Friday, February 16, 2018

Beware of a Special Session

As of this morning, the apparent tax threat to the Wyoming economy is not as urgent as it was before the session. There are still two bills to keep an eye on, HB0051 about gross receipts collections and HB0176 creating a "tax reform 2020 committee". It would be great if they both failed, as that would raise the bar further for the statists in the legislature. While I am all in favor of a state tax reform, I would not want it to happen until the legislature has appointed a "2020 spending reduction committee".

That said, it would be naive, bordering on irresponsible, to believe that the tax-and-spenders in our legislature will give up this easily. We had cause for celebration when the Revenue Committee chickened out and refused to get behind any of their own major tax-hike bills. However, a statist just does not give up this easily; do not think for a moment that the people who crafted bills that would raise our taxes by half-a-billion dollars or more, suddenly threw their hands up in the air and said "OK, you know what, I was wrong - raising taxes is a bad idea". 

Politics does not work that way. The statists we are up against; the lawmakers who spent all of 2017 trying to find a way to raise sales and property taxes; to expand the sales tax; to raise excise taxes; and create an entirely new tax; those lawmakers are dyed-in-the-wool statists and will not give up. They have realized that they cannot use the usual pathway through the interim committee process, but instead of giving up they are working on finding another way forward. 

There are three reasons you should all be on the alert for a special session, any time from a week from now to at least the end of March. 

First, as mentioned, a statist does not wake up one day as a born-again conservative. For sure, there are statists, even socialists, who come around and change their fundamental views. I am a good example: raised a socialist in a home with two hard-core socialist parents, in a country run by socialists for decades, I did not begin to question my beliefs until I started traveling Europe. I saw the British economy flourish under Lady Thatcher, asking myself "if our Swedish socialist welfare state is so awesome, how come the Brits have better cars, newer homes, can spend more on restaurants and wear better shoes than we do?" 

Another formative experience was the summer I spent traveling through the Soviet satellite states in eastern Europe. I will never forget walking along the Berlin Wall on the east side. 

It took me years to give up my belief that government was the path to prosperity and happiness. A statist in Wyoming does not come from nearly as extreme a viewpoint, but it still takes time, a long time, for them to change their beliefs. When they do, on the other hand, you will not hear the end of it. 

Have you heard any of the legislators who originally backed the Taxmageddon package come out and repent? No. All they have done is to quietly stash those bills away somewhere. All my political intuition tells me that they are waiting for the right moment to bring them up again, with a much better chance to get them passed. 

A special session would be the logical venue.

My second reason for expecting it, is the somewhat better outlook on the Wyoming economy. As I have repeatedly explained on this blog, our "new normal" state of economic activity is something we will have to live with for the foreseeable future - unless, of course, we get a governor and a legislative majority that are willing to commit to structural spending cuts and substantial deregulation. In that case, Wyoming would become a prosperity powerhouse. 

However, until that happens, our "new normal" is exactly that: a new, normal state of economic activity that can easily be disrupted by higher taxes. 

Some people, however, misread this new state of normality. They see it as a sign that the economy is now on its way back to the heydays of yore, when tax revenue was as abundant as gravy on Thanksgiving. This, of course, is a big misinterpretation of economic reality, but a statist mind will often try to warp, bend and reshape reality to fit his own image of what it should look like. 

A special session would be the logical consequence of the statist macroeconomic pipe dream. 

The third reason to expect this unusual event is the unfortunate lack of support for structural spending reductions among fiscal conservatives. This applies to fiscal conservatives in both the legislature and among our gubernatorial candidates. In the legislative branch, there is not a single proposal for fundamental school-choice reform. Done right, this reform would reduce the cost of our K-12 system by $250-$300 million per year, while creating a new private industry contributing $450-$500 million and thousands of new jobs to our economy.

Nor have I seen proposals for Medicaid reform, which also could cut costs - permanently - for our state's taxpayers and open for making the program a completely in-state operated program. This, again, would allow for substantial cuts in costs; on the non-elderly side, a very first reform would shave off more than $100 million in permanent cost cuts. And this is without adding the benefits of a future Obamacare repeal. 

These are just two examples of reforms that the fiscal conservatives could have brought up as bills in this session. If they had, they would have strongly contributed to building a successful alternative to future tax hikes. 

Sadly, things do not look better on the executive side. Not one of our gubernatorial candidates have shown any interest in permanently reducing the size of our state government. So far, Harriet Hageman's only substantial mention of the Wyoming economy was in her announcement speech when she made clear that she wanted a "regulatory renovation" plan for our state. That is a great idea, but it is not sufficient. As for fiscal policy, all she said was that she does not think it is a good idea to use discretionary revenue for permanent spending. 

Hageman needs to do more - a lot more - if she wants to convince fiscally conservative voters that she is their candidate. 

Taylor Haynes remains an unknown quantity on this matter. I hope I misread him when I suggest that his desire to grab federal lands and associated severance tax revenue, is combined with a belief that Wyoming will continue to get federal funds from Washington. If this is what he believes, then I fear he might just be out to put more money into state coffers. 

If our fiscal conservatives would come out stronger and actively contribute with proposals for permanent reductions in state spending, we would show the statists that there is a stronger alternative to their Taxmageddon vision. It would not sway the hard-core tax-and-spenders, but it would win over enough fence sitters to permanently reduce the big-government crowd of lawmakers to an amusing minority. 

As things are now, there is nothing fun whatsoever about the direction in which our state is moving. We fiscal conservatives have given the tax hikers a real run for their (our) money, but we have a long, long way to go before we have secured a prosperous future for our state. 

A little bit more help from our elected fiscal conservatives would help. Especially if the governor calls a special session for the purposes of raising taxes. 

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