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After All, Theme Parks Are Places to Visit, Not to Live

Something sounds familiar about this description of Rome, doesn’t it?

A survey by the European Commission two years ago placed Rome last out of 28 EU capitals in a ranking for the efficiency of city services. Despite great food, superb coffee and an enviable climate, on an index of quality of life, the capital came second to last, with Athens at the bottom. Its Renaissance churches, cobbled streets and vibrant piazzas still wow tourists from around the world, but beyond the historic centre, the city is a mess and life is a struggle for locals.

As I’ve said before about Rhode Island, if you’re having to work too hard to go to the beach, don’t have the disposable income to go out for dinner, and have to cut corners on your grocery bill, living in a place with such attractions doesn’t do you much good.  In fact, when the local establishment leverages the premium that people are willing to pay to live in such a place in order to confiscate high levels of taxes and return low levels of service, living in such a place can do you harm.

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Intrusive Agences Sloshes Billions Around for ObamaCare

I just came across this letter from IRS Commissioner John Koskinen related to his July 17 presentation to Congress on the tax implications of ObamaCare for last tax year.  I’m sure there are broad points that could be made with some investigation, about the additional expense of premiums, about likely increases next year, and so on.  On the fly, though, a couple of impressions are worth making.

First is how inappropriate it is for this to be the purview of the Internal Revenue Service.  It’s bad enough that the agency is empowered to take our money away and to collect all sorts of personal information in the process. Now our healthcare is mixed up with it.  This is an agency that targets people for audits if they give to the wrong kind of non-profit.

Second is how the billions just slosh around in government.  With two-thirds of the estimated number of Americans expected to file claims related to the “premium tax credit” having done so:

  • $10 billion was paid out in health insurance subsidies (3.2 million taxpayers; $3,125 average).
  • $780 million more was paid out after claims on tax returns (1.3 million taxpayers; $600 average).
  • $1.3 billion was taken back from taxpayers who’d received subsidies (1.6 million taxpayers; $800 average).
  • $1.5 billion was taken from taxpayers who had to pay the penalty for not having insurance (7.5 million taxpayers; $200 average). (The percentage of income used to calculate this penalty doubles in the current tax year.)

The IRS will now be sending collection letters to  710,000 Americans with a “reminder” that they have to file, along with “correspondence” to another 760,000 who filed tax returns without the ObamaCare form.

Beyond its attempt to take over healthcare across the country, this law is an excuse for government intrusion and redistribution of income.

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Fiscal Condition Versus Making a Living: Live Free or Die

Rhode Islanders should be pleasantly surprised to find their state coming in at number 38 out of 50 on the Mercatus Center’s ranking of the states’ fiscal condition.  Any list that keeps the Ocean State out of the worst 10 is apt to be received with either relief or suspicion among the people who live here.

Of course, this particular list was sweetened by the fact that Rhode Island came in second best in New England — behind only New Hampshire, which southern New Englanders tend to see as an impossible-to-replicate land of low taxes and “live free or die” liberty. As WPRI reporter Ted Nesi put it, Rhode Island’s placement is “not great, but notably higher than Connecticut (#47) or Massachusetts (#48).”

Given this unexpected result, though, there’s reason to wonder whether Mercatus’s methodology misses the ways in which Rhode Island games every system.  After all, comparing states’ employment levels with their pre-crash peak, Massachusetts is nowthe fourth best in the country.  In MoneyRates.com’s “Best and Worst States to Make a Living 2015,” Massachusetts is #20, while Rhode Island is in its more-familiar territory in the bottom 10 (at #42).

Shouldn’t the health of a state’s economy bear some relation to its fiscal health?

Continue reading on WatchDog.org.

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Let’s Make Sense Out of Refinancing

Governor Gina Raimondo’s proposed RhodeWorks project to repair Rhode Island bridges and roads with debt financed through tolls on truckers is a 10-year project:

Our plan will get us to 90% structurally sufficient bridges by 2025, make Rhode Island more attractive for businesses, and create about 11,000 job-years over the next decade

The latest variation is the one that passed the state Senate, which the House may (or may not) take up in an autumn session.  The Senate’s version presents a smaller scale, down to a $500 million bond, from $700 million, but it also includes “an additional $120 million… through the refinancing and restructuring of prior federal debt.”  Folks should take a closer look at that part.

Reviewing supporting documentation, it appears that the extra money is actually the first four years of lower debt service from refinancing GARVEE bonds for an extra four years.  As things currently stand, the state still owes $289 million on the bonds and will be done paying them after 2021.  The refinancing will extend the payments to 2025 and add another $15 million in interest.  (Refinancing costs aren’t mentioned, so let’s assume it’s part of the $15 million.)

