Saturday, October 13, 2007

Tax and Spin

Former District 30 Delegate and Ward 5 Alderman Herb McMillan published a guest column in The Capital recently, and at the request of the author I will now-republish the article and offer commentary--more like affirmation--of the points contained therein.

(You are probably thinking: "Hey, wait a minute, we are the sharpest, most intelligent, and now that you mention it, the most handsome blog readers and political activists that there are. We already know about this; heck, we read it last week." I can assure you, loyal readers, stories like this need to be told whenever possible.)



TAX AND SPIN: MARYLAND’S BUDGET DRAMA

It’s a time-tested script. Liberals enact mandated spending increases and create a structural deficit, while claiming to be fiscally responsible. The structural deficit becomes a real deficit, and we have a budget crisis. The Governor makes minor budget reductions.


Let's talk about the current Governor's minor budget reductions. He created something like 1000 new jobs, eliminated 200 or so of those, and proclaimed to make 'painstaking cuts that took real political courage'--neglecting the fact that on net he was still plus 800 jobs! This is not a cut!

The drumbeat for higher taxes begins. The Governor calls a special session. Increased taxes and expanded gambling are rolled out as a “Progressive Revenue Reform Package.” Progressives (liberals) bicker over slots. Finally, they reunite to “compromise” and “courageously” pass a revenue (tax) package.


First of all, if you aren't frustrated by the partisan bullshit of slots in Maryland, then I have to believe that your blood runs cold. Here is what has happened in the last 5 years with slots:

4 years ago: ( Republican Governor Ehrlich) Can we have slots? (General Assembly) NO.
3 years ago: (Republican Governor Ehrlich) Can we have slots? (General Assembly) NO.
2 years ago: (Republican Governor Ehrlich) Can we have slots? (General Assembly) NO.
1 year ago: (Republican Governor Ehrlich) Can we have slots? (General Assembly) NO.
This year: (Democrat Governor MOM) Can we have slots? (General Assembly) Yes.

Secondly, Herb makes a very good point about the words used for political spin. Before, it was conservatives and liberals. But apparently it has been determined that liberal is too derogatory of a term, and now the term 'progressive' is popping up everywhere. And our subconscious tells us that progressive means 'cutting edge', and we are less likely to get mad when the government steals our money and redistributes it.


Which brings us to the second example of spin: 'revenue package'. Governments do not earn revenue. They do not have financial interests of their own. Governments are funded by taxes and taxes only, that they collect from us against our will to serve the interest of the public. If a private company raises prices as part of a 'revenue package', we can choose not to buy that company's product if we don't want to pay such a high price. If the government raises taxes, what can we do?

(Answer: we can write blogs.)


They slightly reduce two taxes, raise every other tax, pass slots, and tell you that only the rich will pay more.


This is a grave offense, and The Capital is a grave offender. Let me tell you something--if the government is collecting $1,700,000,000 more in taxes than it was before, we will be paying more taxes. I once thought that a parallelogram is what the Pony Express delivered, but even I know that if the government raises taxes, we pay more.

Democrats haven’t deviated from this script yet. Governor O’Malley’s “centrist” budget created 1000 new state jobs, increased spending by 7.6%, exceeded tax receipts by a billion dollars, and consumed Ehrlich’s billion dollar surplus. Yet Speaker Mike Busch called it a “fiscally responsible budget that limited growth.” Ignoring fiscal reality, the General Assembly cut O’Malley’s budget by less than 1% (200 million) and added millions in new mandated spending to next year’s 1.5 billion deficit.

Maryland's total budget is about $30 billion per year. $1.5 billion represents a deficit of about 5% of the total budget. I submit that every person reading this blog has had to cut 5% from their budget at one point or another. I have seen prices for certain foods--tomatoes, lettuce, and milk to give examples from the last couple of years--double in price within 6 months! I don't have the luxury of being able to raise prices that quickly--I have to cut my spending. The state should learn to do the same.

The legislature had barely adjourned when calls for a special session started. Governor O’Malley cut a few of the 1000 new vacant jobs created in his budget. He labeled additional reductions as “threats to our quality of life.” Then O’Malley hit the campaign trail, pitching Maryland as a lightly taxed, revenue starved state. Government needed to “create more revenue”. Taxpayers “got their money’s worth”, and higher taxes would “maintain our quality of life”.

The special session thing is total balderdash. The legislature celebrated like they had just cured cancer when the session ended...and what did they accomplish? Now we have to spend hundreds of thousands of dollars for a special session that promises to make us spend even more? Fantastic.

