Tuesday, June 13, 2017

A Tax-Hiker's Guide to the Galaxy of Logic

Radio talk show host Michael Savage once said that Hell is a place where logic does not apply. After the meeting with the Joint Revenue and Education Recalibration committees in Riverton on Monday, I am beginning to wonder if we have encountered a slice of Hell right here in our beloved Wyoming. 

The first indication is provided by the opening of the report from the meeeting by the Casper Star Tribune. In a notably teary-eyed tone, they note that resistance to higher taxes remains strong:
Lawmakers have for months said the situation cannot be solved by solely taxing or just cutting. But lawmakers have expressed wariness, at the least, to increasing revenue in a state that has some of the lowest tax rates in the country and leans heavily upon the mineral industry. Sen. Ray Peterson, R-Cowley, was silent for much of the hours-long meeting in Riverton, but he summed up many legislators’ predicament near the end of the meeting. “I’m up for re-election in another year,” he said. He serves on both the revenue committee and the recalibration committee, which was created three years early to examine the state’s funding model in the midst of the crisis. 
Of course. This is pure logic: if elected officials only could avoid having to be elected, things would be so much better. If it wasn't for voters, elected officials could raise taxes as much as they wanted to, without even the slightest impact on the economy. Right...?

To be fair, many of our legislators know all too well what higher taxes mean for their constituents - and for their own businesses and jobs. Furthermore, when the Casper Star Tribune portrays legislative resistance to tax hikes as merely a concern for voters' reactions, the newspaper actually mocks Wyoming voters and makes fun of our hard-working people and struggling business owners.

Has the newspaper considered the possibility that Wyoming voters do not think that it is worth the money to save government from spending cuts?

Back to their report from the Riverton meeting:
Dean Tempte, an analyst with the LSO, told lawmakers that raising the sales and use tax 1 percent and sending that money straight to state coffers would provide more than $154 million per year during the 2019 and 2020 fiscal years. Wyoming is currently 40th in the nation for highest sales tax; it’s been at 4 percent since 1994.
From the viewpoint of logic, what does it even mean to rank a state by its sales-tax rate? We know nothing about personal income, consumption propensities, the actual sales-tax base... The Tribune makes no effort - beyond pure rhetoric - to make this statement coherent before its readers.

But, as they say, sometimes even a blind chicken finds a piece of corn. The Tribune actually reports something interesting:
A statewide 1 percent lodging tax, which lawmakers like Speaker Steve Harshman indicated some interest in, would chip in $6.4 million annually during those years. That number was surprisingly low to Rep. Michael Madden, R-Buffalo. Sen. Cale Case, a Lander Republican, said guides and outfitters were exempted from any lodge tax and that companies like Airbnb are, as well. People visiting or passing through Wyoming would probably make up 80 percent of the money that the tax would collect, officials explained, which is why it was attractive — at least more so than sales or property tax increases — to some lawmakers. “We gotta get out-of-staters,” Harshman said.
Some logic, finally! A consistent point that we can examine, albeit briefly. 

This is a case of classic tax-patching: put a patch of a tax here, another there, and yet another one over that way. Spread them out, hope for a little bit of revenue here and some more over there. It is a doomed strategy for three reasons:

1. Small tax increases are almost impossible to detect statistically, which means that it is meaningless to try to determine whether or not they produce new revenue as expected.
2. The individual taxpayer, on the other hand, falls victim to a taxed-by-a-thousand-blows experience. Eventually, it wears down their purchasing power, leaving the private sector to pick up the tab in the form of slimmer margins, fewer jobs and forfeited income.
3. A tax-patching strategy is terrible for transparency and legislative accountability. (I am, of course, absolutely confident that this is an unintended consequence of any tax patching here in Wyoming.)

But, inevitably, logic wears off the pro-tax argument. Instead of trying to "get out-of-staters" with a slew of small new taxes, why not just put a toll booth at the state line and tell everyone with an out-of-state license plate that "we need so and so much of your money to pay for our state government". It would be far more honest and give visitors a fighting chance to decide whether or not they have already spent enough on their own government back in their state.

Then, we are hurled back into Hell as Michael Savage sees it. Take, for example, this quote from Senator Peterson, as reported by the Tribune: 
“We’re so dependent on minerals,” Peterson said. “I don’t think we’re overtaxed. At the same time, I know what taxes do to businesses, to taxpayers, to citizens.”
Now, that's a thought in frantic search of elementary logic. If we are not over-taxed, then what is it that "taxes do to businesses" as well as to "taxpayers" and "citizens" that Senator Peterson is worried about?

There was more of the same from the senator:
Peterson said that businesses would bear the brunt of any sales tax increase, especially in his district of Park and Big Horn counties. Because Montana has no sales tax, he said, businesses on the Wyoming side of the border can either lower their prices to match or risk losing customers. “When you start talking about a property tax increase, the base is so small you can’t spread it out,” he said, referring to Wyoming’s small population. Still, Peterson said, he wanted the revenue committee to arrive ready for the next session, a shortened period that begins in February 2018, with bills that will tackle the situation. That might include a tax increase.
In other words, if we can raise taxes without raising taxes, then we can raise taxes. 

But in fairness to Senator Peterson, he was not the only one wandering aimlessly through the labyrinth of economics and basic logic. He was joined by Speaker Harshman, who, according to the Tribune, had this to say:
During the session that ended in early March, the House passed a bill that would’ve raised the sales tax temporarily and under certain circumstances. But staunch opposition to tax increases in the Senate, led by Sen. President Eli Bebout, made the likelihood of any tax increase making it through that chamber slim. ... [Speaker] Harshman, a chief architect of the House bill that originally included conditional tax increases, said that if the Legislature had backed that measure, lawmakers wouldn’t be meeting today and the crisis would be solved.
Right here, Speaker Harshman nailed it. In a short few words, relayed to us by the Casper Star Tribune, the Speaker declares that the "crisis" is only a crisis because there is not enough tax revenue to pay for government. Nothing else matters.

Where Senator Peterson at least makes an effort at putting logic to work in his argument against tax hikes, Speaker Harshman goes all out in ignoring altogether the economy that produces his dearly sought-after tax revenue.

He was in good company, says the Tribune:
Bebout said that if it did come to taxes, he’d like it to be put before the voters. During an earlier public comment period, Rep. Cathy Connolly, a Laramie Democrat, did just that. A woman who identified herself as a former special education teacher and principal had taken the mic to advocate raising an alcohol tax. Connolly said that the recalibration committee would look at raising cigarette and beer taxes but noted that even if increases on those items were passed, it would “garner us a fraction of what we need.” “Raising sales taxes, property taxes, how do you feel about those?” Connolly asked the woman. The woman replied that she had “no problem with that.” “We are educating our new leaders of our state,” she said. “I do not have a problem paying extra for something important as education.”
So if the legislature raises the alcohol and tobacco taxes, this woman pledges to become an alcoholic and destroy her health by smoking profusely. 

We thank this anonymous voter and taxpayer for her personal sacrifice, as she graciously lays down her life to protect our state government from agonizing spending cuts. She should be proud of herself. She is part of a long, European tradition with the finest intellectual heritage. Behold, a lesson in political logic worthy of a Wyoming legislator - and statist voter:

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