Think about that.  Over the ten years of the RhodeWorks project, this refinancing will actually cost $15 million.  It will direct $15 million away from infrastructure or some other area of state spending.  If the state simply pays off the bonds, it’ll spend around $50 million a year through 2021 and then that money will be freed up for the final three years of RhodeWorks.

By contrast, if the state refinances, it will free up $20 million early on but add $30 million in the later years, with an overall increase of $15 million when all is said and done.

Now let your imagination run wild and consider the possibility of the state’s paying for bridge and road repairs with savings rather than debt.  $500 million is $50 million per year for 10 years.  Over the course of the RhodeWorks program, the last three years would be paid for simply by paying the GARVEE debt on time.

It boggles the mind to wonder how many decisions like this are piled up on the regular expenditures of the state’s nearly $9 billion annual budget.

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Charters in Public-Private Limbo

I’m in the minority among my ideological peers, on this, but my thinking on charter schools has changed quite a bit in recent years.

Many conservatives, I believe, see them as a sly way to insert wedges into public education’s cracks in order to bring about wider-scale reform of the system.  If we create this alternate system of schools, literally entered with the luck of the draw, that is free of the restrictions that (for some reason) we continue to tolerate in district schools, then parents will demand that district schools be made free of the restrictions, too.

To advance this stratagem, we’ve been willing to overlook basic descriptive facts about charters that would normally concern us a great deal.  In order to work around the damage that the democratic nature of our government has wrought in education (thanks, largely, to the self-interested activism of teacher unions), we’re creating institutions over which the public has less control.  On the one hand, charter advocates insist that they are “public schools of choice,” so they should fall within the range of inside-government benefits, but on the other hand, they are demanding that the people paying the bills should not have immediate, democratic control over them.

In any other context, conservatives would recoil against that just as surely as they ought to recoil against crony capitalist deals giving connected insiders taxpayer cash for their private business dealings.  Principle should not be something to be weighed against practicality.  Rather, we should hold to our principles because they produce the outcome that we desire; it is in determining our goals that we should weigh morality and practicality.

My concern, in treading off our principled path, is that we’re more likely to get lost than to return to our firm ground.  Instead of breaking the rigid grip of special interests on public schools, charters will kill off private schools — at least all of them that are accessible to anybody who’s less than rich.  Then special interests will successfully tighten the vice, making government education a true monopoly rather than the near-monopoly that it currently is.

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Post Script on House Budget Night

Ted Nesi has consulted with the State House librarian and learned that there were unanimous budget votes in 2008 and 1999.  As a first impression, that means the House wasn’t due for another one for a couple of years, but it also suggests that shock at the unanimity might have been a little overblown.  As somebody who tweeted that the vote was “an outrageous indicator of a very sick representative democracy,” I’d make two points.

First, I wouldn’t be at all shy about suggesting that Rhode Island’s representative democracy has been very sick for much longer than the period back to 1999.

Second, the final unanimous vote was mainly significant as the sharp edge of the entire evening.  Looking at the journal from the House budget night in 2008 for contrast, a few things stand out.  For one, the House didn’t wrap up until almost midnight, so it wasn’t the same quick session.

More importantly, there was some contentious drama.  On a quick skim, it looks like two floor amendments actually passed by surprise, leading to reconsideration votes to change the outcome.  That isn’t exactly the festival of harmony we witnessed last night.  From the perspective of the electorate, at least it seemed like the system was working… somewhat.

So what about the tax cuts?  Surely around $45 million in FY16 cuts, largely for businesses and Social Security recipients, is a positive development in line with what small-government conservatives have long recommended?

Yes, but expenditures from general revenue (i.e., local money) are expected to go up by $108 million versus last year’s enacted budget.  From an economic standpoint, the question is whether the revenue sources that are making up for the tax cuts provide a bigger boost than the drag created by taking money out elsewhere.  The governor’s budget schedule, for example, shows a $125 million increase in each of the personal income tax and the state sales tax; that’s money out of the economy, some of which will be going to hand-picked segments.

To put specifics on the argument, during FY16, the Social Security tax cut is expected to cost the state $9.3 million in revenue, which we could say is largely paid for with a new $6.9 million in taxes on small tourism businesses.  Maybe this is an economically productive and morally sound transfer of wealth, but we never hear that argument.

On their own, each change might be positive, but at the end of the day, they fit into the mix in the same way special-interest handouts do.  The lack of real contention in the budget debate is an indication that all of the interests that have a voice are now bought off.

What should the rest of us do?

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Follow-Up on Childcare Subsidy Increase

Last week, Rhode Islanders learned of a $2.15 million increase in state childcare subsidy rates for providers.  Although details of the first-ever agreement with the Service Employees International Union (SEIU), which now represents the private, independent providers, have still not been released, the House Speaker’s office has provided The Current a few additional budgetary numbers.

The $2.15 million is being added to base spending of $58.9 million, or a 3.65% increase, overall, bringing the total to $61.1 million.  If these provisions of the budget pass as currently written, it will represent a $7.45 million bump in spending for these payments over the current fiscal year, or a 13.90% increase.

Despite requests to multiple government agencies, the state has still not released any details of the agreement, including dues.  Child Care Union Info, with which the RI Center for Freedom & Prosperity has worked in the past, reports a wide variety of dues from other states, although some of the contracts have been terminated.  At the higher end are states in which the union’s dues are calculated as a percentage of subsidies, sometimes with a maximum.

In Michigan and Massachusetts (which is SEIU), the rate is 1.5%.  In Washington (also SEIU), it’s 2%.  Either rate would put the SEIU’s take in Rhode Island around $1 million, or about half of the total raise that the budget would grant.  (Given Rhode Island’s small size, the union would be likely to seek dues at the higher end.)

As I stated in a release just put out by the Center, the governor and General Assembly could have increased payment rates without the involvement of a union, if needy families are having difficult finding childcare providers.  As yet, there has been no claim of such difficulty.  In 2013, the law was changed (in a way that is likely unconstitutional) to give independent childcare providers more leverage, and now the Speaker of the House tells Providence Journal reporter Katherine Gregg that he believes they “deserve to be paid a fair and equitable wage.”

Clearly, these providers have advocates at the State House, and those advocates could have provided the same raises at a lower cost to taxpayers by cutting out the SEIU.  However, between 2004 and 2014, the SEIU gave $30,333 to Rhode Island politicians, according to the Board of Election’s campaign finance Web site.  This makes the interaction win-win-win for everybody except those who have to pay the bills.

UPDATE (2:57 p.m., 6/17/15):

See here for updated numbers.

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Another Union Win in Rhode Island (SEIU Childcare Edition)

Yesterday, I noted that legislation in the budget currently under consideration in the Rhode Island House would not, in fact, provide more money to support all-day kindergarten.  Rather, it would give districts the portion of extra state aid that they would have received if their kindergarteners counted as full students in the funding formula even if they don’t have all-day kindergarten in the upcoming school year.

The original version of that legislation would have accelerated the funding formula phase-in to give switching districts the full state aid for all-day kindergarten.  If the General Assembly were to put that language back in, it would come at a cost of about $2.8 million.

Put that on the scale next to the fact that the General Assembly’s budget provides an extra $2.15 million for an increase in payments to state-subsidized childcare workers whom the Service Employees International Union (SEIU) successfully (and controversially) unionized after the General Assembly opened the door for it.  So, rather than helping to provide full-day classes for over 2,000 Rhode Island children, the General Assembly has chosen to give a boost to the cost of a service already being provided by 540 adults.

That’s not really the trade-off, though.

Because this would be the first contract that includes union dues, the actual providers (many low-income, themselves) won’t see all of that extra money.  We don’t know how much the SEIU’s dues will be, because as the Providence Journal article on the budget provision points out, the budget itself is the first indication anybody in the public has that a contract agreement has been reached, but we can put together some rough estimates.

In similar contracts across the country, dues tend to be flat fees of $25 to $35 per month or percentages ranging from 1.3% to 2%.  By the flat fee method, figuring 540 providers, the union dues would cost $162,000 to $226,800.  Going with percentages, the annual dues would be $719,550 to $1,107,000.

In other words, half or more increased cost of providing this service could be going directly to a labor union.

That, of course, depends on providers’ deciding to stay with the union.  Based on the U.S. Supreme Court’s Harris v. Quinn decision last year, it appears that childcare providers cannot be forced to join the union.  No doubt, the SEIU will tell providers that the big increase was entirely its doing, and cutting the union out of the loop would mean no future increases.  In that light, the portion of the $2.15 million that does not go to dues could be seen as some extra sweetener to make the union medicine go down.

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End of the Sessioner #2: To Bond or Not to Bond, Questions About Priorities in the Governor’s Toll Plan


What Rhode Island’s Governor and legislature decide in the next couple of weeks with regards to highway tolls depends on what their policy priorities are, by which I mean…

1. Despite the fact that a case for funding a decade or more of highway construction with a revenue bond, instead of saving money on interest and spending the savings directly on construction, has not yet been presented to the public,…

2. …a revenue bond financed through tolls seems to be an integral part of Governor Gina Raimondo’s transportation infrastructure plan.

3. Speaker of the House Nicholas Mattiello is concerned about the impact highway tolls would have on the local economy, which is a reasonable concern, and has signaled he’d like to see some kind of local-relief plan implemented.

