11.20.14

Schwertner’s Gas Tax Diversion Bait and Switch

Posted in 84th Legislature, Taxes, Transportation at 12:37 pm by wcnews

The problem with ending tax diversions has always been that the GOP will never say how they will replace the funding for the items the diversions are funding.  That still holds true with the state Sen. Charles Schwertner (R-Georgetown) and his proposed legislation to end gas tax diversions.

He has pre-filed legislation to stop diverting $620 million dollars a year for other things.

Schwertner calls it “truth in taxation”, that he believes “when we have a dedicated tax, it should go to that dedicated purpose.”

Schwertner notes keeping all state fuel tax money for highways is only one piece of the funding puzzle, adding the state needs $4 to $5 billion dollars a year.

Schwertner says the fuel tax has been used, among other things, for the Texas A&M Transportation Institute, the Department of Public Safety, and the Attorney General’s office.

He says once this legislation is passed, then the discussion will start on prioritizing the state’s budget. [Emphasis added]

In other words Schwertner won’t tell us how he’ll replace the money, if at all, until his bill and amendment are passed.  This legislation cannot be fairly evaluated without knowing how or if the diverted money will be replaced.

At the link above there’s an audio conversation available, give it a listen.  For someone who likes to talk about so-called “truth in taxation” he’s certainly unwilling to admit how he would replace that $620 million.

10.01.14

Patrick, Hegar Support Higher Sales Taxes, Lower Taxes For The Wealthy

Posted in Around The State, Election 2014, Taxes at 11:51 am by wcnews

One thing that was exposed as a result of the Lt. Gov. debate on Monday night was the extreme position of many in the GOP, highlighted by GOP nominee Dan Patrick, who want to make taxes more unfair in Texas.  Via Forrest Wilder.

In the same way, he hopes to win in November by promising tax reforms that he’ll be hard-pressed to deliver. He’ll decrease some unspecified number of people’s property taxes by spiking the sales tax—in other words, he’ll move the state from a tax that hurts the middle class to a tax that hurts the poor. We’re weeks away from the election, and Patrick’s already got several sessions of dubious policies he’s promised to get done next session. (Add overhauling public ed to the list.)

As Kuff reminded us in his post on the debate, the GOP tried this in 2005. But the facts of how unfair a plan like this would came out, it was too greedy even for the GOP back then.

Texas families earning less than $100,000 a year would pay about $1.1 billion more a year in state taxes, while higher-income residents would see a tax cut of $437 million under a House bill designed to cut school property taxes, a report said Tuesday.

The Legislative Budget Board’s analysis of House Bill 3 also shows that the legislation would shift a portion of the state tax burden from businesses to individuals.

And that’s the kind of scam Patrick wants to run now.  Instead of that gem the GOP wound up passing a tax swap in 2006, that created a structural deficit, but they left the sales tax alone.

Democratic candidate for Comptroller Mike Collier made this known back in the spring when his opponent Glen Hegar won the GOP primary, Hegar, who once urged “just do it” on property tax abolition, now more cautious.

During the recent Republican primary for state comptroller, state Sen. Glenn Hegar repeatedly endorsed eliminating local property taxes in Texas.

Borrowing from GOP opponent Debra Medina’s 2010 playbook, Hegar urged a shift to sales taxes to make up the more than $40 billion a year of revenue that cities, counties, school districts and other local governmental entities would lose.

Hegar, R-Katy, even suggested a very rapid transition to the new tax system. At a Longview tea party gathering in January, he told a man in the audience, “You just do it.”

This week, though, the governing implications of so massive a shift seem to have cooled Hegar’s jets.

Burying the property tax, after all, would require leaders to more than double the current rates of all state and local sales taxes.

Getting rid of the property tax, and replacing it with a much higher (at least doubled) sales tax would make an already unfair tax system in Texas, even more unfair. The GOP likes to call them consumption taxes, but these taxes fall much harder on consumers with low incomes then those at with higher incomes.

