"Regressive" Taxation Hypocrisy

Every Spring when the IRS comes calling, and local Real Estate Tax bills arrive, talk turns to how "unfair" taxation is in this country - "tax cuts for the richest 1%", etc.

The tax-spenders want more money and on the surface decry anything resembling everyone paying the same rate of tax on anything. They feel that those that have more should pay a greater percentage to the communal pot (for the social "experts" to spend). This is the concept of "progressive" taxation.

We are constantly amazed at the silence of these folks on the most regressive taxes of all - property, cigarettes, alcohol, and most insidious, state lotteries.

It is extremely difficult to get a hold of State "target demographic" marketing data. They don't want to talk about it. However, WoodfordTaxFacts.com has obtained some of this information and it is stunning.

Essentially, what we need to understand is that those most prone to smoking, drinking, and gambling with "lotteries" are at the lowest rungs of the socio-economic ladder. These taxes are a disproportionate burden on the undereducated, elderly, and immigrant populations. They always have been and they always will be.

The Real Estate tax as we've discussed many times is a tax on savings, not income, and burdens those on fixed incomes the most (read - low income/retired/elderly).

Where is the "progressives' " outrage? As an aside, how can you have "sin taxes" on certain behavior/consumption and then "profit" from same in the form of taxation? The status quo indicates it can be politically justified by putting those monies into "education, training, treatment, and heathcare" programs. However in Illinois, after the promises faded, the monies end up in the "General Fund" anyway. Remember when the Illinois Lottery was instituted? The sales pitch was that gambling (the numbers racket) was going on anyway, and why not just have the state horn in on the illegal enterprises and take a piece of that pie. Who could complain? That was supposed to be a property tax relief deal for education funding. It was going to go into the proverbial "lock-box".

The huge hike in tobacco taxes and the lawsuit settlements (tax) on "Big Tobacco"? That was to go into Medicare. The State is still not paying doctors and hospitals for 18 months.

Beer, wine, and liquor license fee increases and excise taxes? Well, those were always intended to ease the transition from prohibition and were to go into prevention and care of abusers; never happened.

So next time your friends complain about how the poor and middle class pay too much tax relative to "the rich", remind them that an easy way to put real money into low income pockets would be to eliminate the aforementioned taxes, get rid of the lottery, and gently remind them that less than half of all Americans pay any federal income tax.

Next up - we'll discuss the federal "Earned Income Tax Credit" monies gushing out to Mexico via illegals living here, but legally able to file and claim dependents back home. Anything we can do to help out Mexico . . .

Local School District Spending Reprint - by request

We promised a group that we'd post this again for easy access.

Please forgive the repetition.

The numbers from left to right for Olympia School District are:

2,231
-6.69%
$7,826
18.99%
$6,258
18.84%
"no" as far as the "65% solution"

(Click on the above chart to enlarge.)

Ethanol Source Switch To Switchgrass?

The U.S. government gives refineries a tax incentive or subsidy of 51 cents for each gallon of ethanol they blend with gasoline.

Last week President George W. Bush said Congress should drop a 54 cent-per-gallon tariff on ethanol imports from Brazil.

The Brazilians say they will be "energy independent" next year, although their fuel usage is miniscule compared to the U.S. Brazil, and much of the rest of the world, process sugar cane and switchgrass for bio fuels.

Demand for ethanol may someday outpace the ability of U.S. farmers to produce corn (the year 2025 is bandied about). Sugar growers have enjoyed Federal protection and largesse since the hay-days in Cuba. This new vision is one of a nation dependent on switchgrass as the key feed for ethanol production.

It takes about 6 to 8 years to develop the switchgrass enzyme conversion technology sufficient for ethanol production plant practicability, according to our sources.

O.K. So here's the question - do we want to eliminate the (primarily) Brazilian tariff, or do we want to continue subsidizing domestic production with the tariff in addition to all of the other ethanol/sugar incentives and mandates?

In this corner . . . A.D.M,

In this corner . . . Cargill . . .

we'll let you figure out who is whom in the ring and why.

That Ever Louder Sucking Sound From Up North

Here's a surprise. It seems (according to the Chicago Tribune) that head of the Chicago Public Schools, Arne Duncan, doesn't think the "new" State moneys in the Springfield "budget" will be nearly enough:

Chicago will get about $100million extra in general state funds, allowing the district to take off the table a threat to increase class sizes, Duncan said. Chicago also will get another $16million to help reduce its deficit, according to state officials.