4. However, Federal case law based on the U.S. Constitution’s interstate commerce clause clearly looks askance upon local carve-outs when it comes to highway tolls/user-fees/whatever you want to call them, meaning that…

5. …if a tolling plan did include a local “discount” in its structure, there is a risk it would be immediately enjoined (with the help of ground-transportation trade organizations which appear to have some pretty good lawyers).

6. And, of course, if a tolling program were enjoined right away, a bond sale probably couldn’t proceed until the case was resolved, which would probably take several years, at least.

What to watch for is this: if the priority is issuing the bond, something without anything resembling a local exemption that could bring the court-system into the process needs to be passed soon, and a special session in the later half of the fall might be too late to get bonds issued for this tax-year. If, on the other hand, the bond itself is less of a priority, the timeline is not quite so immediate, and some explanation to the public of why interest payments associated with a bond make sense is in order.

But bond or no-bond, it’s going to be difficult to construct a local preference for vehicle tolls that survives Federal court scrutiny. Based on the proposal already submitted, we know this won’t prevent the Governor from supporting tolls. Will the Speaker eventually come to share to the same attitude?

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Wanted on Family Leave: Clarity of Thought

Herewith, an example of the reason our nation may be in inexorable decline, from the AP’s Jennifer McDermott, under the Providence Journal headline of “In R.I., residents gush about paid family leave“:

Rhode Island last year began allowing workers to take up to four weeks of paid leave. Many workers say they love the program, and employers say it hasn’t hurt business as some had feared. …

About 5,000 people have taken paid family leave in Rhode Island so far. New Jersey and California are the other states that provide it, and several states are considering it. Washington state passed legislation but has put off implementing it.

Those two paragraphs convey a fundamentally un-factual and misleading impression.  Rhode Island didn’t just “begin allowing” workers to take off paid leave last year.  There has never been a ban on paid time off.  I’m sure employers have offered that as a benefit to workers, whether formally or ad hoc, as circumstances have come up, and there’s private insurance that people can purchase (or receive as a benefit) to accomplish the same thing.  Similarly, the state doesn’t “provide it.”  In effect, the state is simply mandating the insurance, whether people want it or not.

This program is actually an excellent example of the illness that the West’s creeping progressive political philosophy has wrought.  The government is forcing us to pay for a program that not everybody needs or wants, and then the government takes credit for “providing” the program.  The state is forcibly taking money away from everybody, causing harm to the economy that is difficult to measure, and then taking credit for the relatively small population that benefits (buying votes and excusing even more government power).

The Associated Press found a couple of extreme examples, but we can be sure that the 5,000 people who’ve received some benefits range from those cases, on one end, to abuse of the system, on the other, probably with a bell curve between them.  And even then, only 1% of people holding Rhode Island-based jobs have benefited.

The fact that “the state’s largest employer” found the 500 of its employees who’ve used the program to be a “nonissue” does not tell us the economic effect.  The state is forcing people to pay real money to mitigate a risk that they’re otherwise willing to accept, perhaps because they have contingency plans (like, you know, savings).  When benefits are paid out, there’s no guarantee that the money isn’t just offsetting something that isn’t as economically productive.

Put differently:  Taking money away from people who are working to pay people for not working is not economically neutral, and it’s politically corrosive.

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Press Conference & Request By Concerned Citizen, Bill Murphy, to Testify about Unfairness of Pension Settlement

[The following was received via e-mail this afternoon.]

Concerned Citizen Seeks to Testify about Unfairness of Pension Settlement to Taxpayers at Court Hearing Tuesday, Schedules Press Conference to Explain Request to the Public

Concerned citizen Dr. William J. Murphy will hold a press conference in front of the Frank Licht Judicial Complex at 250 Benefit Street in Providence at 4:30 PM on Tuesday, May 26, 2015 to explain to the public the reasons for his request to testify about the unfairness of the pension settlement to taxpayers at the ongoing fairness hearings in Superior Court. Dr. Murphy will deliver a statement emphasizing that the terms of the settlement itself as well as the impropriety of the court-supervised secret negotiation process that produced it have significantly harmed the financial welfare of taxpayers, violated the political rights of citizens, and severely damaged the public interest.

(EAST PROVIDENCE, RI – May 25, 2015) – Dr. William J. Murphy, a concerned resident of East Providence, has petitioned the Rhode Island Superior Court to testify at the ongoing pension settlement fairness hearing Tuesday. He held a press conference at Superior Court in Providence on Tuesday to issue a statement explaining the reasons for his request.

