Sunday, April 18, 2010

The next governor's dilemmas

isconsin Political Fix
not just another blog
April 18, 2010

By Bill Kraus

Dilemma #1

When the state needs more revenues, the Democrats turn to the income tax for either a straight increase in the tax rate or a temporary surtax if the need looks like it is going to be temporary. The Republicans favor increases in the sales tax rate.

Since the onset of the taxophobia epidemic, this stalemate has been resolved by doing little or nothing about the big two revenue sources and sort of letting the property tax take the fall.

The reasoning(s) are: the sales tax is regressive, and the income tax is a deterrent to business executives and rich people who want to move here or stay here.

The flaw of letting nature take its course is that property taxes are regressive deterrents as well. The appeal to legislators and governors is that local governments assess them; they are somebody else’s problem.

Dilemma #2

Property tax dependency is really driven by the fact that it is used to fund K12 and technical college education. Education is constitutionally a state responsibility.

The most effective route to more tolerable property taxes is by expanding and increasing the sales tax and/or raising the income tax to pick up this state responsibility.

Dilemma #3

The biggest reason the state needs more revenues is we can’t cut our way to retaining our reputation as an education state without a new economy to buttress the traditional sources of jobs and money which are stagnating or faltering or both.

There are things that governments can do to build a new economy, but they are limited by resources and skills. What governments know how to do is welfare and infrastructure. Both can be used to create jobs, but both mostly require more tax revenues to do so. And, worse yet, the jobs they create are old economy jobs not new economy jobs.

There are, however, things governments can do to support and inspire and even help people in the private sector who do know how to create new economy jobs. The trouble is that this is high-risk stuff. A baseball analogy is apt. Even the best job creators bat something like .300, and that .300 is composed mostly of singles. Home runs are scarce.

Candidates are more likely to prefer other solutions. Lower taxes are said to be helpful in creating this new economy, and a friendly regulatory climate also has its adherents. Less spending without getting too specific about “on what?” gets a lot of lip service as well. The real stimulus, though, is something a revenue-short government doesn’t have much of: capital investment money.

Dilemma #4

The members of the Legislature who will have to approve whatever proposals the governor suggests to deal with these dilemmas are risk averse and occupy safe seats. This reduces appetites for anything adventuresome that might not work, disturb the status quo inordinately, or feed the anti-incumbent forces already in motion.

Dispassionate redistricting, anyone? It may be a necessary precursor to dilemma dismemberment.

Follow Bill Kraus on:
twitter / wmkraus

No comments: