Would you like to know how much lower your taxes would be if Brian Dubie gets elected and his tax cut plans are enacted?

Sorry, that information is not yet available, possibly not even to Brian Dubie. So far, though Dubie has been more specific about his tax plans than any other candidate, he has said only that “to help make Vermont more competitive with other states, we must aim to lower the top rates to the middle of the pack, from the current 9% to between 6-7% (which) still does not meet the regional average of 5% as seen in Maine, Massachusetts, and Rhode Island.”

(Yes, if you think you read those same words on this site the other day, you’re right; there’s a reason for repeating them. As also noted in the previous post, that’s not what the top rates are in those other states, and information gathered in the last few days shows that Dubie got the facts even wronger than first thought. Back to that below; first, to Dubie being specific)

Or maybe not all that specific, but at least there are numbers attached to his tax plans. He wants to cut the top rate from nine percent to six percent (using common practice, the News Guy spells out single-digit numbers and ‘percent,’ though Dubie’s document did not). Elaborating a bit, Dubie spokesperson Kate Duffy said the idea was to lower the rates of the other brackets by one third, also.

For households in the lowest tax bracket – up to $56,700 –that would drop the tax rate from 3.55 to 2.38 percent of a household’s taxable income, or from $2,012.85 to $1,349.46, a saving of $663.39, or a little more than one percent of its taxable income.

Unfortunately, it’s impossible to determine exactly how other taxpayers would be affected because the Dubie campaign has not released more detail. For instance, after a household earns $336,550, its additional income is taxed at 8.95 percent (not nine, as Dubie said, but close, and at another point he did acknowledge that the rate was slightly less than nine percent.).

Cutting 8.95 percent by a third brings it down to six percent. A household with $500,000 in taxable income, then, would see its tax cut by at least $4,821, a slightly smaller percentage of its income than the lower-paid household.

But that assumes a reduction only in the top rate of the wealthy household. If it also pays that lower rate (2.38 rather than 3.55 percent) on its first $56,700, plus lower rates on the other brackets, there could be a “cumulative effect,” in the words of Vermont Tax Department statistician Bill Smith.

“It very much depends on the structure,” Smith said. “If people at the top actually get the benefit of reduced rates for all the lower brackets, then the higher your income, the more your benefit is.”

But that might not be what Dubie intends. If all the rates were cut by a third for all taxpayers, total revenue would drop by a third (or even more). That would amount to more than a billion dollars over the next few years, while Dubie’s plan is to cut taxes by only some $240 million.

Absent more details from the Dubie campaign, voters will have to wonder how much his proposal might save them. The campaign could not provide that information yesterday because it was busy with its 26-hour “marathon” of campaigning from early Tuesday to mid-morning Wednesday. In a statement, Dubie tweaked his Democratic opponents, who were holding their own campaign tour, but mostly during normal business hours. Their schedule, he said, meant they were “apparently blind to the needs of working Vermonters who do not get to be home in time for dinner.”

Dubie, in short, is staying “on message,” which does not include discussing details of his tax proposal. Do not consider that remark a criticism of Dubie. Or more, accurately, a criticism of Dubie as opposed to other candidates. Peter Shumlin, the presumptive Democratic nominee (pending a recount), has provided somewhat more details about his proposal to bring a “single-payer” health care system to Vermont than Dubie has about his tax plan. But only somewhat, and nothing about how Shumlin would finance his health plan without raising taxes, which he has said he will not do.

So it’s not the individual; it’s the age. There was never a political golden age in which campaigns centered solely around detailed public policy debates. But there was a time – and not long ago –when a major party candidate would not dare to propose cutting tax rates by a third, and….and that’s it. There would have been some table of how the plan would impact the various brackets. The campaign would have identified – and made available to reporters – the economist who had helped work out the details.

That was then. This isn’t, and it’s hard to blame the candidates. With few exceptions, reporters (and especially television correspondents) don’t ask about policy details. Maybe the voters don’t care, either.

Now to those inter-state comparisons: Vermont does have a higher top marginal income tax rate than its neighbors, but the gap is much smaller than Dubie claimed. Rhode Island reduced its top rate earlier this year. But to 5.99 percent, almost 20 percent higher than what Dubie claimed. The new law also eliminated some tax preferences (sometimes called ‘loopholes), most of which benefit the highest earners, so reducing the top rate was not totally advantageous for upper-income taxpayers.