Dr. Murphy opened his remarks by saying that, “The pension settlement is grossly unfair to good citizens of Rhode Island because it adds over $290 million to the unfunded pension debt that the state’s already overburdened taxpayers cannot afford. Even more troubling, the terms of the settlement itself as well as everything about the nature of the process itself fail to demonstrate appropriate sensitivity to the economic hardships this increased tax burden would impose on elderly citizens living on fixed incomes as well as low-income younger taxpayers and their families who remain deprived of adequate economic opportunities in part because of the unaffordable state pension system, the high rates of taxation imposed to feed it, and the resulting negative consequences for the Ocean State’s economic competitiveness.

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More Losses for Taxpayers, Student Loan Edition

As college graduates move on to wherever they’re going, it’s worth remembering this finding from February:

In obscure data tables buried deep in its 2016 budget proposal, the Obama administration revealed this week that its student loan program had a $21.8 billion shortfall last year, apparently the largest ever recorded for any government credit program. …

The 40 million Americans with student loans are now saddled with more than $1.2 trillion in outstanding debt. And with higher education costs rising much faster than inflation, the already massive program has been growing at a spectacular clip; direct government loans alone increased 44 percent over the last two years despite an aura of austerity in Washington. The Obama administration has tried to ease the burden for some borrowers by reducing their payments to 10 percent of their income and forgiving their loans after 20 years; this year, the Education Department plans to make all borrowers eligible for that “pay-as-you-earn” relief.

Even better, thanks to what the writer, Michael Grunwald, calls “a quirk in the budget process for credit programs,” that money just goes straight to national debt, without Congressional input.

Sadly, as all of these new sticks fall on taxpayers’ backs, few Americans — including or maybe especially the better educated among them — will understand where the massive burden came from.

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The Silver Lining on Rhode Island’s Foam

I have to break into my Friday evening pre-reveling (“reveling” being something I’ve recently discovered to be illegal in Tiverton, if it disturbs somebody else) to note that this is one list on which I’m happy to find Rhode Island in the bottom 10 of states:

Tax treatment of beer varies widely across the U.S., ranging from a low of $0.02 per gallon in Wyoming to a high of $1.29 per gallon in Tennessee. Check out today’s map below to see where your state lies on the beer tax spectrum.

Although, the half-drunk libertarian in me (whom I’ve suspected to be half drunk even when I’m completely sober) can’t help but bristle at this:

The Beer Institute points out that “taxes are the single most expensive ingredient in beer, costing more than labor and raw materials combined.” They cite an economic analysis that found “if all the taxes levied on the production, distribution, and retailing of beer are added up, they amount to more than 40% of the retail price.”

I’ll put that on my list of injustices to battle, but noting that the list is long, so anybody inclined to rush forward is encouraged to do so.

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Property Tax Reform Lessons from Small Town Rhode Island

At a public hearing to discuss the two budget options that would be on the ballot for local voters in the smallish town of Tiverton, Rhode Island, the town administrator shook his fist at me.  “Every single account you cut needs to have the money in it,” hesaid.

I’d submitted an “elector petition” budget for the town government that would hold the total tax levy at a 0.9 percent increase, versus the 2.9 percent increase proposed by the government.  The 0.9 percent budget, which voters ultimately chose with a 60:40 margin, meant a drop of the highest tax rate in the area, across two states, and savings for property owners of $39 per $100,000 of value on their home (about $100 on average).  The previous year, my proposed 0.0 percent budget had won a smaller amount of savings.

In recent years, Tiverton has led the two nearest Rhode Island counties in foreclosures.  The town’s total tax burden had doubled in about a decade.  In that context, what struck me about administrator Matthew Wojcik’s speech — apart from the Republican’s Obamaesque threat to “get in [my] face”–was the insistence that local government could not possibly make cuts, paired with the assumption that residents of the town always can.

Property taxes are a problem in Rhode Island.  According to the Competitiveness Report Card put out by the RI Center for Freedom & Prosperity, based on data from the Tax Foundation, Rhode Island has the seventh-worst property tax burden in the country.  In 2006, the state’s General Assembly passed a law phasing down a cap on each city and town’s property tax revenue increase, to 4 percent by 2013.

Continue to read on WatchDog.org.

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Excitement for the Wrong Direction for I-195 Land?

Rhode Island’s informderati is all atwitter (pun intended) with the news of a “life-sciences complex” proposed for the land formerly occupied by I-195:

A real-estate investment and development company that partners with universities and hospitals across the country to build research parks has submitted a joint proposal to build a multimillion-dollar facility on 5 acres of former highway land in Providence — drawing praise from Governor Raimondo, House Speaker Nicholas Mattiello, Senate President M. Teresa Paiva Weed, Providence Mayor Jorge O. Elorza and others. 

Wexford Science & Technology of Baltimore, a subsidiary of BioMed Realty Trust Inc. in San Diego, and CV Properties LLC, the Boston firm leading development of South Street Landing on Eddy Street in Providence, hope to build a life-sciences complex with lab space, academic research space, a hotel, and retail and residential space. Richard Galvin, founder of CV Properties, said it’s too early to pin down exact costs, but “it will be several hundred million dollars” to build.

The details are sparse, so far, and one question that will need to be made explicit is whether “partnership” with a bunch of non-profit organizations means tax exemption for the development once it’s done.  One can imagine a bunch of tax deals to get the thing built and then payments in lieu of taxes (PILOTs) once it’s operational.

Off the top of my head, the scorecard for that supposedly game-changing property is:

  • Student housing
  • A minor-league baseball stadium
  • A facility with no prospective clients, thus far, other than non-profit universities

These strike me as things that a state should seek when its people are thriving, not when they’re tapped out for taxes and leaving the state in despair.  But whaddayagonnado, I guess.

So far, developers that have submitted proposals are seeking tax-stabilization agreements with the city because Providence’s commercial property taxes are far higher than in other communities. Yet the city has not granted any such tax treaties yet.

It all comes back to an institutional mandate to maintain the power of government insiders.  Unless that changes, Rhode Island’s done.

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James Cournoyer: Please Allow Municipalities to Have the Flexibility of a Three Platoon Firefighting System

[James Cournoyer sent the following e-mail to members of the General Assembly. It is published here with permission. Additional background on this subject is available here.]

Dear members of the General Assembly,

Please reject House Bill H-5473 and Senate Bill S-0533, which seeks to make fire-fighter Platoon Structures / Shift Schedules subject to Collective Bargaining, and therefore potentially subject to the decisions of unelected and unaccountable arbitrators.

These bills serve only to further erode essential Management Rights and the ability of municipalities to exercise home rule.

Employees are already afforded an abundance of work-place and employment protections via the myriad of state and federal labor laws and regulations that currently exist.

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Why Not Set the People Free?

J.D. Tuccille highlights some murmurs in Europe that remind one of the Rhode Island attitude:

The shadow economy—off-the-books business and labor that would be perfectly legal if people felt like subjecting themselves to taxes and regulations—ebbs and flows with the years. Right now, it’s down a bit in many countries from the days of the recession, but shadow economic activity is still huge. Across the European Union, it’s estimated to amount to 18.4 percent of GDP. Why people work off the books is no secret—high taxes and burdensome regulations are constantly cited by economists as primary drivers for people to hide what they’re doing. So, current policies are like kryptonite to people who want to keep the fruits of their labor. Got it. The obvious solution then is to…harangue and coerce people back into the official economy?

Even though regulations are pushing people out of the taxed-and-regulated economy, leaving them with effectively no taxes or regulations, government officials aren’t simply going to reevaluate their approach.  In their view, it isn’t government’s job to accommodate the people.  The diktat has been issued, and the people must be made to comply.

Even if it means banning cash so every transaction can be traced.

At least in Rhode Island, government officials make periodic noises about easing regulations.  Still, the plan appears to be to try every power-centralizing solution they can imagine for a hundred years before simply doing the obvious and leaving people alone.

(Via Instapundit.)

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When the Students’ and the Teachers’ Interests Differ

This paragraph out of a 2010 Julia Steiny column has come to mind periodically ever since, but I somehow never got around to posting about it.  It makes an important point that is too easily forgotten as the state argues over standardized testing, teacher evaluations, charter schools, school choice, and even property taxes:

When Marcia [Reback, President of the RI Federation of Teachers] had had enough, she outted the elephant in the room. The interests of the teachers and kids are not the same, but were sometimes in direct conflict with one another. And when their interests diverge, she said, “I represent the teachers.” And shrugged. Who could argue with that?

Think about that.  Here we have a wealthy and powerful union organization, funded with money forcibly taken from taxpayers and frequently used to help elect politicians and modify laws in order to tilt negotiations and the entire educational landscape in its favor, whose mission is, at least in part, to advocate in opposition to the needs of school children.

Reback’s statement has come to mind for two reasons, this week.  The first is that the school choice legislation on which I’ve been working is being heard by the RI Senate Education Committee, today.  The second is that the 0.9% budget that I put in for Tiverton won, and the local school department has been threatening not to go forward with all-day kindergarten in the upcoming school year if it didn’t get its full budget request (even though doing so is a no-brainer).

In both cases, we’ll get some indication whose interests elected officials put first.

That’s a critical question at the local level.  Sure, most cities and towns probably have it written down, somewhere, that school committees are supposed to put the children first, but the incentives undermine that mandate.  Many school committees are stacked with teachers, whether retired or active in other communities, and many others were elected with the help of teachers unions and their activist allies.  Even if they weren’t, the nature of their position creates incentive to balance the demands of the teachers with the needs of the students and their families, not to advocate for the latter.