Think of it this way, and extra $20 when spending $100, if it’s raised to 20%…and extra $25 is it’s 25%. An extra $25 bucks on a grocery bill, it makes a $40 pair of shoes $50.  Who does that hurt more the single mom or the wealthy suburban family?  No property taxes will help those at the top abundantly more than everyone else.  And don’t expect them to share, Half of All Income Goes to the Top 10 Percent.

A plan like Patrick and Hegar’s would also take away local control of tax dollars, as Democratic candidate Leticia Van de Putte so aptly pointed out in the debate.  City and county governments would be left to rely on the state sales tax for money to pay police, firefighters, and first responders as well as all city and county employees.  And during an economic downturn, where sales tax plummets, the cuts could be disastrous.

The GOP’s plan has always been higher taxes on the poor and middle class, and lower taxes on the wealthy.  There is no feasible plan they will come up with that will lower taxes for Texans.  All they can hope to do is pass another tax swap scheme.  A scheme that will create a worse budget situation that they can then use to cut state spending on education, health care, roads and other infrastructure and speed us on our way to privatization.

07.31.14

Perry’s incentive programs were a waste of taxpayer money

Posted in Around The State, Taxes at 11:10 am by wcnews

There have always been many things wrong with these funds that The Lege allowed Rick Perry to play with.  But the main one is that there’s really no beneficial economic reason for them.  Most of the companies that came here would have anyway, without the incentives.  Also the money would have been better spent on other needs to entice businesses to Texas.

The exact things that the GOP in Texas has been neglecting for so long would be the best business incentive.  From this EOW post, Hutto/Carmel Creek Tax Incentives Bigger Than Austin/The Domain.

It is commonly thought that firms will migrate to a particular state for the purpose of reducing costs, since lower costs may result in higher profits for business owners. But state and local taxes are not typically a significant cost of doing business. All state and local taxes combined make up but a small share of business costs and reduce profits only to a limited extent. Indeed, the costs of taxes pale in comparison to many other location-specific costs, and numerous location factors—including qualified workers, proximity to customers, and quality public services—can be more critical than taxes. The availability of these vital location factors depends in large part on each state and locality’s commitment to public investment—and their ability to pay for it. Research, in fact, substantiates that public investment plays a positive role in helping lower costs for firms. [Emphasis added]

In a place that’s booming like Texas, there is no need for this. The only time incentives like this pay off is in an area that is extremely economically depressed.

The better place for Texas to be spending it’s money would be on transportation, schools, water, and infrastructure. It looks like more and more people are getting hip to Perry’s scam.

Kuff, Another look at Perry’s slush fund.
HChron, Time for an overhaul, possible elimination, of state business incentives.

06.04.14

Hegar And The “Cumbersome” Property Tax

Posted in Around The State, Commentary, Taxes at 12:55 pm by wcnews

As usual, with any tax discussion in Texas, the main issue is not being discussed.  We’ll start with this, Hegar: “I firmly believe the property tax is very cumbersome”.

“I firmly believe the property tax is very cumbersome,” Hegar said. “It’s very troubling for homeowners, for business owners…it’s unfair in how it’s applied across the board.”

But, the Katy state senator said it’s up to the Texas Legislature, not the comptroller’s office, to decide to amend the system.

Yes, there’s plenty of unfairness, especially when it comes to commercial and corporate tax breaks. It’s nice how he quickly pointed out that it’s someone else’s responsibility anyway. He’s currently in the Texas Legislature.

The real issue, of course, is the unequal, unfair, and insufficient tax system we have in Texas.  Our schools and higher education systems are under-funded.  Our health care, and safety net in Texas is at or near the bottom.  Our infrastructure is crumbling.

If, as Hegar says, the property tax is cumbersome, then there are ways to alleviate that.  But it’s not by eliminating it and raising the sales tax to 25%.  A more sane way to do it would be by have a balanced state tax system across three types, aka the three-legged stool.  The stool consists of three kinds of taxes – sales, property, and income.  Having all three allows each to be low, and in Hegar’s words, less cumbersome.

