Vermont Tiger

Not Well Received

Today's Rutland Herald editorial in praise of taxes was not well received in the Wooden Soldier Restaurant.  Not right after we got our property tax bills in the mail just this last Friday.  It was a grumbly coffee session this morning.  One man's property taxes had shot up from $3200 to $4000.  That's $333-a-month rent to the town on top of his mortgage.  His brother's property taxes in North Carolina are $800.   And he hardly has a fuel bill.  Taxes.  Fuel.  When it rains, it really rains.   It's awfully expensive to remain in this, the 48th sunniest state in America (therefore the third cloudiest).

Tax Consequences

Tax Holiday Brings Out Shoppers
headline, WCAX website

The sales tax holiday is now behind us and it was a success by its own benchmarks -- people came out and spent money to take advantage of lower prices.  What a marvelous, innovative concept. 

With the event still a fresh memory, then, it might be profitable to review the bidding and see if there might be some other lessons to be learned.

First, let's recall that in certain, surly blogospheric quarters, the administration of the tax holiday was subject to some amiable ridicule.  No apologies.  Governments are addicted to complexity.  Bureaucrats ensure their own indispensability by making regulations unfathomably complex so that citizens will need their help to comply.  We might have had a tax holiday but when it comes to creating and enforcing incomprehensible regulation ... governments never take a day off.
 

A Primer On Vermont's Sales Tax Holiday

(Editor's note:  This essay by Art Woolf is, undeniably, one of our greatest hits.  With the tax holiday coming up this weekend, we decided it was time to republish. Which we did ... as soon as we had stopped laughing.)

For those Vermonters who do not plan to spend the entire weekend in church or synagogue, July 12th and 13th present an opportunity to stimulate the economy. By shopping.  As a public service, we will attempt to answer some commonly asked questions about this nifty program.   

Okay, how does it work?

Simple. Buy stuff and the state won't charge you any sales tax.   

Wow. How much will I save?

Americans Overwhelmingly Reject Redistribution

Somebody please tell Montpelier:

"Americans overwhelmingly -- by 84% to 13% -- prefer that the government focus on improving overall economic conditions and the jobs situation in the United States as opposed to taking steps to distribute wealth more evenly among Americans."

According to a recent Gallop poll:

• Americans Oppose Income Redistribution to Fix Economy
  
• Lack of Support for Wealth Redistribution Spans Political Party, Income Groups
• Half of Americans Think Government Is Doing Too Much, Not Too Little

Go figure.  And all this time I thought I was in the minority of people who like earning and spending their own money. These poll results beg the question: if so many people oppose redistribution, why do so many people support political candidates who promise it?

People Who Move Lose Intangible Benefits

The town of Needles, California is hurting.  People are fleeing the town and businesses are failing. And now the town wants to leave the state of California. So, what's the cause? Is it because it's not pretty enough? People will always flock to bucolic places, right? Nope, that's not it:

“It's a beautiful little community; we've got a river that runs right through it, we've got Interstate 40, Route 66 and a railroad. It's a community that on paper should be a prospering little town. If our little town were in any other state than California, we would be the best community in the state."

--Needles City Council Member Steve Thomas

The Hits Keep Coming

Property taxes will be going up.  Bad news any time but especially bad heading into a recession.  By not doing  anything, the legislature – one house of which was led by someone currently running for governor – voted to raise taxes.  In one of the most heavily taxed, and economically feeble states in the union, no less. 

Still, anyone tempted to lash out at Montpelier for ignoring the signals should get a grip and remember that the legislature worked very hard and delivered an industrial hemp bill ... among other things.

Government's Role II: Don't Give Our Children A Choice or Voice

We've referenced Off The Rails many times here at VT.  For those of you who have not read it, the short version is that given the changing demographics of Vermont, and the likely future path of state revenues and expenditures resulting from those demographic changes, Vermont will either have a far higher tax burden than the state has ever experienced or we will have to make significant changes in our spending and spending priorities.

The U.S. faces similar problems due to promises the government has made, promises that essentially force future taxpayers to do things they never had a chance to vote on. Gene Steuerle, senior fellow at the non partisan Urban Institute, very clearly outlines the problem:

Never before in U.S. history have so many promises been made to so many people for so many years into the future. Every additional promise, no matter what its merit, only attempts to tie that fiscal straightjacket tighter around future voters....In a little more than a decade, we'll likely have around $1 trillion more in annual revenues, yet under current law almost all of that growth will have been pre-allocated without so much as a nod from the existing or future Congresses.

And this is something very new, and very different, for the U.S.:

...in most of the 200-plus years since the American republic was founded, most spending and tax debates were over projects of the day. They weren't about controlling what government priorities would be in 50 years. Whether worthwhile or horrible, precedent-setting or routine, new laws and programs weren't designed to predetermine government's direction for decades to come.

Can we expect this year's presidential candidates to focus on this?  Don't bet on it, although Ross Perot is again trying to bring attention to the issue, just as he did in 1992 (although this time without running for president).

(h/t Andrew Samwick)

 

A Revolt Next Door

In Massachusetts – where there is a tradition of not enduring excessive taxation politely – legislators are worried that a movement to repeal the state income tax might just succeed. Of course they are.  They want that money.  A couple of legislators are  willing to admit that

... voter anger might not be as great if the state kept its promise from years ago and lowered the income tax rate to 5 percent. It is now 5.3 percent.

They also said state government has to take steps to earn the trust of voters.  

You think?

Incentives Do Matter: Part Deux

One of France’s most prominent chefs just escaped to Monaco. French cultural icon Alain Ducasse  gave up his citizenship to flee excessive taxation.  Quel horreur. 

France losing Ducasse would be like Vermont losing ... humm?

Well anyway, you get the point - Incentives do matter.  The UK-based Times has the details:

Government's Role: Protecting Us From Helping Our Children

The operative wording of the 1997 Vermont Supreme Court's Brigham decision, which set up the basis for Act 60, is

Children who live in property-poor districts and children who live in property-rich districts should be afforded a substantially equal opportunity to have access to similar educational revenues.   Thus....we hold only that to fulfill its constitutional obligation the state must ensure substantial equality of educational opportunity throughout Vermont.

Although many thought that Act 60, and Brigham, meant that the state would and should provide the funding to increase spending among low spending districts, others were concerned that some districts were spending too much and ought to be prevented from doing this, even though the higher-than-average education spending was paid for entirely by local taxpayers. 

It now appears that a similar situation is occurring in Massachusetts, where the citizens of Wellesley want to build a new $159 million high school, with most of that coming from their own tax base.   Massachusetts State Treasurer Timothy Cahill is opposed, saying

Just because you have the money doesn't mean you should be allowed to do it. One community should not be able to provide better opportunities for kids versus another community just because they have the money.

As Greg Mankiw notes

In essence, Mr Cahill does not want the residents of Wellesley--a group with higher-than-average income--to spend their own money on their children. I suppose it is better for them to buy fancier cars or spend more on dinners out at tony restaurants. But better school facilities? Absolutely not!

Mr Cahill's one-size-fits-all principle has many implications. For example, why should wealthier parents be allowed to hire tutors for their kids? Or give them private music lessons? Or send them to pricey summer camps? If Mr Cahill thinks that people should not be able to spend their own money to improve the lives of their children, the Wellesley High School is only the first step of a much larger project.