From the Legislative Fiscal Bureau, roughly analogous to the Congressional Budget Office, an assessment (p.11) that notes the tax revenue implications of three bills implemented under the current Administration:
Our estimates include the impacts of all law changes enacted in prior years and three of the January 2011 Special Session bills: (a) SS SB 2, which federalizes the treatment of health savings accounts; (b) SS AB 3, which would create an income and franchise tax deduction or credit for businesses that relocate to Wisconsin; and (c) SS AB 7, which would create an income and franchise tax deduction for businesses that increase employment in the state. SS SB 2 has been enacted into law as 2011 Act 1. The other two bills have passed both Houses of the Legislature, and the Governor has indicated that he will sign them. It is estimated that, together, these three bills will reduce general fund tax collections by $55.2 million in 2011-12 and $62.0 million in 2012-13.
This means approximately $117.2 million of any shortfall over the next two fiscal years is a direct consequence of measures that have just been implemented by the current Administration.
More on this from Forbes.
It is of interest to inspect the Legislative Fiscal Bureau’s tabulation of the 2010-11 fiscal year balance.
Source: Legislative Fiscal Bureau (Jan. 31, 2011).
The parallels to the Great Depression just keep on coming.
Many are not aware but the Great Depression generated some of the greatest tax revolts in the history of our nation.
It is amusing that the tax revolt during the Great Depression just as the tax revolt during our Great Recession have both festered and broken to the surface in the mid-west, but the manifestation is much different.
Unfair assessments were not new to Chicago but on May 9, 1930 a group of real estate owners formed the Association of Real Estate Taxpayers of Illinois (ARET). The group had no intention of leading a tax revolt, only to join together to litigate appraisals.
The protesters led by the ARET went to court. ARET won and the board was ordered the board to hear 30,000 pending appeals. The board appealed to the state supreme court.
Taxpayers began to refuse to pay their taxes. Because a partial payment of taxes still left the tax payer liable and subject to losing property the taxpayers refused to even pay a partial payment.
The state begin to strike back and all of the usual subjects lined up to support the state, the teacher’s unions (Chicago Teacher’s Federation, the Men Teacher’s Union, the Federation of Women High School Teachers, the Illinois State Teacher’s Association).
The attacks by the Chicago government, the confusion of conflicting court rulings, all led to Chicagoans simply refusing to pay their taxes.
But now look at Wisconsin. The leaders of the tax revolt are the people of Wisconsin and their elected leaders. The tax revolt in Wisconsin is real and the opposition is the usual subjects, the teacher’s unions and the other rent seekers sucking at the public trough.
The more things change the more they stay the same.
I was interested in the article in Forbes. As I read it I thought how uncharacteristic it was so I looked up the author, Lee Sheppard, to find her background. The article may be from Forbes but I am not sure the sentiment is from Forbes, closer to the NYTimes. The following is from an article in the NYTimes.
Local, state, and gov’t spending (including federal transfers) has grown at 6-7% to less than 3% for private GDP. Since ’00, real total gov’t spending has grown at ~4% to real private final sales growth of near 0%. This divergent trend simply cannot continue.
Taking the trend rates of gov’t spending and real private GDP and final sales from the ’80s-’90s and the marked deceleration in GDP since ’00, total gov’t spending, including transfers, will have to be cut by 35-40% over the next 10+ years to come back in line with private US economic output, and much more than that in real per capita terms going out 20 years or more; and this assumes that private GDP does not decelerate further in the meantime, which is certainly a possibility.
The unprecedented Boomer demographic drag effects with Peak Oil and US and global population overshoot will force widespread cuts in public spending and private investment and spending, as well as an unprecedented drawdown on financial assets as Boomers attempt, unsucessfully, to maintain their spending into late life.
Ricardo: Gee, that’s in depth analysis. You might have observed she contributes to Tax Notes and then provided some insight into the reputation of that serial.
According to this
http://politifact.com/wisconsin/statements/2010/nov/29/jim-doyle/gov-jim-doyle-says-wisconsins-projected-budget-sho/ there were projections last November of a deficit of $1.5 billion (possibly more) for this year. How did the budget magically come into balance?
http://imperialeconomics.blogspot.com/2011/02/trend-of-us-real-private-gdp-per-capita.html
Gentlemen, have a look at the trend of real private GDP per capita. There is no way possible that gov’t spending, particularly gov’t wages/salaries and benefits, can continue, let alone not be cut dramatically.
The private sector simply cannot afford what we have promised ourselves in public goodies based on decades of inflationary/reflationary credit-based growth of 6-7% and cheap liquid fossil fuels, when the trend rate of private GDP per capita is growing at barely 3%, and now contracting on a real trend basis since ’01.
Gov’t must be cut 25-30% and then eventually 35-40% (approaching half per capita); and then we must gut the tax code and start over, eliminating taxes on labor, savings, capital improvements, production, and inter-generational transfers, instead taxing energy, utilities, pollution, waste, traffic, rentier speculation, and land resource and place value rents thereafter.
http://www.energybulletin.net/stories/2011-02-15/earth%E2%80%99s-limits-why-growth-won%E2%80%99t-return
http://questioneverything.typepad.com/question_everything/2011/02/past-the-point-of-no-return.html
Growth is over for the human ape species. It’s well past time to begin to adapt to the Great Regression; that is, it’s already too late to prevent it, but we can do our best to mitigate the worst effects, at least for the pink apes in North America and western Europe.
Menzie,
I work in a great company but I have some flakes who work with me. I do not judge them by the company they work for but by their personal words, work, and reputation. Also, I did not pass judgement on Lee Sheppard. I posted the NYTimes piece to allow others to make their own judgements. It appears that by your response you judge that the NYTimes was put her in a bad light.
Ricardo: No, I judge that the article was largely non-substantive and hence not helpful to furthering anybody’s understanding of real issues.
“(b) SS AB 3, which would create an income and franchise tax deduction or credit for businesses that relocate to Wisconsin; and (c) SS AB 7, which would create an income and franchise tax deduction for businesses that increase employment in the state. … It is estimated that, together, these three bills will reduce general fund tax collections by $55.2 million in 2011-12 and $62.0 million in 2012-13.”
It is very hard to assess this material without knowing some details about how the various proposals were scored, especially SS AB 3. SS AB 7 sounds problematic, and I suspect it was crafted sans the benefit of any of the trove of qualified public finance academics in the state.