s residents will progressively rise. But there’s not much that can be done about that. Educated, white, Anglos aren’t having children anywhere in America, all of which is getting older. Nationwide, the share of the population over age 65 is projected to rise from 12.9 percent this year to 17.8 percent in 2025.

Vermont does have challenges. Like the rest of the country – but more than most states in the Northeast – income inequality is growing. The immigrants tend to be affluent retirees or educated folks who come to work at Fletcher-Allen, IBM, or the University of Vermont. The emigrants tend to be the less educated who can not find the jobs in factories, farms, or forests that supported their parents and grandparents.

That’s a real problem. But – again – hardly unique to Vermont. It is a problem that stems from great progress. Oversimplifying just a bit, the prosperous half of the world has solved the production-of-goods problem. People can produce more machinery, food, and fiber with a fraction of the workers needed a few decades ago. Among the functions that need fewer workers are forestry and dairy farming. Milk, wood pulp, and saw logs will continue to be produced here, but by many fewer people. To live decent lives, the rest will either have to get the kind of education needed in the new economy, or go somewhere else (though pretty soon, going somewhere else won’t do much good, either).

For the most part, then, Vermont’s problems are the country’s (and even the world’s). Sure, there are a few things this state could do better, or different. It’s even possible – though hardly proven – that cutting taxes and easing the regulatory process might be among them. Meanwhile, it could be a good idea for both Democrats and Republicans to see if they can avoid grating Vermont the distinction of being the whiniest state in the union.

Ad-Watch I

Wednesday, September 29th, 2010

“Truth in Advertising,” is a slogan, a policy, and a law, not a contradiction in terms.

It just seems that way.

Truth in political advertising may still be a slogan and a policy. But it is more often a contradiction in terms because it is exempt from law. Coke may not claim that Pepsi will give you hives, nor Ford allege that General Motors cars are unsafe without risking a lawsuit.

But in a campaign commercial, candidate Smith may say just about anything about candidate Jones without legal consequences. If the allegation is false, Jones can’t sue, at least not with any hope of winning. The only remedy for dishonest political speech is – and ought to be — honest political speech, on the part of the accused candidate, decent citizens, and assorted opinion leaders.

Oh, and on the part of the press, or, to use the (sadly) more current term, the media. Applying the same standards to all candidates, journalists ought to scrutinize political ads for accuracy and honesty. Herewith, then, the first of what will be several “ad-watch” posts on the Vermont governors race.

But let’s add a third standard to accuracy and honesty: a little subtlety, a recognition that, in politics at least, not every statement is either the truth or a lie. As noted in an earlier post, “lie,” is a harsh word that should be avoided unless the facts allow no alternative. Sometimes people are just wrong. In their enthusiasm, they often fail to see the whole picture.

Or maybe they decide not to see the whole picture.

Besides, in politics it’s easy – and infernally common – to make a statement which is not false – which is technically factual – without really being the truth, or at least the whole truth. Political commercials can be true and not true at the same time.

Take the Republican Governor Association ad on behalf of Republican candidate Brian Dubie saying this about Dubie’s Democratic opponent, Peter Shumlin: “As a proud architect of Act 60, he’s raised your property taxes. Last year, Shumlin led the effort to raise over $20 million in taxes on the working families of Vermont.”

The second sentence is accurate. Shumlin did help lead the effort to raise taxes by about $20 million, and it’s reasonable to assume that those taxpayers were Vermonters, members of families, and “working,” in that they were, in one way or another, gainfully employed.

Very gainfully, as it turn out. In common parlance, “working families” suggests (though it does not explicitly state) middle-income folks – cops, teachers, store clerks, salespersons, keypunchers, and the like. Those are not the people whose taxes Shumlin helped raise. They were, in fact, the people whose taxes he helped lower, while the top two or three percent of the income distribution ladder paid the higher taxes.

As to the first sentence quoted above of the RGA ad, it’s at least half true. Shumlin was one of the architects of Act 60. Whether that means he’s “raised your property taxes” is debatable, and probably depends who “you” are.

