Monday, November 28, 2016

The Campaign to Raise Your Taxes

The campaign to raise your taxes is on. On Saturday, the Casper Star Tribune declared:
Political watchers sometimes joke that Wyoming is the most conservative socialist state in the nation. In other words, residents want quality schools, well-paved highways, low fees to register their vehicles and good government services. But they refuse to pay much in taxes. A new University of Wyoming study shows that the disconnect between the demand for government services and the aversion to taxes persists to this day, even as the state faces serious economic troubles. 

This is the usual drum beat, aimed at inflicting guilt on the average taxpayer in Wyoming, who does not pay any income taxes but whose property, sales, excise and other taxes are more than enough, given his often modest earnings.

The Tribune, however, is undeterred, as they boldly explain our legislature's options for the 2017 session:
Confronting Wyoming is a $157 million shortfall for the current fiscal year. Lawmakers have few options to shore up the hole when they meet January in Cheyenne: cut programs, raise taxes or dip into the $1.6 million rainy day fund.
The rainy-day fund is slightly larger than $1.6 million, but that little factoid aside... the Tribune makes it sound like our elected officials have somehow been backed into a corner as they can only "cut programs, raise taxes or dip into the ... rainy day fund". In reality, those are all the options that budget policy allows a state legislature. In fact, short of access to a central bank, these are by definition the instruments of fiscal policy. There are no other options, period. 

Unfortunately, already here the Tribune sets the tone for its entire article: a drum beat for higher taxes. They continue:
With the minerals industry paying the majority of the state’s bills, Wyomingites have enjoyed some of the best services in the country without having to open their wallets to pay for the programs. The UW survey showed the state’s residents want government services at the same or increased levels. The poll, released Tuesday, found that most Wyomingites would be fine with increased beer, alcohol and nicotine taxes – which wouldn’t really provide the level of money necessary to keep or increase services. But they don’t want to pay more in the levies that could meaningfully boost revenue: sales, property or income taxes.
The University of Wyoming opinion poll is very probably a solid study according to opinion-poll methodology. That said, all opinion polls get the answers that their questions ask for. Suppose we ask "Would you prefer private schools if it lowered your tax bill and gave you more choices for your children's education?", chances are we would get an affirmative answer from the overwhelming majority of parents in our state. 

Suppose, next, we asked: "Would you be willing to pay higher taxes to maintain today's government monopoly on K-12 education?" Given the first question, it is safe to predict that Wyoming parents would say "no" by a sizable majority. 

We could then use our opinion poll, again conducted according to standard polling methodology, as evidence that Wyomingites prefer spending reforms that reduce the size of the state budget to higher taxes. 

As presented by the Casper Star Tribune, the UW poll gives the firm impression that Wyomingites do not understand that government costs money. That is, of course, not true: each and every property owner in this state is very well aware what government costs him or her; every family shopping for clothes to their kids, doing the math to add sales taxes to the bottom line; every family breadwinner filling up his or her car on their commute to work; every small business owner struggling to not have to lay off another employee; everyone is very well aware that government costs money.

But instead of asking regular Wyomingites what they think about the cost of government, the Tribune turns to Buck McVeigh and the Wyoming Taxpayers Association as if to reinforce the point that we the people of Wyoming do not really understand what government costs us:
“There is a disconnect here,” said Buck McVeigh of the Wyoming Taxpayers Association, a group that represents some of the large companies that pay taxes to Wyoming. “I don’t believe most of the residents, if you corner them in a coffee shop and just ask them who pays the bulk of the taxes, a lot of them will tell you we receive a very good subsidy from the mineral sector. But I don’t think that goes very far in terms of them understanding the true magnitude of how much we are subsidized by the mineral sector in this state.”
And then, the punch line: 
State data shows the average family of three pays $3,000 in taxes — and receives $30,000 in public services — if they own a house valued at $190,000, McVeigh said.
These numbers are floating around the state, being used in arguments for higher taxes. So far, though, nobody has presented the actual methodology being used to arrive at these numbers - and so long as that methodology remains a mystery, nobody should accept these numbers. 

The implication here is that Wyoming households only pay ten percent of the cost of government, which - using the $30,000 number - is estimated to a bit over $5.7 billion per year. This is an interesting number, because whenever we hear legislators and the governor talk about how much government costs us, they stop at a 2.?-billion dollar figure. That, of course, only represents the General Fund, meaning that whenever it is convenient to make government sound modest, there is a low number on tap.

When, on the other hand, the average Wyomingite is to be made feeling guilty for not paying enough for government, then all of a sudden the full-blown number for state government spending appears in the conversation, almost like magic.

The reality is that every person employed in a private-sector job in Wyoming pays every dollar of taxes collected in this state. Even the severance taxes. Yes, the severance taxes: if government did not tax coal mining companies for every ton of coal they sever from the ground, that company could pay its employees more. In other words: employees in the minerals industry forfeit part of their own earnings so that government can collect their taxes. 

The same goes for property taxes paid by small businesses, or taxes on your spending at the gas pump or when you buy a pair of shoes. 

Long story short: all taxes are paid by people working in the private sector, whether it is the cashier at Wal-Mart or the chief financial officer of a major corporation. Everyone gives up something to give government what it demands. Given this, and given the taxes that are delivered into Wyoming state coffers each year, it is simply disingenuous to claim that we do not pay enough taxes. 

But let us turn the plea for higher taxes around one more time. Those who claim that we are not paying enough also imply that we can certainly afford to pay more. This means two things:

1. For some reason, Wyoming needs more government workers per 1,000 private-sector workers than any other state in the country; and
2. Wyomingites employed in the private sector can certainly afford to pay more in taxes.

The first point, which I have pointed to for a good seven years now, still demands an answer from proponents of higher taxes. The truth is, the Bureau of Labor Statistics reports that in 2015 Wyoming had 300 state and local government employees per 1,000 private employees, close to twice the national average of 167.

Why do we need such a large government workforce in our state? California, which at 166 is closest to the national average, can get by with 45 percent fewer state and local government employees, relative the private-sector workforce. Nebraska has one third fewer government workers, relative their private workforce, than we do. 

Compared to Nebraska, we have 5,800 more state employees than they do, adjusted for the size of the state population; we also have almost 18,500 more local government workers. What is it that they add to our state that Nebraskans have to do without?

As for the second point, according to data from the Bureau of Economic Analysis an average private-sector job in the United States is compensated at $47,800 per year. This is an average for full-time and part-time jobs. In Wyoming, the same number is $40,400.

Not only do private-sector jobs pay $7,400 less here in Wyoming, but those jobs are increasingly hard to come by these days

Outside of the shrinking but still well-paying minerals industry, a private-sector job pays, on average, $36,000 per year. 

Can someone arguing for higher taxes on Wyoming families please tell me how much more of those $36,000 a person can afford to surrender to government? What should they give up in their family budgets? What can they afford to live without for the long haul, so that government will not have to make any long-term sacrifices?

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