Massachusetts has a lower top rate – 5.3 percent. But Massachusetts, like most states, taxes capital gains as ordinary income. Vermonters can exclude 40 percent of some of their capital gains (again; this preference was eliminated in 2009, partially restored this year), effectively reducing the top rate for many wealthy taxpayers. Massachusetts households earning as much as $100,000 a year pay more in income taxes than do comparable Vermonters.

Maine’s highest tax rate is not five percent but 8.5 percent, and it kicks in at just under $40,000, according to Mike Allen, the director of economic research at Maine’s Department of Revenue Services. That means a Maine household earning as much as $300,000 a year pays substantially more in state income taxes than a Vermont household with the same income. It’s only when the income goes much higher that Vermonters usually pay more.

They rarely come out and say so, but advocates of lower top rates know this. In fact, it’s just what they want – lower rates for the very rich. No, this does not brand them as plutocrats. They are convinced that in order to have a healthy rate of economic growth, a state (town, county, whatever) needs lots of rich folks to provide the investment entrepreneurs need.

Is there any evidence to support this conviction? To be examined, along with some other tax questions, soon (but not, remember, Friday, when there will be no post).

Do Vermonters really pay (as a percentage of income) the highest property taxes in the country, as Brian Dubie says in his economic policy document? Earlier this year, a study by the Tax Foundation concluded that Vermont’s property tax was fourth highest.

It all depends on what’s being counted. The Tax Foundation was counting property taxes paid by “owner-occupied housing.” Information about the study on which Dubie relied, by the Vermont Economy Newsletter, is available only to subscribers. But Art Woolf of Northern Economic Consulting (the newsletter’s publisher) helpfully confirmed via email that its study dealt with all property – residential and otherwise.

Whether the average family will be relieved to find out that its property tax bill is “only” the fourth-highest in the land is questionable.

But not as questionable as the conclusion that it is, in fact, the fourth-highest in the land.

The Tax Foundation study, released earlier this year, found that Vermonters paid $1,869 in property taxes per person in 2008, the seventh highest per capita but fourth as a percentage of per capita income.

But hold on. A subsequent Tax Foundation study revealed that the 2008 figure was  a reduction from the 2007 number ($1,994), a 4.9 percent decrease. Vermont was one of only four states in which total property tax collections per person actually went down in 2008. 

Besides, these statistics, while legitimate (they are taken from U.S. Census numbers) are based on aggregate payments. Researchers add up all the property taxes (or the residential property taxes) paid in Vermont, divide by either population or income, and…Voila! A ranking.

But that ranking does not mean that Mr. and Mrs. Typical Vermonter are paying the fourth, seventh, or fourteenth highest property taxes in the country. In fact, it may not mean anything at all.

The point here is not that there is anything wrong with these studies, or anything dishonest about Dubie’s use of the Vermont Economy Newsletter. The point is that like all economic statistics (but probably even more than other economic statistics) tax data can confuse at least as much as they can clarify, meaning they are easily misunderstood if not misused. The prudent citizen, then, would be well advised to cast a skeptical eye on any candidate’s claims about taxes.

For instance, Dubie proposes lowering Vermont’s top marginal income tax rate “from the current 9% to between 6-7%,” which “still does not meet the regional average of 5% as seen is Maine, Massachusetts and Rhode Island.”

Actually, judging from the tax tables in those states, the highest earners in Maine and Rhode Island would seem to pay more like eight percent of their taxable income in state income taxes.

That still leaves Vermont with a slightly higher top rate. But most Vermonters do not pay higher income taxes than their counterparts in those other three states. According to Rhode Island’s tax tables, for instance, the lowest-earning taxpayers (less than $56,700 in taxable income) pay 3.75 percent of their taxable income in state income taxes. Vermonters earning the same pay 3.55 percent. Even a Rhode Island household with $100,000 in taxable income pays more ($5,157) than its Vermont counterpart ($4,040). In Massachusetts, a household with $80,000 in taxable income pays $4,239 in state income taxes, almost $600 more than it would pay in Vermont.(all these estimated comparisons are for married couples filing joint returns).

There is at least one other problem with these state-by-state tax rankings. The “scores” are often very close. Sometimes taxpayers in the fourth, fifth, or seventh ranked states don’t pay much more than the folks in the states ranked twelfth, eighteenth, or twentieth.

Two years ago, a reporter (OK: full disclosure: this reporter in another guise) estimated how much a typical Vermont family would save in taxes if it moved to Delaware, ranked right in the middle, tax- obligation wise, in a study by the Federal Reserve Bank of Boston.

The conclusion, tilting the evidence Delaware’s way for every estimate and every assumption, was that they might save as much as $700 a year, though probably less, and none at all if they moved into one of the school districts with higher property tax rates (which are, not surprisingly, the districts with the highest-rated schools).