Even with the extra state funds, the district may have to increase property taxes, Duncan said.

It makes one wonder if there could ever be enough money, doesn't it?

Crazy Like A Fox!

Just when one thinks one has seen about everything - Matt Drudge today reports that Rupert Murdoch (yes, that Rupert Murdoch - Fox News, NewsCorp., N.Y. Post) has agreed to host at least one Fund Raiser for Hillary Clinton in the near future, according to The Financial Times.

Assessor Assesses Property Tax Health

We stumbled across this quotation from a letter to the Chicago Tribune dated February 26, 2006:

". . . At one time, property was the driving force in the economy, creating wealth and producing incomes. Since property is no longer the force driving the economy, it can no longer be the main force driving tax revenues.

The first step to fixing the system is to substantially reduce the over-reliance on property taxes. The lost revenue needs to be replaced with a tax that covers all economic activity. Only when the property tax is no longer holding up the whole house will we be able to make the necessary major repairs."

James M. Houlihan
Assessor
Cook County
Chicago

Letters From: Champaign, Illinois

Toward a Living Wage

May 02, 2006
John Bambenek

After attending the annual Intercollegiate Studies Institute (ISI) Leadership Conference in Indianapolis, one of the things I thought about was a living wage. The argument by many of the participants was that the best way to lift people out of poverty and provide a living wage was to provide a robust economy — basically, trickle-down economics. Even Thomas Woods' talk, which had a religious character, had this general idea. In fact, when he was asked to reconcile St. Peter's teaching on obedience to the government with disagreement on welfare policy, he largely fumbled the answer, in my opinion. I favor my response to the question.

The problem with talking about a living wage is that it always talks about the issue from only one end of it. Either you have to artificially raise wages or trickle-down will raise wages. Still, this only talks about the problem from the aspect of raising the amount of money getting paid. There is another way to get to a living wage: decrease the cost of living so that current wages are sufficient.

Increasing wages by raising the minimum wage is an unsatisfactory solution by itself. There is a finite amount of money going around and all things being equal, a business will offset increased costs by cutting costs elsewhere. In the realm of employment, they will usually not hire as many people or not pay people above the minimum wage as generously (i.e. stagnate wages at the minimum wage line). It presents an intractable problem. What is better — 90% employment at 80% of a living wage, or 80% employment at 90% of a living wage? Costs could be cut elsewhere, but businesses already have the incentive to do that. Creating a burden is unlikely to help them be more efficient. This skips past that difficultly of setting a living wage (for what type of living arrangement) and that some people shouldn't be paid a living wage (high school students, college students, temporary workers).

This also can lead to inflation because any cost a business incurs will be passed on in its prices. Those increased labor costs will get passed on again and again to the only entity that is unable to pass off costs. We'll call that person "the consumer." We could theoretically determine a living wage at some snapshot in time and mandate that all workers be paid that wage. Even if there is no additional unemployment, that increased labor cost will result in increased prices across the board. This translates to an increased cost of living and makes the living wage insufficient once the costs pass through the system. Even if you could control the rate of employment, there is no way to set a living wage. It would increase the cost of living and make that living wage insufficient again.

The solution to this problem is to stop focusing on the size of the paycheck and to start focusing on the cost of living. There are several components that make up the cost of living. There is food and the sales tax to buy that food. There is housing and the property tax levied against that property. There is medicine, government fees, income tax, etc.

One way to cut the cost of living directly and immediately is to cut taxes. This can be accomplished be getting rid of wasteful and unnecessary government spending which is always inefficient and bleeds money away from the economy. Even welfare payments bleed money off that remains in the black hole of Washington DC.

Another way is to decrease transaction costs for people doing business. For instance, the legal and insurance systems allow for businesses to not only prepay their future lawsuit settlements, but also provide a nice way to compartmentalize those costs and pass them on to the consumer. The dirty little secret about suing companies is that they aren't the ones paying — society is. And in fact, you've already paid.

Likewise, property tax gets passed down to renters in the form of higher rents. Sales tax raises prices for consumer goods. Higher business taxes make for higher prices. Increased regulation makes for higher regulation costs and higher prices.

