Unto Everything There Is A Season

Who was it that said election time is ‘silly season?’  For years I’ve rolled with that description, but more and more, it seems to be ‘trashing season’ and ‘fibbing season.’

To that point, in our three way gubernatorial race, we see a peculiar juxtaposition of campaign approaches.  The incumbent emphasizes his stewardship of the ship of state during his current term, and how he plans to manage the enterprise should he be re-elected.

The two challengers, exactly as you might expect, do their level best to move votes away from the incumbent with time-tested, consultant driven enticements.  One says he’ll lower property taxes, clearly very high in our humble, mostly rural state, by 20 to 40%, and pay for it with a 1% increase in the sales tax.  The other says he’ll buy us the new things we want by virtue of ‘budget priorities.’

Let’s take that first challenger’s claim.  As a veteran of two TABOR battles deep in the trenches, I well remember the competing promises of “tax reform” to dissuade voters from voting for the TABOR proposals, both of which limited the growth rate of government spending.

Anyone who’s played on this field in the past knows two things are certain.  First, the only way to lower taxes is to reduce spending; second, ‘tax reform’ is a red herring served up by governing elites to lure us into believing that they’re on our side, and aren’t addicted to the lure of spending other peoples’ money.

Want proof?  Think back to the promise made by then Senator Peter Mills; Chris Lockwood, the long time head of the Maine Municipal Association; and Dana Connor, the similarly entrenched head of the Maine Chamber. If voters would please, please defeat the TABOR referendum, they promised to come to us with a superior proposal for resolving our concerns about unconstrained growth in property taxes and government spending.

Permanent members of the ruling class all, their hollow promise made just enough difference to defeat the efforts of engaged and devoted citizens who were determined to rein in the unlimited spending appetites that ruled our state and our municipalities for decades on end, and still do.

So here we stand with proposals from two current challengers that similarly vow to address our implicit, if not explicit concerns about high taxation.  Let’s take them one at a time.

Lowering Property Taxes by 20-40% With a 1% Sales Tax Increase

The first thing to note is that this proposal says nothing about controlling or otherwise reining in spending.  Instead, it’s the classic shell game that promises to lower one tax by raising another, and in this case, ‘exporting’ a big part of our tax burden to those unsympathetic tourists who avail themselves of our blessings while not paying their ‘fair share.’  This is a perennial favorite, straight out of the ‘don’t tax you, don’t tax me, tax the one behind that tree’ playbook.

My property taxes are about $8,000 per year.  Assuming that this plan would reduce them by the mid-point of 30%, that’s $2,400 taken out of municipal revenues that has to be replaced.  Generating that much more from a 1% sales tax increase means that $240,000 in retail sales have to be taxed at this higher level just to cover my property tax reduction.  I’m sure as hell not going to pay $2,400 in additional sales tax, none of which would be deductible, compared to property taxes, which are fully deductible.

Let’s look at this from another point of view.  According to the Maine Municipal Association web site, property tax revenue in 2008 was about $2.0 billion.

Elsewhere we found data saying that Maine Sales Tax Revenue in 2012 was approximately $1.1 billion.  We’re comfortable suggesting that by 2012, property tax revenue was easily in the $2.2 billion range, if not considerably more.

No matter.  Let’s go with the midpoint of the promised property tax reduction: 30%.  That means a decline of $660 million in municipal property tax revenue.  Which according to the candidate proposing the idea, would be offset by a 1% increase in the sales tax.  Clearly, this would come no where close to generating the necessary $660 million, a 60% increase in sales tax revenues!

Numbers aside, the larger problems here are the co-mingling of state and municipal finances, which is a recipe for fiscal disaster, dueling accusations, and budgetary mischief of the worst sort.  Just look at the history of the state’s support of public schools via “General Purpose Aid to education.”  And the efficacy of the homestead exemption and circuit breaker programs, among other schemes to ‘lower property taxes.’

Face it: property taxes are the most insidious form of taxation.  They are ‘adjustable rate,’ and ‘adjustable base,’ meaning they’re virtually impossible to constrain.  Towns are going to spend whatever they want to spend.  They set their budget, look at the revenue coming in from other sources, and then set the property tax rate to generate the rest of the revenue they need to balance the budget.