The facts contradict O’Malley’s tax and spin roadshow. Maryland has the 9th highest total tax burden per person, and the 3rd highest income tax in America. Those who claim Maryland taxes are “low as a percentage of income” should remember people, not percentages of income, pay taxes.

I am actually fine with evaluating things based on percentages...

Maryland’s cost of living is high.

This is the point we really need to worry about. We could be the richest state in nominal (non-price level adjusted) terms, but in real terms, it's a different story.

BG&E, despite O’Malley’s campaign promises, increased power bills by 50% in June; gas prices are near $3 per gallon; and property tax assessments increase annually. Working families, small businesses, and retirees not only deserve to keep their hard earned dollars; they need them.

O’Malley’s wrong about revenue. Government doesn’t create revenue. It simply consumes the tax dollars you earn. Maryland doesn’t have a deficit because we fail to tax enough - Maryland has a deficit because we spend to much. State spending has increased 15.3 billion in 10 years – over 100%.

Amen. Herb is honest in his disdain for unrestrained spending growth--he voted against Governor Ehrlich's last budget for precisely that reason.

Do Anne Arundel County residents “get their money’s worth” from state taxes? Anne Arundel County gets 24 cents in state aid for each dollar of state taxes collected within our county. We received $4,356 in state education aid per pupil. Baltimore City received $11, 235 per pupil. We’re fourth from the bottom in state aid. The same formulas that mandate increased state spending, including Thornton funding, also distribute more of your tax dollars to other counties. We pay more state taxes, and we receive less. That’s “progressive?”

After reading this, do you have any confidence that governments spend your money fairly, or wisely? I have an idea, let's have government be in charge of our health care--I bet they could do a better job than the private market. (Even though you cannot hear the tone of my voice, I trust that the sarcasm was conveyed.)

Are your taxes well spent? Three years ago, Baltimore City couldn’t account for 40 million in state education money. It disappeared. The non-profit Advocates for Children and Youth discovered that $500 million of Thornton funding slated for summer school and tutoring had been used instead for general budget items, including health benefits, salary increases, and heating. They also noted that Maryland student scores on independent national tests had failed to improve, despite a 2.2 billion increase in education funding since 2002. Students have performed only marginally better on state tests.

At this point, I don't even have to say anything...Herb is on a roll.

O’Malley claims his revenue reforms put money in your pocket. But it doesn’t stay there long. His income tax restructuring reduces taxes for family’s making between $50,000 and $125,000 by $176. Property taxes on a $350,000 home are reduced $105 for a total savings of $281. However, O’Malley’s 1.3 billion in regressive taxes (sales, gas, car titling) born by 2.1 million Maryland households, costs an average of $585 per household. On average, each household is now out $304. That’s not even considering the adverse impact of O’Malley’s taxes on businesses and jobs.

Bottom line: nearly $2 billion in new taxes is not good for the economy.

The political success of O’Malley’s regressive-progressive tax increase hinges on convincing us that only the rich pay more. Unfortunately, there aren’t enough wealthy people in Maryland to cover a $1.5 billion tax increase. The next best thing is to make it appear there are, by “progressively” raising their taxes and slightly reducing middle class income taxes. But that only generates $163 million in revenue. The sales tax and other regressive taxes generate $1.3 billion in revenue. Sure the wealthy pay higher taxes; but so will everyone else. Just follow the money.

It would be nice if this show had a happy ending. But with this cast of characters, what did you expect?

Herb McMillan represented Annapolis in the House of Delegates from 2003-2007. Unless otherwise noted, data utilized comes from the Maryland Department of Legislative Services.

9//28/07

1 comment:

PAUL FOER said...

About the only thing with which I agree is "Government doesn’t create revenue. It simply consumes the tax dollars you earn." Yet not completely. Government can and does create jobs, incentives for growth, stability for an improved business climate and can fill in many gaps where the market cannot provide.

Blaming Md government for inflation or gasoline prices in well, does it require a comment?

In addition to serving in The House, Mr. McMillan was also and Annapolis Alderman and Mayoral candidate. I give him high marks in only one area-that of being a consistent and consistently relentless watchdog on out of control spending and insisting that Government not just tax and spend. That is needed and I commend him for that. However, he is an extremely divisive, negative and pugilistic individual with profoundly if not edtremely conservative views out of step with Maryland and Annapolis.
We need government in order to have a civilized society--and that takes taxes. How can we look around at all the economic vitality that is Maryland, and how Maryland leads in so many areas, and somehow claim we are taxed too high and that government stifles growth? It's just not that simple, so I am always concerned with dogmatic folks who try to make things seem so simple.