To effectively reduce the cost of living, every regulation, every tax, and every wasteful or unnecessary government spending initiative needs to be stopped. There are important regulations and things the government should tax and spend money on. However, it will always spend money inefficiently and bleed money away from the economy when they do it. This needs to be minimized.

Productivity gains, increases in efficiency of production and distribution, and new technologies will also help (as it always has) to increase the quality of life of all workers. This is where trickle-down is most helpful. However, it's only part of the solution.

The more the cost of living can be reduced by reducing the bleeding effect of government spending and regulation, the more people there will be living above the poverty line.

(John Bambenek is an academic professional for the University of Illinois and a columnist for the Daily Illini and blogs at Part-Time Pundit deep from the corn fields of Illinois.)

Woodford County Pension Costs

What does this picture tell us?

















Well, first off a little clarification on data. The information comes from the recently released annual financial audit.

SLEP = Sheriff's Law Enforcement Personnel
ECO = Elected County Officials
OQE = (all) Other Qualified Employees

Now, here are the compounded average percent increases for these classifications:

SLEP +34%
ECO +39%
OQE +40%

It doesn't take a rocket scientist to see there is potentially an elephant in the budgetary closet here.

We're not sure what or where the '05 cost data is; still hunting.

2007 State of Illinois Budget Summary

. . . and the State of Illinois is . . . tenuous at best
. . . Here's a "budget" summary:

Overview

• General Funds spending of $25.8 billion is up $1.4 billion or about 6%;
• The four-year total for the Blagojevich administration is $3.5 billion more than when he took office, or $1 billion more than the $2.5 billion increase Illinois saw during George Ryan’s tenure.
• More than $250 million in spending added to the Governor’s original budget proposal in order to get it passed.

Record-Setting Budget

• State Government spending at an all-time high;
• State debt is at an all-time high;
• Backlog of unpaid bills at an all-time high;
• Under-funds the worst funded pension system in the nation;
• Sets the stage for future pension raids;
• Ignores warnings of Fitch Ratings, making a downgrade almost inevitable;
• Illinois is 45th in the Nation in Job Growth since Blagojevich took office, trailing all other surrounding states.

Aren’t You Glad You Are Paying?

• $1 million for Bullying Prevention;
• $30,000 for an exhibit to honor legislators from Chicago State University;
• $200,000 to NEIU to conduct a study on the North Atlantic Slave Trade;
• More than $7 million in lump sums for the Department of Human Services for undisclosed uses;
• $50,000 for the South Suburban Disproportionate Minority Confinement Foundation;
• To cover the cost of insurance for the same-sex domestic partners of state employees.

Education Funding

Education gets $438 million increase. (Financed by short-changing the Teachers’ Retirement System by $495 million. Once again teachers are forced to use their own pension system to fund education in Illinois.)

How the education money is allocated:

• $170 increase in the foundation level to $5,334 at a cost of $239 million
• $56.7 million increase for Mandated Categoricals (which mainly benefit suburban schools. The $239 million to $56.7 million ratio (less than one to four) is about half the traditional ratio of one to two);
• $10 million increase for flat per-pupil grants;
• $45 million for the Governor’s Universal Pre-school initiative;
• $10 million for class-size reduction grants.

Veterans Scholarships

• No money added to the budget to pay for the Governor’s Veterans Scholarships which means the schools (and therefore other students) end up footing the bill.

Pension Raid Continues as Planned

• Budget underfunds worst funded pension systems in the nation by $1.1 billion;
• Budget does nothing to reverse the expected rating downgrade predicted by Fitch Ratings;
• Budget does nothing to prevent more post-election raids;
• Teachers Retirement System shorted by $495 million;
• State Universities Retirement System shorted by $140 million;
• Other systems shorted by $498 million;

Chicago Teachers Pensions

• The final budget adds $10 million for Chicago Teachers Pension
• Chicago Teachers Pension System gets fully funded ($75.2 million, up $300,000 from last year)
• Chicago Plan is 80% funded, while TRS is 60% funded.

Now think about your own personal household or small business budget for 2007. Would you ever dream of doing these kinds of things? We think our favorite line item is the $1 million for "bullying prevention".