Increasing the participation of state government in ‘sharing’ revenue with the towns only further exacerbates the finger pointing that allows each to blame the other for increasing taxes.  “It’s not our fault,” selectman or town councilors say; “the state isn’t keeping their promise.”  At the same time, the legislature says “we can’t keep funding the runaway budget increases at the local level.”

When you come right down to it, federal revenue sharing and state revenue sharing have probably caused as much damage to responsible governance as any other phenomenon.  Agreeing to any plan that would further the notion is self-destructive, if not fiscally suicidal.

“Budgets Are About Priorities”

This is the profound assertion of the other challenger.  True enough, true enough.  But his statements are all platitudes with no specifics about what changes in expenditures and revenues he has in mind, which means the candidate expects to spend far more than current levels, and isn’t willing to say how he’ll pay for it.

The candidate espousing this noble motivation has never given a hint of which established budget lines he’d eliminate or reduce.  How could he?  Doing so would gore someone’s ox, which is never a resume booster for someone seeking elevation to higher office.  At the same time, said candidate never gives a glimmer of his plan to pay for the costs of his proposed expansions in government ‘investments’ and entitlements.

Make no mistake about it;: candidates who propose such things believe that only government spending can make the economy, and life itself, better than it is at the moment.  Here are some examples from his campaign, each of which will cost more in spending; but each is expressed in language that could suggest the opposite:

• Revitalize Maine’s economy and to put our state back on the right track. A conversation about building an economy in Maine that works for everyone, not just the wealthiest among us, that turns around our dismal private-sector job growth and that creates new opportunities to strengthen the middle class.
• A business and investment plan to create jobs in the state
• Reducing the cost of health care and eradicating homelessness
• Upgrading our schools and classrooms
• Fair taxation and fighting poverty to protecting our environment and fighting climate change
• Expanding Medicaid under the federal health care law
• It starts with a promise to invest in Maine’s future.

This candidate says his plan will cost at least $36 million in the first year and calls for investments in renewable energy, among other things.

From AP coverage of the most recent debate:

“I’ve suggested he’s going to propose some kind of tax and he’s keeping it a secret,” said Eliot Cutler, a former Democrat who narrowly lost to LePage in 2010.

Michaud responded that “budgets are about priorities” and argued that he has the experience negotiating budgets in the state Legislature necessary to turn his policy proposals into reality.

Other analyses have indicated growth in budget levels of $300 million or more, with no details, and no indication of where such revenues would come from.

Sadly, in today’s poorly informed political climate, such details are not considered relevant.  All that matters is good intentions.

The Bottom Line:

The overwhelming majority of politicians seeking office pander to various interest groups, promising to give them what they want: more spending on this, more training in that, and broader coverage/enrollment for one program or another.  All without saying how they’ll pay for it, and how it will increase the breadth and depth of perpetual government bureaucracies and entitlements.

Those seeking to unseat an incumbent are particularly prone to such promises, especially when challenging someone who doesn’t come from that classic school of politics.  This is short term politics at its finest, with no regard for long term consequences.

Only rarely does someone come along with the courage to propose giving us what we need, not what we want.  Someone who considers the consequences of policies ‘not merely for one group but for all groups,’ as economist Henry Hazlitt recommended in Economics in One Lesson.

This is an exceptionally tough “road less taken,” because it runs counter to the natural tendency for government to expand and the public, knowingly or not, to become increasingly dependent on it.  It calls for constant battles with both the elected and unelected establishments, and opens up the proponent to facile charges of mean-spiritedness and lack of compassion.

Some times ‘tough love’ is needed in dealing with children and others in our personal lives, and the weak among us, anxious not to offend, fail to give it.  It may be even more necessary in modern day governance, and even less likely to be dispensed, because retaining power is the all-consuming priority.

At the moment, we have a Governor who is doing his personal and professional best to implement policy this state needs to have a prosperous and sustainable future for all; not just some.  And the only way his opposition knows how to respond is to propose the same tired government-centric programs that drove us to the brink in the first place.