In Texas we are missing one leg of the stool and therefore it causes the other two to bear more or the burden, be more cumbersome.  The sales tax is the most regressive, (imposes a greater burden (relative to resources) on the poor than on the rich), of these three taxes, and the income tax the least regressive. Taking away the property tax and raising the sales tax would therefore raise taxes on poor and working Texans while lowering taxes on the rich.

In order for Texas to have a more equal, fair, and sufficient tax system to fund our state’s needs, we should be talking about an income tax and which would do all of that and allow for much lower property taxes.  Don’t worry, it’s not like anyone running for office, from either party, is going to propose anything like this.

04.10.14

Carter Votes For Cuts That Harm Middle Class, Poor & Cuts Taxes For Rich

Posted in Around The Nation, Bad Government Republicans, Health Care, Taxes at 8:59 pm by wcnews

Out GOP Congressman John Carter voted for the Ryan budget which takes dead aim health care (Medicaid, Medicare, The ACA), education, and support for the poor, while giving another tax cut to the rich.

As Digby says, “This is the GOP Agenda“, Politics House Passes Ryan Budget With Big Cuts.

The 219-205 vote on the budget outline takes a mostly symbolic swipe at the government’s chronic deficits. Follow-up legislation to actually implement the cuts isn’t in the offing. Twelve Republicans opposed the measure, and not a single Democrat supported it.

The measure passed after a three-day debate that again exposed the hugely varying visions of the rival parties for the nation’s fiscal future. Republicans promised a balanced budget by 2024 but would do so at the expense of poor people and seniors on Medicaid, lower-income workers receiving “Obamacare” subsidies, and people receiving food stamps and Pell Grants.

Democrats countered with a plan that would leave Obama’s health care plan and rapidly growing health programs like Medicare intact, relying on $1.5 trillion in tax hikes over the coming decade to bring deficits down to sustainable but still-large levels in the $600 billion range.

The GOP plan, by Budget Committee Chairman Paul Ryan, R-Wis., would cut more than $5 trillion over the coming decade to reach balance by 2024, relying on sharp cuts to domestic programs, but leaving Social Security untouched and shifting more money to the Pentagon and health care for veterans. It reprises a controversial plan to shift future retirees away from traditional Medicare and toward a subsidy-based health insurance option on the open market.

While staking out a hard line for the future, follow-up legislation is likely to be limited this year to a round of annual spending bills that will adhere to a bipartisan budget pact enacted in December.

But the Ryan plan does paint a picture of what Republicans would attempt if they claim the Senate this fall and the White House in 2016. Its cuts to entrenched benefit programs like Medicare and Medicaid, however, would be difficult to pass even if Republicans gained control of both the House and Senate in this fall’s elections.

“It’s totally out of touch with the priorities and values of the country,” said Rep. Chris Van Hollen, D-Md. “This is a clear road map of what Republicans in Congress would do if they had the power to do it.”

[...]

Ryan’s plan revives a now-familiar list of spending cuts to promise balance, including $2.1 trillion over 10 years in health care subsidies and coverage under the Affordable Care Act; $732 billion in cuts to Medicaid and other health care programs; and almost $1 trillion in cuts to other benefit programs like food stamps, Pell Grants and farm subsidies.

The measure also promises deep, probably unrealistic cuts to domestic programs like education, health research and grants to local governments that are funded each year through annual appropriations bills.  [Emphasis added]

And this, House-Passed Budget Shows Parties’ Divergence.

The move underscored the different universes the two parties occupy as election season heats up. Democrats see the budget, which passed on Thursday in a 219-to-205 vote, as a political millstone, with brutal cuts to popular government programs, sweeping and controversial changes to Medicare, and tax cuts for the rich. Republicans consider it a modest step.

[...]