It’s an imbalanced system that can’t do otherwise than harm children.

 

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Robbing productive class Peter to pay college graduates Paul

Is the departure of recent college graduates keeping Rhode Island at the back of the pack economically? Progressives in the state’s legislature apparently think it would be beneficial to have taxpayers subsidize student loans. A look at student debt data suggests that would be a major burden on a population that’s already heavily taxed–and that the idea may, in fact, backfire.

The debate has been raging almost since the turn of the millennium: With Rhode Island’s population waning, who’s leaving?  The first assumption was that the rich were fleeing the high taxes, which inspired policies meant to keep them — like an alternative flat tax and a phase-out of the capital gains tax.

Progressives objected that the evidence did not show flight of the rich, and as it turned out, they were right.  The departing demographic was the “productive class” — families in that highly motivated period of their lives when they’re exchanging their time, sweat, and talents for a trip up the rungs to the middle class.

To make that group stay, though, politicians can’t cut taxes in exchange for the campaign support like do for the wealthy.  And the productive class doesn’t use direct government handouts, so the government can’t make them stay by handing out entitlements.  They need less regulations so they can work and innovate, and they need to be able to keep the money that they’ve earned, rather than having it taxed away.

If we look at who is sponsoring two relevant pieces of legislation on the subject, it becomes clear that Rhode Island progressives have decided to try and bribe recent college graduates into staying in the state. Based on the rationale described in the bills, they hope a younger crowd will be like their older brothers and sisters in helping the economy to grow.

Continue reading on WatchDog.org.

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Tracing the Problem of School Budgets

Two Providence Journal articles related to Warwick schools, yesterday, raise a broader question, and a partial answer to that question raises an important point that one seldom hear’s considered, in Rhode Island.  First up is the tale of the excess capacity:

The consultant hired to help consolidate the district’s 23 schools briefed City Council members and Mayor Scott Avedisian on Wednesday, and said as much as 40 percent of classroom space is sitting vacant. 

“I’d have to say, it’s the most dramatic I’ve seen in all my years of analysis,” said Edward Frenette, a senior vice president at Maini & McKee Associates, the Cambridge, Mass.-based firm in charge of crafting a master plan for the district. The firm has done 21 school consolidations in Rhode Island and Massachusetts.

The second article has to do with Mayor Scott Avedisian’s suggested use of those savings:

Edward Frenette, a consultant with Symmes, Maini & McKee Associates working with the School Committee, has told city officials Warwick could have as many as 8 to 10 more school buildings than it needs.

“Closing school buildings and consolidating schools is not an easy task,” Avedisian said in his budget message to City Council members. “It is very difficult and I will stand behind whatever decision is made. But a decision must be made. Simply not making a decision is costing millions of dollars a year that could go to technology and programs.”

A taxpayer advocate’s first response might (rightly) be to wonder why tax relief wouldn’t be on that list of things for which school consolidation savings could be used.  The study’s conclusion is that taxpayers are paying for school capacity that the city doesn’t need, so why wouldn’t it make sense to return that money to them?

The question is partly rhetorical.  One suspects that government officials see the current tax revenue as what the public is willing to pay for government, so if money is saved on one thing, it should just be spent on another.  I don’t think most taxpayers look at it that way; they tend to think they’re paying only what they have to for necessary services.

In fairness to Avedisian, though, state law complicates things.  Cities and towns are required to keep up maintenance of effort, which basically means that local school funding can never go down.  Municipalities can calculate that funding on a per-student basis, to account for falling enrollment, but I’ve never seen a clear answer to how that works.  In Tiverton, for example, the administration simply projected more students to enter our schools next year.  Taxpayers could presumably look at a ten-year average, or something, but the potential exists for an expensive legal battle.

As the article intimates, closing schools is difficult enough without the unknowable factor of a lawsuit.  So, the money stays with a school.

The question of why a union-dominated General Assembly would impose that difficulty on cities and towns pretty much answers itself.

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The Budget Fight in Tiverton

For those who take a keen interest in Tiverton politics, local politics in general, or seeing a town employee shout at me and threaten to “get in my face,” I’ve put up a number of posts on Tiverton Fact Check in recent weeks:

  • An explanation of the 0.9% budget (Budget #2) that I submitted.
  • Video clips of outbursts from Town Administrator Matthew Wojcik’s (a Cumberland resident and Republican) directed toward residents, including me.
  • A video clip of my explanation of the budget.
  • A review of misleading statements from town officials and activists at a one-sided infomercial that they produced for public-access television.
  • My letter to the editor describing the positive vision for Budget #2.
  • Some additional points to dispel the fear that the school committee will cancel plans to go to full-day kindergarten if they don’t get $126,000 that they don’t need.
  • A review of a falsehood promoted by Tiverton 1st coordinator Brian Medeiros that one of Tiverton’s many massive tax increases in recent years came because the town didn’t have money in its reserves to soften the blow of a reduced state reimbursement for the now-forgotten car-tax phase out.
  • An analysis of the misleading comparison of Portsmouth’s larger reserve fund to Tiverton’s (still very large) one.
  • An explanation of the utter falsehood pushed by Tiverton 1st in a mailer that went out to some residents.
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Dissembling on HealthSource Tax