Seven hundred bucks ain’t chicken feed. But our hypothetical new Delawareans would probably pay that much and more were they to buy or rent a house comparable to the one they left in Vermont. Not to mention that they’d be in Delaware, a nice place but a lot hotter, flatter, and more crowded, which many a Vermonter would probably find it worth $700 to avoid.

What all this boils down to is that these state-by-state tax comparisons are close to meaningless, especially when they consider only taxes, not other economic data.

If tax minimization is one’s goal, one should consider moving to Alabama. Taxes are much lower than they are in Vermont. But so are salaries, by almost $10,000 per household. Vermont is 19^th from the top in median household income; Alabama is fifth from the bottom.

In general, the lowest-tax states are also the lowest-income states. There are states where the taxes are somewhat lower than Vermont’s and the median income as high or higher. But in most of them, houses are much more expensive than in Vermont, and of course, the pace of life is more hectic.

The big (if partial) exception is New Hampshire which is prosperous, and which has neither a general income nor general sales tax. Property taxes are quite high in some localities, but on balance, a Vermonter moving to New Hampshire would have smaller tax bills and a higher income.

Well, a higher income if he or she moved to southern New Hampshire, which is not small-town and rural like most of Vermont, but urban, suburban, and effectively (though not officially) part of the Boston metropolitan area. Southern New Hampshire is where one finds most of the people and most of the prosperity. That’s also where one finds expensive houses and higher property tax rates.

Dubie and others often use New Hampshire as “proof” that lower taxes lead to faster economic growth. New Hampshire does have lower taxes than Vermont, and, in most recent years (though not all) faster economic growth. But New Hampshire’s proximity to Boston has a lot to do with its growth, and many states with lower taxes – Delaware, for one, these days — grow much more slowly than Vermont.

As it happens, there is an obvious refutation of the ‘low taxes equals high growth’ argument: the United States of America, where a 1981 tax cut was followed by 16 months of economic decline (which reversed itself only after a tax increase in 1982); where a small income tax hike for upper-income earners was followed by years of non-inflationary economic growth; where tax cuts in 2001 and 2003 were followed by several years of economic torpor and then the worst collapse since the Great Depression.

Only a fool would argue (a few have) that the tax increases caused the economic growth which followed them. But only a bigger fool could argue that lower taxes always lead to a faster-growing economy. It isn’t that taxes don’t matter. They do because everything matters. But because everything matters, taxes are only one of many things that matter.

If Brian Dubie has his way, taxes are going to matter a lot in this campaign. By framing the issue as he has – tax cuts for everyone but an emphasis on lowering the top marginal rate for the top earners – he has both put the Democrats on the defensive and left himself open to the charge that he’s favoring the rich.

All of which makes it worthwhile to examine the details, such as they are, of his tax proposal, a task for Wednesday.

NOTE: The News Guy is taking the day off Thursday, so there will be no post on Friday.

The fight is on, and it promises to be a humdinger.

Attack and counter-attack. Quick response. Thrust and parry. Jab and hook. Give no ground or quarter. The best defense is…well, you get the picture.

All of which is lots of fun, but threatens to obscure the meaningful substantive differences between Republican Brian Dubie and either Peter Shumlin or Doug Racine.

In fact, “obscure,” may understate the case. “Pervert” could be more appropriate. The barbs each side is throwing at the other seem designed to convince voters that the opposition is extremist: that the Democrat would raise everybody’s taxes; that Dubie would permit the poor to starve on the sidewalks.

Not hardly.

As mentioned here the other day, the winner will be governor, not emperor. Even if Shumlin/Racine wanted to raise everybody’s taxes, the Legislature would not. Nor would it allow the poor to starve on the sidewalks.

Besides, the Democrats, who are prudent, do not want to raise everybody’s (or anybody’s) taxes, and Dubie, who is decent, does not want the poor to suffer at all, much less starve on the sidewalks.

“People who depend on vital state services are not going to be abandoned by state government,” said Dubie campaign spokesperson Kate Duffy.

Even the semi-defensible attacks are a bit over the top. There is some justification for Shumlin to argue that Dubie’s economic policies would lead to “deficits, unending deficits, tax cuts for the wealthiest Vermonters and budgets that don’t balance.”  Dubie’s determination to cut taxes and his vagueness about what programs he would cut do complicate the budget-balancing task.

But in addition to redundancy (deficits are “budgets that don’t balance”), the attack ignores Dubie’s pledge that tax cuts “won’t happen in one big step or one year,” but would be “incremental.”