The budget — the fourth presented by Mr. Ryan, the chairman of the House Budget Committee — is nonbinding and will go nowhere in the Senate.

But Republicans will try to use the vote to prove their tough-minded fiscal credentials. And Democrats will seek to tar their opponents by spotlighting the budget’s deep cuts to education, food stamps and transportation programs, its proposed transformation of Medicare, and the tax rate cuts for the rich.

The budget bill tally demonstrated the Democrats’ certainty that the Ryan budget will badly hurt its supporters — no Democrats voted for it.  [Emphasis added]

Make no mistake, despite all the articles stating that this has no chance of passing, this is the GOP agenda. And if they pick up seats this November they will set out to make this a reality. As evidenced by Carter’s Orwellian press release after his rubber stamp of the Ryan Budget.

There is a much better option, The Better Off Budget.

BOB web logo blue(1)

During our economy’s best decades, Congress invested in the American workforce and every family was better off for it. But recent years have been dominated by growing inequality and a Republican majority in Congress obsessed with slashing the budget, making it harder for working Americans to find decent jobs and save for the future. The Congressional Progressive Caucus’ Better Off Budget reverses the damage budget austerity has inflicted on hard-working families and restores our economy to its full potential by creating 8.8 million jobs by 2017.

The Better Off Budget reverses harmful cuts that have hit working families the hardest—starting with repealing across-the-board budget cuts known as the “sequester.” It creates a fairer tax code so that low and middle-income families no longer pay more than they should while the world’s biggest corporations benefit from unnecessary loopholes. Our budget reverses harmful pay freezes, expands benefits for federal retirees and strengthens federal health care and retirement programs Americans rely on.

When the federal budget invests resources wisely, we can meet the needs of working families and shrink the deficit. The Better Off Budget not only creates jobs, it reduces the deficit by $4.08 trillion over the next 10 years. It’s the right budget for the country, for working families and for our future.

That shows a clear difference between Democrats and the GOP. I certainly hope that Democrat Louie Minor, who is running against Carter, will support the Better Off Budget.

[UPDATE]: Bernie on the Ryan Budget:

04.01.14

Collier Pointing Out The Craziness On The Right

Posted in Around The State, Election 2014, Taxes at 8:44 am by wcnews

What Democratic candidate Mike Collier is doing thus far in the race for Comptroller of Texas is spot on.

The wing nuts in the Texas GOP, for too long, have been getting away with saying crazy things and not being held accountable for them.  Showing the painful reality of their right wing fantasies on Texans is what’s been lacking for too long.

And voters need to understand that a 20% plus tax on everything they buy would  be an economic disaster.  Especially for those at the bottom of the income scale, who are already hurting.

Way to go Mike Collier. The HChron has more on Hegar’s disastrous plan to raise sales taxes, Increased sales taxes to take spotlight in ads for comptroller.

Local property taxes account for roughly 47 percent of tax revenue in Texas, according to a 2012 report from the comptroller’s office. State and local sales taxes make up 32 percent of revenue.

Another 2012 study – written by former deputy comptroller Billy Hamilton and published by a Republican group called Texas Tax Truth – said consumers would have to pay up to 25 percent in state sales tax to make up for the approximate $45 billion in lost revenue caused by abolishing property taxes. [Emphasis added]

“There’s no way that Hegar can make a sensible convincing policy point that we should get rid of the property tax in favor of a broader, larger sales tax,” said Cal Jillson, a political scientist at Southern Methodist University.

And, the shift from property taxes would deprive local governments, school districts and other entities of their primary method of revenue collection, said John Kennedy, an analyst at Texas Taxpayers and Research Association. That would mean municipalities would have to rely primarily on the state to finance their operations.

Making school districts beg the state even more for funding.  That’s another right wing dream come true.  This is just another right wing fantasy that would hurt the majority of Texans.  We need real solutions not more tea party nonsense.