This Kathy Gregg article on Governor Gina Raimondo’s reaction to poll results showing a new HealthSource tax to be hugely negative should not slip through the cracks.  The results of the poll found 63% opposed to the tax and only 27% in favor.  Here’s Raimondo:

“It’s out of my hands. I can’t say we are not going to have the health exchange,” Raimondo told reporters Thursday, the morning the poll results were released.

“Obamacare is what is is, the Affordable Care Act is there. I had nothing to do with it. [But] we have to implement it … and pay for it. And what I tried to do is present a proposal to the General Assembly which would put the least amount of cost on business owners for the maximum amount of benefit.”

Well, no.  It’s not out of her hands.  Handing it over to the feds means that “we” — i.e., the state government — are not paying it.  True, either way, Rhode Island health care customers will be paying the bill, but the distinction between the state and federal governments is not immaterial, not the least because of the games government officials are playing with the numbers.

“So we can either give it to the federal government or we can do it,” Raimondo said, again characterizing her proposal as one that “makes sure we run it in Rhode Island at a cost which is equal to or lower than the federal government.” …

In calendar year 2016, House fiscal staff advised lawmakers the new surcharge — that Raimondo describes as a “health reform assessment” — would be 4.74 percent for individuals and 0.98 percent for small businesses. During the next fiscal year, which begins on July 1, 2016, individuals would pay an extra 3.76 percent, and small-employers 1.05 percent to raise $11.2 million.

Kathy Gregg compares this with a 3.5% federal fee that would raise $8.6 million, but that isn’t an apples-to-apples comparison.  The federal 3.5% is applied to plans in the exchange and then spread out to all health care customers with similar plans.  In other words, the effective rate for the to people actually paying would be much lower.

The HealthSource tax, by contrast, starts with the budget for the exchange and then applies its 4.7% and 1.0% fees to all plans.  In the federal case, the federal government carries all of the risk for cost overruns, because its fee is set by law.  In the state case, the state government carries all of the risk, and the director of HealthSource can just adjust the tax as she sees fit.

I’d also take issue with the assertion that “business owners” are hurting and need that lower rate.  Are individual health consumers not hurting, or are they just not organized enough to be a political problem?

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Legitimacy and the Trust Deficit

Scott Rasmussen notes that the American people are losing trust in government for all sorts of (justified) reasons, which erodes the public sense that the government has any real legitimacy as a representative organization:

Until people can trust government, the government cannot enjoy the necessary consent of the governed. That’s true whether the distrust comes from a black teenager in Baltimore or a Tea Party leader in Texas.

For government in America to regain its legitimacy, government officials must change their behavior. People may gain power by winning an election, getting a badge or landing a job with the IRS, but legitimate authority is something that has to be earned every day.

This observation, at the national level, is evidence of my theory that the ills that plague Rhode Island, and similarly governed places, will eventually spread like an infectious disease if they are not cured at their source.  Rhode Islanders have long had a sense that they are locked out of government, that the rule of law does not exist (at least not in a fair, even way), and that things will never change.

There’s a reason people will be surprised if the public doesn’t help fund a second minor-league baseball stadium in the heart of Providence, on land that was promised to be a source of tax revenue and economic development.  This level of distrust is what happens when it’s clear that special interests will manipulate laws, as with the Central Coventry Fire District, in order to ensure that they never lose.

Although not to that level, yet, the “government versus the people” dynamic goes on in every city and town in Rhode Island, every year.  When voters approved, by nearly a two-to-one margin, an alternative budget that I proposed last year in Tiverton, holding the tax levy to a 0.0% increase, elected officials didn’t embark on a year of soul searching to figure out (or even ask) what people want.  They spent the year using their public meetings to attack me as if I somehow fooled the community, and they (apparently) worked in back rooms to come up with threats that might help them turn out the vote.  (This is nothing new.)  Now, we’ve got Town Administrator Matt Wojcik using a public forum (in front of other town employees over whom he has managerial authority) to snarl at me as if I’m a reckless deceiver simply for giving the people an alternative.

I think that’s what Rasmussen means about earning legitimacy every day.  In Rhode Island, and increasingly at the national level, the emphasis is on finding ways to give the people something the insiders say they need, but that they may not want and would not accept if they could actually make representative democracy representative.