Wednesday, February 1, 2017

The Good, The Bad, The Ugly: Update 2

After yesterday's review of Senate Files, today we take a look at the 304 bills on the House side. As with yesterday's overview, the selection criteria for the bills listed below have more to do with the thinking behind the bills than their potential eventual success. Once the session is over, we can sum up the actual impact of the bills that made it past the governor's pen. Right now, though, what matters is to get an idea of the prevailing strategic thinking among our elected officials - especially with reference to our state's economic crisis.

One final point before we get to the bills:
I had planned to include the unfortunate school-finance omnibus bill, but it requires far more attention than it can be given here. I am working on a separate article on that bill; in that article I will also address the somewhat confounding proposal that Representative Madden has put forward in HB150.

With that said - here are the latest Good, Bad and Ugly House bills form the 2017 legislative session:

The Good

HB129 - Food Freedom Act; amendments. Sponsored by Representatives Lindholm, Blackburn, Blake, Halverson, Hunt, Laursen, Pelkey, Salazar, Steinmetz and Winters; and Senators Barnard, Boner, Christensen and Driskill.
It is rare to see a bill that squarely promotes deregulation to advance economic freedom, but here we have an example. It is limited to a small sector of our economy, but it is nevertheless a step forward.
When the egalitarian ideology began conquering America for real, its proponents made sure to celebrate every tiny step they took in their favored direction. Conservatives and libertarians are far more likely to lash out at each other for "babysitting" legislators who only take minute steps toward freedom, than they are to celebrate small victories like the very introduction of this bill. (Should it become law of the land, another celebration is called for.) 
What matters, though, is that deregulation efforts such as the one promoted in this bill do not become the only steps we take.

HB134 - Taxable value of industrial property. Sponsored by Representatives Clem, Biteman, Edwards, Hallinan, Henderson, Jennings, Lindholm and Winters; and Senators Boner and Driskill.
The idea here is to give manufacturers a temporary property-tax rebate as they establish themselves here in Wyoming. I have my reservations against this bill, which I explained when I recently analyzed it. However, with those reservations in mind, I nevertheless came to a cautiously favorable conclusion:
Overall, HB134 is a welcome contribution from Representative Clem et al. I would just suggest two minor modifications. First, the term "industrial" is used instead of "manufacturing". ... in economics parlance the term "industry" means a distinct production sector of the economy, for example "banking industry" or "service industry". ... I would suggest they replace "industrial" with "manufacturing" ... Secondly, ... there are risks with having a tax rebate that expires abruptly (though predictably). A better idea would be to give businesses a chance to perpetuate the lowest tax rate, for example by means of an "invest in Wyoming" credit where a business that continues to operate and invest in future operations in the same plant, or new plants in the state, can deduct those investments from their property tax. The deduction would cap out at the difference between the regular property tax rate and the lower rate that applies to the first three years. This encourages businesses to stay on, not just for the duration of the tax rebate. An "invest in Wyoming" credit could then gradually expand to apply to all businesses in the state.

HB146 - State funds; prohibit investment in Iran and Cuba. Sponsored by Representatives Gray, Biteman, Edwards, Jennings and Lone; and Senator Meier.
There is a simple message in this bill: to forbid the state from investing state funds in Cuba or Iran.
While this bill does not have any major fiscal impact on the state, it is an important bill in the context of HB60 and HB79, both of which want to allow the state to invest more aggressively. Once the state can enter the stock market, it is basically only a matter of time before our state acquires shares in a company that either is partly owned by Iranian or Cuban interests, or does business that directly or indirectly benefits those countries. 
There is also a meaningful exception in the bill:
The investment prohibition... shall not apply to investment in an entity that promotes journalistic or religious activities in Cuba or Iran.
Well done. Go for it.

The Bad

HB12 - Tax exemption repeals. Sponsored by the Joint Revenue Interim Committee.
The exemptions targeted by this bill are small, almost invisible to the naked fiscal eye. For this reason, under normal circumstances it would not be worth any attention. However, given what a bad macroeconomic shape our state is in, and given the runaway budget deficit, any increase in the tax burden on any corner of our economy is a bad idea. We need every effort we can get from the private sector to stop our downslide.
In addition, it is worth noting that the Joint Revenue Committee has not only spent the time, but also endorsed, this bill - when they could have devoted the same time and legislative effort toward devising a new, growth-oriented tax policy. As things are now, I see no sign at all of any such strategic thinking from the Revenue Committee members.