03.24.14

Stuff Costs Money

Posted in Around The State, Commentary, Taxes, Transportation at 11:20 am by wcnews

That’s the fundamental issue that’s been skirted when talking about taxation in Texas for decades.  Critical needs have been neglected because politicians were afraid to cut programs or raise taxes.   Instead we get tax diversions and neglect.  Which is why we don’t have the roads we need, public and higher education are struggling, health care is inadequate, and we lack needed water infrastructure, just to name a few.

All of these themes play out in a recent post from Terri Hall, regarding comments made by GOP state Rep. Drew Darby (R-San Angelo), Tax hike? Lawmaker tells road lobby gas tax hike coming.

Texas State Rep. Drew Darby told a friendly crowd of road builders that he’ll continue to push for a gas tax hike to help shore-up the State’s road funding shortfalls at yesterday’s San Antonio Mobility Coalition (SAMCo) luncheon. Darby supported a bill to capture half of the vehicle sales tax receipts, raise the gas tax 10 cents a gallon, and double vehicle registration fees during the legislative session last year. So his support of gas tax hikes are well known. But what makes his comments to SAMCo so newsworthy is his open mockery of those who have a problem with ending the raid of gas taxes for non-road purposes.

The biggest diversion of gas tax goes to public education by constitutional amendment (twenty-five percent). The next goes to the Department of Public Safety (DPS) which gets roughly five percent. The constitution does say the gas tax can go to policing state highways, but that’s a small amount of the DPS budget. The Texas legislature has raided additional sums to the tune of billions over the last several decades for anything from computers in the Comptroller’s office to enhancing employee benefits in the Attorney General’s office. Taxpayers want accountability for those funds and restitution before any tax hikes are contemplated.

Diversions have been part of budgeting in Texas for quite some time. It allows politicians to shift money without raising taxes. Instead of “deficits” in Texas we have budget tricks.

There has been no support for a gas tax hike for the last decade when lawmakers first started to take note that gas tax was no longer keeping pace with road needs. They’ve turned to toll roads and massive borrowing as a get out of jail free card, but that one trick pony is pretty well used up as the state has maxed out its credit card and all the toll viable roads have already been built. But rather than pull the plug on loser toll projects, lawmakers have turned to subsidizing toll projects that can’t pay for themselves propping up toll projects with gas taxes, Texas Mobility Funds, general obligation bonds, and even local property and sales taxes in a double, triple, and/or quadruple tax scheme.

While the “Truth In Budgeters” have a point – raising taxes may be politically impossible – but truth in budgeting isn’t going to happen anytime soon either.  What we have is a system that’s corrupt and underfunded, and those in charge are fine with that.  They just don’t’ want to be blamed for it.  The only people that have a problem with the current system are the people of Texas, who have to live in it.  And no one is offering them a way out.

No one is standing up for the majority of Texans who need these problems to be remedied. The reality is Texas has a woefully inadequate and unfair tax system. It’s been documented here, via CPPP papers, repeatedly. And most politicians in Texas, from both major political parties, are unwilling to admit it. Let’s face it the reason there’s tax diversions in the first place is because elected officials were unwilling, and/or afraid, to raise taxes to pay for stuff. That’s also why debt has skyrocketed, The Lege sloughed that off to voters through the guise of constitutional amendments. And toll roads were sold as user fees, not taxes, as a way to pay for roads.

What we have on the right is a game being played between the two wings, where they blame each other, nothing gets done, and neither side gets blamed.  On one side there’s folks like Darby and Straus who are willing to begrudgingly admit that we need to raise taxes for stuff we need like roads, water, and maybe education.  While on the other side, there’s a contingent that thinks the state already has enough money for to pay for everything, if the state would just scrub the budget and stop diverting tax payer money.  And as long as those two sides are allowed to talk in circles nothing is going to get fixed.

Of course Texas needs to raise money/taxes to be able to pay for the stuff we need.  Yes we do need to make sure our books are in order so that tax payers know their taxes are going for the stuff it’s intended.  But there’s few if any politicians in Texas running on that.  Unless someone starts holding their feet to the fire the blaming and inaction will continue.