Similarly, Dubie may not be dead wrong when he claims the Democrats have “only two solutions for the challenges we face: more government spending and higher taxes.” Both Shumlin and Racine are on record in the past favoring new programs and higher spending. But while they still favor  some new state initiatives, they are not for higher taxes.

Besides, there’s another candidate who proposes new government spending: Brian Dubie. The jobs plan in his “Pure Vermont” document calls for the state to “increase support for (Vermont Economic Development Authority’s) highly successful interest rate subsidy program,” “ increase public investment in the new Technology Lending Program,” “add support for (Small Business Development Center) counseling,” and create an investment tax credit.

All that costs money. Yet the heart of Dubie’s campaign is to hold the state budget to spending increases of  two percent a year. Because revenue is projected to rise at a higher rate, a Dubie Administration could then cut income taxes by a total of $240 million over four years.

This means, said  Duffy, that Dubie’s plan “is not making any cuts.” State spending, she said, would continue to rise, just more slowly than it has been rising, and more slowly than revenue would rise.

Dubie’s arithmetic is correct, except that he first pledges to close the projected $112 million deficit for the coming Fiscal Year (2012). That would require a spending cut of more than 9 percent, creating a new base. Increasing spending by two percent a year for the next four years on top of that new base would mean that spending would fall by an annual rate of about three-quarters of a percent over a five-year period. Extend the same policy out another five years, and spending does go up, but only at an average annual rate of slightly more than one percent.

That might be the smallest growth rate of state spending in decades, if not a century, raising questions about how realistic the plan is. Dubie claimed that in the early 1990s, Gov. Howard Dean actually level-funded (no increase) spending over a three-year period, a harsher reduction than Dubie’s proposed two percent growth.

Not really. Check the esoteric document available from the Joint Fiscal Office web site’s “Appropriations” page,called “Budget History FY 83-present.” It shows that while the General Fund budget actually went down for one year under Dean, it then started up again, and over a five-year period it rose by an annual rate of 3.4 percent a year.

That document provides other interesting information, both casting doubt on the assertion that Dean really “level-funded” spending and confirming that budgeting is a creative art. In those same recession years that Dean was spending less out of the General Fund, some new expenditures are recorded in the Transportation Fund.

Could it be that the state was using Transportation Fund money (financed from gasoline taxes, auto registration, etc) for non-transportation purposes? The document suggests, but does not prove, that the answer to that question is in the affirmative.

If so, it would not be unusual, in Vermont or elsewhere. One reason for that $112 million projected shortfall for the next Fiscal Year, for instance, is that the Legislature and Gov. Jim Douglas have been effectively filching from the Education Fund by not transferring into it as much General Fund money as the law required. (Legislatures and governors, who make laws, can change them as an alternative to obeying them). Reached at home where he did not have access to his records, Joel Cook, the executive director of the Vermont National Education Association, estimated that the shortfall was at least $50 million.

If the Legislature doesn’t repay that (as it said it would) or come up with enough money again this year, the Education Fund could be short tens of millions of dollars. That would require either deep cuts in school spending or substantial increases in local property taxes.

This poses a potential political problem for Dubie. He wants to cut everybody’s income tax rate by about a third, reducing the top rate from nine to six percent and the lower rates comparably. That’s good politics; everybody likes lower taxes.

But the Democrats will try to convince voters that the result would be higher property taxes, which are the taxes Vermonters really dislike. Democrats are already making that argument as well as claiming that, in Racine’s words, Dubie’s “numbers just don’t add up.”

“He wants to add money for various business promotion efforts…but he wants to cut taxes,” Racine said in a telephone interview. “This sounds like the federal budget discussion. Make promises of higher spending for business and lower taxes for everybody. That’s Washington. We don’t do that here in Vermont.”

That’s harsh, but standard political rhetoric. What came out of the Dubie campaign late yesterday may have crossed the line from standard to…well, to  false. In a statement released yesterday afternoon, Dubie said Racine had wanted to use money from the state’s “Rainy Day Fund” to “expand government-run services,” and that he opposed the “Challenges for Change” plan to make government more efficient.

The first of those accusations is simply incorrect. Racine has suggested dipping into the reserve funds, but only to support existing social service programs, not to “expand” government service. The second charge is minimally defensible, but a stretch. Racine supported “Challenges for Change” during this year’s legislative session, voting for it at least twice,  though he voted against the final Fiscal Year 2011 budget which incorporated “Challenges.”

“Fundamentally, Brian is a decent man,” Racine said. “If he wants to disagree with me, that’s fine. But don’t be deceitful.”

It could be a long two months.