Property taxes have gone up since Act 60. But they would have gone up anyway. More? Less? Who knows? But differently, and as a careful analysis in Tuesday’s Free Press demonstrates, many Vermonters, perhaps most, are paying less in property taxes than they would have under the previous school finance system.

Do not suppose, however, that only Republicans produce political commercials in which debatable allegation is treated as absolute truth. A Shumlin ad entitled Hold It says that Dubie “pushed for a $100 million property tax increases for middle class Vermonters.”

This assertion can not be branded false. Dubie did support Gov. Jim Douglas’s January, 2009, proposals to shift some obligations from the General Fund (financed largely by the income and sales taxes) over to the Education Fund (largely financed by the property tax). The Shumlin campaign provides credible estimates that over a two-year period, the additional burden on the Education Fund might have been $100 million.

But the Ed Fund also gets some money from other sources. Furthermore, in theory, at least, schools could have cut their budgets to offset part of the tax hike. In other words, Dubie never proposed a $100 million property tax increase. He supported proposals that Democrats argue would have imposed that increase. Not exactly the same thing, even if the Democrats seem to be more right than wrong.

Alas, there is one political commercial on the air in Vermont these days making claims that are simply false. This is the Dubie ad  (Dubie’s ads are not available on his web site) claiming that Shumlin plans to release “nearly 800 nonviolent criminals from prison,” and  “turn… drug dealers and child pornographers out on the street long before their sentences were served.”

Shumlin has made no such proposals, though the wording in his “Vision for Vermont” document talking about “transitioning Vermont’s 780 non-violent officers to become productive members of society,” could lead a casual reader to think that the candidate was considering a large-scale prison exodus. But a closer look at the six paragraphs in his document dealing with corrections policy leaves little doubt that he envisions a far more intricate change under which many non-violent offenders wouldn’t go to prison to begin with.

Instead, Shumlin said, the state should provide “community mental health, substance abuse,…affordable housing…and adult education services…to allow (non-violent offenders) to become successful and productive members of society,” while at the same time saving millions of dollars.

The wisdom of this policy is debatable. It can be attacked as naïve or unworkable. But it has nothing to do with letting offenders out on the street before they’ve served their terms. Nor would it include “drug dealers and child pornographers” whose offenses, while “non-violent” in common parlance, are either “listed” in Vermont law (the most serious crimes) or were made the functional equivalent of “listed” earlier this year.

Corrections Commissioner Andrew Pollito (via email)  said that “Act 157 (S.292) of this past legislative session defined nonviolent felony as, ‘a felony offense which is not a listed crime… or an offense involving sexual exploitation of children.’”

Shumlin may have been a bit sloppy in explaining his corrections policy. His estimate that it could save $40 million a year is a rough one, as campaign manager Alexandra MacLean acknowledged,  and very possibly too optimistic. His claim that Vermont incarcerates a higher percentage of non-violent offenders than any other state really can’t be confirmed, according to Sen. Dick Sears of North Bennington, the Chairman of the Judiciary Committee. (identified by the Shumlin campaign as its corrections expert).

It’s also possible that many people hearing Shumlin came away with the impression that he did plan to save that $40 million immediately by releasing hundreds of prisoners. But that’s not what his campaign statement said, and the Dubie campaign did not reply to an email asking for some documentation that Shumlin had ever said he would release prisoners before their terms expire.

Furthermore, according to Sears, there is nothing unusual about the kind of policy Shumlin proposes. Sears, who meets with lawmakers from other states on law enforcement matters, said the policy is known as “justice re-investment,” and is being pursued (or at least carefully considered) in Kansas and Texas, among other states.

It should save money, he said. The kind of community services Shumlin has in mind would cost about $6,500 per offender per year, Sears said, far less than the $40,000 or more it costs to hold someone in prison in the state, and even less than the cost of the prisoners Vermont farms out to private correctional facilities in other states.

The Dubie ad, it seems, is not an example of  truth in advertising. If it isn’t quite a lie – there’s a touch of confusion about just what Shumlin might have meant – it’s close.