03.21.14

That Didn’t Take Long, Hegar Backing Off Wing Nut Campaign Promise To Raise Taxes On The Working Class

Posted in Around The State, Election 2014, Taxes at 8:11 am by wcnews

It’s not surprising that since he won the primary the Texas GOP candidate for comptroller is starting to dial-back his crazy, wing nut rhetoric.  Via the DMN.

During the recent Republican primary for state comptroller, state Sen. Glenn Hegar repeatedly endorsed eliminating local property taxes in Texas.

Borrowing from GOP opponent Debra Medina’s 2010 playbook, Hegar urged a shift to sales taxes to make up the more than $40 billion a year of revenue that cities, counties, school districts and other local governmental entities would lose.

Hegar, R-Katy, even suggested a very rapid transition to the new tax system. At a Longview tea party gathering in January, he told a man in the audience, “You just do it.”

This week, though, the governing implications of so massive a shift seem to have cooled Hegar’s jets.

[...]

On Thursday, Hegar campaign manager David White said Hegar “has been clear that we are many years away from being able to implement such” a shift from property tax to sales tax.

White repeated a response he gave The Dallas Morning News on Tuesday, saying “Glenn will review all options to reduce the burden on taxpayers.”

Of course his recent comments sound much more weasely then his “just do it” tea party bravado.

His Democratic opponent Mike Collier was quick to pounce on his opponents softening tone.

Democratic comptroller nominee Mike Collier, though, has blasted Hegar’s happy talk on property tax during the primary. Collier, a Houston businessman, called it an “unimpeachably bad” policy idea that would produce a monster increase in sales tax, shift power away from localities to the Legislature and “put our schools at unnecessary risk.”

He warned Hegar’s “promise” to eliminate the property tax would require sales tax “to be at least 20 percent – and possibly as high as 25 percent.” In most Texas cities today, the combined state-local sales tax rate is 8.25 percent. Collier even created an online petition drive so voters can protest “Senator Hegar’s sales tax.”

Collier had this to day on his web site, Hegar’s Plan: 20% Sales Tax.

Replacing property taxes with sales taxes would shift the state’s tax burden from the wealthy to the working class. The Center for Public Policy Priorities reported that to replace “all property taxes in the state would require a state sales tax rate close to 18 percent. Add the current local sales tax of 2 percent, and the sales tax rate in most parts of the state would approach 20 percent.”

And that’s the key.  Hegar is proposing a tax swap, that will raise the tax burden on those who can afford it the least, and ease it on those who are already paying too little in taxes.  We should be proposing to do the exact opposite.

Collier also started a petition against Hegar’s tax increase on the working class.

03.16.14

No One Is Offering An Alternative To The Raw Deal Texas Taxpayers Are Getting

Posted in Around The State, Taxes at 12:55 pm by wcnews

We’ve been writing about the raw deal Texas taxpayers haven been getting for quite some time. Don’t Grow Texas takes a crack at it as well, Taxation, Texas.

I know this is boring as hell, but hang with me here because it’s important, and, I think it is an issue that is at the nexus of the future of this state and any political party or leader who wants to offer better opportunity for Texans. Property taxes and increased down payments are making it prohibitive for young families to purchase a home. Tax escrow money calculated on high property taxation rates and then added to a 20 percent down will keep a lot of couples from being able to get a mortgage.

What are other manifestations of state leadership’s failure to properly fund Texas schools? Almost every year voters in various school districts are asked to approve bonds, which they will then retire with some form of payment, for school buildings and educational facilities. Their high property tax rates apparently do not cover the cost of construction and neither does the money provided by the state. Politicians continue to dodge blame for raising taxes by approving bond measures that dump the job onto the backs of the taxpayers who elected them to office. The gas tax in Texas, as an example, has not been raised since 1992, which means we end up with toll roads instead of taxpayer-funded highways that we drive for free. Officeholders are farming out the responsibility under the guise of a public-private partnership.