HB30 - State parks and sites; fees. Sponsored by the Joint Travel, Recreation, Wildlife and Cultural Resources Interim Committee.
The purpose of this bill is defined as:
authorizing the department of state parks and cultural resources to designate parks, sites and areas as fee areas; modifying fees for the use of parks, sites and areas; authorizing voluntary fees; authorizing resident lifetime use permits
In reality, it opens the door for fee hikes and for the Department of State Parks to go on a solicitation spree:
The department may establish methods whereby voluntary contributions may be accepted in support of state parks, historic sites, archeological sites or recreation areas. The department may suggest and solicit specific contribution amounts
Reviewed alone, this bill is yet another attempt at a patchwork-tax hike strategy that is increasingly visible across the spectrum of this year's legislative bills. Taken into context, it shows that the Travel committee is pursuing its own aggressive fiscal agenda: yesterday I reported on SF24, in which the same committee proposes a welfare program for film productions to relocate to Wyoming.
In other words, the Travel committee rakes in more money with one hand while selecting winners and losers with the other. We the members of the insignificant public are supposed to surrender more money for using state parks, while multi-millionaires from Hollywood get tax-paid perks for just showing up.

HB100 - Tax refund program. Sponsored by Representatives Hallinan, Blake and Pownall; and Senator Wasserburger.
I am listing this bill mostly for its lack of clarity. It appropriates $4.1 million of general-fund money for one purpose only: "administering the tax refund for elderly and disabled program as provided in WS 39-11-109(c) (ii)". Just one question: how does it cost $4.1 million to administer a tax-refund program? Does the appropriation include the tax refund itself? If so, how come you have to appropriate money for tax refund purposes? Does the right to a tax refund exist at the annual discretion of the legislature? 
If the refund itself is not included in the appropriations, then we have a really big bureaucratic problem in this bill...

The Ugly

HB102 - Lodging tax rate. Sponsored by Representatives Henderson, Blake and Madden; and Senator Emerich.
Here we have another tax hike, this time an increase in, as the bill specifies, "the maximum lodging tax rate that a city, town or county may impose". The rate would go up from four to six percent. The bill also adds items to the list of what the tax can be used for, namely:
for local tourism and visitor related infrastructure, public services and matching funds for community development.
In other words, not only do the sponsors of this bill want to raise a tax that specifically targets one of our most cost-sensitive industries, but they also want to entrench that tax hike by using it to pay for infrastructure, "public services" - ostensibly including but not being limited to police and fire-and-rescue services - and for corporate welfare (a more suitable term for "community development). Once the tax goes into effect, local communities will claim that they cannot live without it. 
The real story, of course, is that rather than scaling back government services to fit the suit that taxpayers can afford, the bill sponsors want to continue to milk the private sector for all it can muster, and then some. Furthermore, this is the worst possible moment in time for our state's economy to raise any taxes.
I also have to note that I have seen Representative Madden's name on more than a couple of tax-hiking bills. It seems as though he is emerging as the herald of higher taxes in our state. As an economist, Madden should know better.

HB166 - Alcohol taxation; school funding. Sponsored by Representatives Connolly, Dayton, Furphy and Madden; and Senators Anselmi-Dalton and Peterson.
Just as the state legislature put an end to Representative Madden's passionate attempt to have tobacco-addicted taxpayers fund our children's education, this half dozen of legislators get this bill sent to the Revenue Committee.
What I wrote two weeks ago about the moral and economic flaws of Madden's HB151, applies perfectly to HB166 and its pursuit of a massive increase in alcohol taxes for the purposes of replenishing the school foundation account:
this is not a "sin tax" because the purpose is not to discourage [alcohol] consumption. It is an addiction tax, which explicitly relies on the continuous addictive consumption of a product that is medically harmful. Addiction taxes are cynical: they exploit people's weaknesses and addictions for the purposes of funding government. The expectation behind an addiction tax is that people will continue to do what is bad for them, so that government does not have to reduce its number of employees or otherwise cut its costs.
The hikes proposed in HB166 are significant: from $0.0075 to $0.019 on wine; from $0.025 to $0.099 on liquor; and from $0.005 to $0.053 on beer. This represents, respectively, tax increases of 253 percent, 400 percent and 1,060 percent. In other words, the sponsors of this bill expect to take in a significant amount of extra cash from it. 
Then, the bill suggests a reallocation of the alcohol beverage tax so that, instead of the General Fund, the school foundation account gets 78 cents of every dollar collected. This is where cynicism overwhelms reason in this bill: in effect, the bill sponsors tell Wyomingites that "if you want your kids to get a good education, you better have another beer, cork up a second bottle of wine at dinner and make sure Uncle Zeke gets an extra Absolut Vodka for the weekend". 
Think of all the women out there, around our state, who are toiling away in a marriage to an alcoholic; who want nothing more than a helping hand from someone to pull them and their children out of a destructive marriage. Think of the message that this bill sends to those women, as they struggle to provide for their children's future while their alcoholic husband drinks up big chunks of her paycheck every month. What this bill is telling those women is that now, with the stroke of the Governor's pen, he will multiply his contributions to their children's future by simply continuing to drink up his wife's paycheck.
The thinking behind this bill is short-sighted, narrow-minded. And fuddled.

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