Monday, January 30, 2017

Our Lawmakers Build a One-Way Elevator

Our legislators are slowly beginning to acknowledge our state's dire economic situation. A House Bill here, a Senate File there, give us glimpses of hope that our elected officials are slowly beginning to come about and see the crisis for what it really is: a systemic, persistent economic depression that cannot be met with anything less than systemic policies. 

The appropriate response to the crisis requires a level of economic-systemic thinking that, unfortunately, is often notably absent in state legislation efforts. Senate File 159 is a refreshing exception, a fact that we should recognize its sponsors for: Senators Rothfuss, Case, Coe and Peterson; and Representatives Connolly, Harshman, Madden, Miller, Obermueller, Sommers and Wilson.

At the end of the day, though, the bill applies its systemic thinking to exactly the wrong problem.
Imagine a group of hard-working engineers building an elevator that only goes one way.

The sponsors of SF159 want the legislature to appoint a committee of legislators whose job it will be…
to develop comprehensive legislation for a fair, viable and economically competitive state and local tax structure capable of generating revenues to meet the needs of the state and its citizens independent of the distribution of industry for a diversified economy.
 They also specify the issues that the committee shall:
  • Analyze he distribution, uniformity and “equity” of our state’s current state and local taxes;
  •  Examine he “dependability” of the tax system “relative to the needs of the state and its citizens”, including the “relationship between taxes and the revenue needs of the state and local governments” and the “relationship between the tax burden and the benefits citizens receive”;
  •  Study the dynamic impact on the economy of our current state tax system and “the potential impact of any changes to the tax structure”; and
  •  “Identify the path to an equitable tax structure for Wyoming through the year 2040 for a proposed diversified economy.
To complete the relative thoroughness of this bill, the sponsors also want the tax structure committee to determine what methods to use to test the long-term dynamic effects of proposed tax changes. They also charge the committee with identifying incentives for business immigration to Wyoming.

Before we get to the big problem with this bill, let me again say that it is very good that this group of legislators have decided to take a holistic approach to our state’s economic problems. Hopefully, this bill – once it fails – can be the start of a real conversation about finding systemic solutions that will work for Wyoming in the long run.

There is no doubt that our state needs a thorough tax reform. However, the need for such a reform is not independent of the question: what do we do with our tax money? Quite the contrary – and this is where the sponsors of SF159 end up making a one-way elevator – the need for taxation is nothing more than a function of government spending.

That, however, is not a question that our legislative leadership are willing to discuss. Ever since Governor Mead declared in his State of the State speech that his budget is “bare bones”, our legislative leaders seem to have focused this session entirely on protecting state spending. SF159 is not the only example; consider SF131, sponsored by Senators Bebout, Rothfuss and Von Flatern; and Representatives Harshman and Miller. This bill also wants to appoint a committee obsessively focused on the revenue side of the state budget:
The select committee shall sponsor legislation for introduction in the 2018 budget session as it determines appropriate for modification to revenue streams and potential additional revenue options which would provide sufficient revenue to fund ongoing state operations, including state funding of K-12 education operations and capital construction funding in light of current revenue projections.
SF131 is titled “State revenues and expenditure review”, but the focus on expenditure ends with the title.

Ladies and Gentlemen of the Legislature: it is time to stop ignoring the elephant in the room. Your compulsive focus on improving revenue (what we commoners call “tax hikes”) is not only unsustainable, but frankly damaging to our state’s future. While the boat is taking in water on the port side, you are hanging over the starboard railing trying to paddle forward faster.

How about appointing a committee with the same comprehensive ambition as SF159 has for the tax system, but concentrate its work on spending? Here is what it could look like.

1. Replace the purpose of SF159, which says… 

to develop comprehensive legislation for a fair, viable and economically competitive state and local tax structure capable of generating revenues to meet the needs of the state and its citizens independent of the distribution of industry for a diversified economy, 

with another purpose along these lines: 

to develop legislation for a limited and economically competitive state and local government capable of providing for its core functions, while transferring the responsibilities of funding, production and operation of all other functions, currently under government, to the private sector, 

2. Specify the core functions of government based on the delineation between redistributive and non-redistributive functions, with the purpose of terminating state and local government spending on economic redistribution;

3. Design a reform plan aimed at transferring government’s current responsibilities for economic redistribution to the private sector;

4. Estimate feasible starting dates for various parts of the reform plan; and

5. Provide for an end date when all reforms be complete.

A master reform plan based on these principles would, by a conservative estimate, reduce government spending to about a third of where it is today. That number assumes that there are no comprehensive reforms in the non-redistributive cluster of government programs, an assumption that is certainly liable to challenges.

I hope there are legislators out there who are willing to take on this mission. While the probability is slim, there are some small lights of encouragement in our state’s dark, fiscal tunnel. Tomorrow I will present another Good, Bad and Ugly list, which of course will include those bills.

For now, let us hope that SF159 fails and our legislative leadership turns their spotlight to a comprehensive spending-reform plan.

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