By constitution, Texas is a pay-as-you-go state. We are not allowed to acquire debt like the federal government. But lawmakers have been avoiding that requirement by using bonded indebtedness to circumvent the law. About $40 billion dollars in bonded indebtedness has currently been issued for everything from transportation and water projects to construction of public housing and state colleges and universities. It becomes an irresponsible shell game so politicians can campaign by insisting they’ve not raised anyone’s taxes, but the debt has to be retired somehow and it is the taxpayers’ obligation.

Meanwhile, the TEF gives away hundreds of millions in taxpayer dollars to corporations moving to Texas and when they arrive local municipalities are giving them exemptions on property taxes, which keep valuable corporate land off of tax rolls for significant periods of time. Programs like enterprise zones, manufacturing exemptions, and value limitation and tax credits under the Texas Economic Development Act take billions of dollars out of state coffers and place the obligation for making up that lost revenue on the shoulders of homeowners.

According to the Texas Taxpayers and Research Association, Texas property taxes have more than tripled, increasing 3.4 times since 1990. Although the state does not have a personal or corporate income tax, an annual income tax assessment of around $800 per individual would raise more than $20 billion dollars and could easily lift some of the weight carried by homeowners since not everyone earning an income in the state owns and is paying property taxes. A corporate income tax would generate even more revenue, considerably increasing funds to alleviate homeowner burdens. Texas currently only has a one percent margins tax on corporations.

So here’s a suggestion for someone who wants to be a leader: talk about the arcane issue of tax reform. Be a voice for creating more balance in the source of funding that pays for state government. It will provide enough money to properly and equitably fund state schools and, by reducing escrow demands on new home down payments, will spur home construction as more new families moving to the state are able to purchase homes.

Anybody who takes on this job has courage and gets my vote. And probably millions of others, too.

What this shows is the lie we’ve been told for so long. No state income tax, along with giving welfare to corporations, was supposed to make us all better off. Well it hasn’t. It’s time that we tried something else, and it would be nice if someone running for office would make the case.

That’s a big reason why so many Texans don’t show up to vote.  No one is offering a clear alternative to the system we currently have.  Most people know it’s unfair, at the least, but more likely corrupt at the worst.  Those who don’t vote know this, and therefore see no reason to show up to vote for someone who is, essentially, offering the same system but not quite as bad.

02.26.14

The Free Market Myth Takes Another Hit – Our Rigged Systems

Posted in Around The Nation, Around The State, Taxes at 12:16 pm by wcnews

David Cay Johnston’s latest article, The shocking numbers behind corporate welfare.

State and local governments have awarded at least $110 billion in taxpayer subsidies to business, with 3 of every 4 dollars going to fewer than 1,000 big corporations, the most thorough analysis to date of corporate welfare revealed today.

Boeing ranks first, with 137 subsidies totaling $13.2 billion, followed by Alcoa at $5.6 billion, Intel at $3.9 billion, General Motors at $3.5 billion and Ford Motor at $2.5 billion, the new report by the nonprofit research organization Good Jobs First shows.

Dow Chemical had the most subsidies, 410 totaling $1.4 billion, followed by Warren Buffett’s Berkshire-Hathaway holding company, with 310 valued at $1.1 billion.

The figures were compiled from disclosures made by state and local government agencies that subsidize companies in all sorts of ways, including cash giveaways, building and land transfers, tax abatements and steep discounts on electric and water bills.

In fact, the numbers significantly understate the true value of taxpayer subsidies to businesses, for reasons explained below.

[...]

Good Jobs First does not oppose all subsidies. Rather, it favors transparency in the hope, executive director Greg LeRoy said, that any subsidies will be used wisely to expand the economy and not just prop up inefficient enterprises.

The data on welfare paid to companies come from Good Jobs First’s Subsidy Tracker 2.0, an improved Web tool that examines subsidies by linking subsidiaries to parent companies. The older version of the tool obscured the benefits to brand name corporate parents such as Apple, Google, Toyota and Walt Disney.

The size and range of the subsidies the tool has uncovered helps explain the burdens taxpayers must bear because so many major corporations rely on welfare for much or all of their profits rather than earning them.

Such burdens are especially hard on the poor. The bottom fifth of households in all but one state pay a larger share of their income in state and local taxes than the top 1 percent of earners. This means that corporate welfare effectively redistributes from the poor to those rich enough to own corporate stock. [Emphasis added]

Many forms of subsidies to business are excluded from Subsidy Tracker 2.0. For example, Good Jobs First does not count federal subsidies. It also leaves out indirect subsidies like perpetual monopoly rights of way for pipelines as well as rules that limit competition in pharmaceuticals, telecommunications and a host of other industries.

Here’s more on how Texas fares, Texas is a “Low Tax State” Overall, But Not for Families Living in Poverty.

New data from the Census Bureau appear to lend support to Texas’ reputation as a “low tax state,” ranking it 40th nationally in taxes collected as a share of personal income.  But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Texas’ tax system very differently. In particular, the poorest 20 percent of Texans pay significantly more of their income (12.6 percent) in state and local taxes than any other group in the state.  For low-income families, Texas is far from being a low tax state. In fact, only five states tax their poorest residents more heavily than Texas.

Our rigged economic system has carried over to our political system, which is rigged as well. Many no longer see any reason to vote and it’s created a class bias in voting.

But voting is supposed to be the great equalizer – especially in the modern era of one person, one vote. Elected officials may collect campaign contributions from the rich and hear regularly from lobbyists speaking for the privileged, but if they ignore the interests and concerns of middle-income constituents, they supposedly can be replaced on Election Day.

But as nice as it sounds, the research doesn’t show this to be the case. Even when elections are procedurally fair and every vote is counted, some groups of U.S. voters are more likely to vote than others. In particular, voters tend to have higher incomes than the population as a whole. As researchers, we set out to explore differences in turnout between rich and poor voters in various states – and probe the impact of “class bias,” the degree to which the rich are more likely to vote than the poor.

Class bias in voting is getting worse. From 1976 to the onset of the Great Recession, 21 states saw decreases in class biases in voting, but 29 states saw increases – and the increases were much larger than the decreases. And richer voters are generally less supportive of policies that serve to make incomes more equal.

As researchers, we decided to test the hypothesis that the more class bias in voter turnout is skewed toward the rich, the less likely egalitarian policies are to be enacted, resulting in higher income inequality than in states where class bias in voting is less pronounced.

In the states, class bias in voter turnout is associated with increases in income inequality. This is true even when we take into account other factors that could affect economic inequality, such as the age and racial composition of the state population, trends in economic growth and the politics of people in the state.

So what did we find? How does class-skewed voting contribute to rising inequality?

First, states with higher levels of class bias in voting have been less likely to enact minimum wage increases. This increases inequality, since higher minimum wages are known to be associated with reductions in income differences.

Second, as class bias in voter turnout becomes more pronounced, state governments become less liberal generally and less responsive to public opinion when the public moves left to support steps that could reduce inequality. Liberal public opinion tends to favor egalitarian policy interventions, so governments that are not responding when the public moves in that direction are less likely to enact a wide variety of policies that could mitigate economic inequality.

What then can be done by those who disagree with Tom Perkins and wish to reduce income inequality? Our research suggests that encouraging more widespread voter participation is part of the answer.

We used to redistribute money from the wealthy to make our society more equal. Now we redistribute money from everyone else to the wealthy to make our society more unequal. This needs to change.  The only way to un-rig our systems is to get more people out to vote, and dilute the vote of the wealthy.

Further Reading:
Where Have All the Workers Gone?
Liberals Face a Hard Day’s Knight?

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