The MacIver Institute, an organization of endlessly imaginative analysis, has highlighted this LFB memo that reports that under the right conditions, the structural budget balance will be +$535 for the 2015-17 biennium.
Those assumptions include a $116 million cut to this FY’s appropriations, revenues in the 2015-17 biennium would rise (annually) at the rate it has during the previous five fiscal years, 2.9%, and net appropriations in each of the years during the biennium would stay at FY2014-15 levels, “adjusted for one time commitments and 2015-17 commitments.”
I am not an expert in the intricacies of budgeting (here’s a start), and the evolution of Wisconsin tax revenues. However, what I can see in graph for Wisconsin here, for the period 2008-12, suggests to me that 2.9% figure is highly sensitive to sample period (gee, wonder why they picked that particular five year period?). If I use the data at the Governing website, I get a little less than 0.5% growth per annum.
In addition, the zero spending growth assumption is highly unrealistic. As Jon Peacock at the Wisconsin Budget Project wrote:
Some people who derided structural deficits in the past are now arguing that this isn’t a big deal because the state can grow its way out of this problem. That’s true in a sense, but also very misleading. Assuming tax collections increase as expected to about $14.4 billion in the current fiscal year, growth of 4% per year in 2015-17 would close the budget hole if total spending is frozen. But keep in mind that the spending needed for a status quo or “cost to continue” budget typically increases almost as fast as revenue – because of inflation and population growth. Thus, freezing spending in 2015-17 at the current level would not be a painless exercise; it would require significant cuts in areas like Medicaid, K-12 and higher education, and the corrections system budget.
It’s also important to keep in mind that the current structural deficit calculations focus only on the General Fund and assume that in 2015-17 the state will stop transferring dollars from the General Fund to the Transportation Fund. In light of the problems in state and federal financing for transportation, there will be significant pressure to continue to make those transfers.
In other words, the LFB tabulated at the direction of State Representative John Nygren what would happen if one let revenues move, but not spending. Mechanically, it must be that the balance looks better — no mystery there. It’s a well known trick, used earlier on a national stage; for more on the national version of the can opener assumption, see these posts on Ryan plan (I) and Ryan plan (II). For more on MacIver Institute analyses, see this post.
So, for me, a more honest appraisal of the situation is presented in Figure 1 below.
Figure 1: (Negative of) General Fund Amounts Necessary to Balance Budget, by Fiscal Year, in millions of dollars (blue bars); and estimate taking into account shortfall of $281 million for FY2013-14 (red square), and adding $380 million to each of the fiscal years in the 2015-17 biennium (green squares). “Structural” denotes ongoing budget balance, assuming no revenue/outlay change associated with economic growth. Source: Legislative Fiscal Bureau (September 8, 2014), Wisconsin Budget Project, “Wisconsin needs $760 million more for Medicaid,” Channel 3000 and author’s calculations.
It’s very likely that the budget could be greatly helped, and *everyone* would be better off if fewer people were in the Wisconsin penitentiaries.
But, the very people who want to cut government spending are the first to be “tough on crime”.
Sigh.
No mystery there. It’s simply that a certain type of people are happy to implement policies that are both popular and foolish. That said, do they usually cut government spending? All I ever get to see is unfunded tax cuts.
«do they usually cut government spending? All I ever get to see is unfunded tax cuts.»
The politics are very simple: when Republicans are in power, they cut taxes on Republican voters; when Democrats are in power, Republicans demand spending cuts hitting Democrat voters, because of the deficits created by the tax cuts.
In that way Republicans get the credit for tax cuts and Democrats get the blame for spending cuts. This has been going on for decades and it seems that most Democrats haven’t figured it out yet.
That’s based on the “two Santa” strategy:
http://capitalgainsandgames.com/blog/bruce-bartlett/1701/jude-wanniski-taxes-and-two-santa-theory
http://economix.blogs.nytimes.com/2012/03/20/the-origin-of-modern-republican-fiscal-policy/
“The essence of the Wanniski argument was that each political party needed to be a different sort of Santa Claus. The Democrats were the spending Santa Claus, promising more government benefits. The Republicans should be the tax-cut Santa Claus, he said.
Many of the nation’s problems in 1976 stemmed from the unwillingness of Republicans to play that proper role. Instead of being the tax-cut Santa, they had become the party of fiscal austerity. The balanced budget was the sine qua non of Republican economic policy. This was both bad economics and bad politics, Mr. Wanniski said.”
I doubt everyone will be better off with more crime.
It’s not easy to catch and convict a criminal, even if he committed dozens of crimes over many years.
We should praise the professional work of police, in general, for reducing serious crime rates to 1963 levels.
The U.S. is the best at getting criminals off the streets, rather than having them run amok, like in other countries.
And, a small group of people created a lot of propaganda about the “War on Drugs,” along with decriminalization and legalization.
There’s a positive correlation with drug use and serious crimes, including during the crack epidemic in the 1980s. For example:
http://en.wikipedia.org/wiki/File:Property_Crime_Rates_in_the_United_States.svg
Tough laws work. Hanging horse thieves, in the Old West, was very effective in preventing horse stealing (since they couldn’t “lock” horses).
Actually, the key factor in the drop in crime was regulatory: getting the lead out.
Is the crime rate higher in Europe? I would like to see some statistics to back up that assertion.
Robert, it seems, Sweden hasn’t done well solving crimes (it may be worse in Syria):
Sweden’s unsolved violent crime rate at 95 percent
15 November 2008
“Robberies and violent crimes made up 75 percent of all reported crimes in Sweden last year, which added up to around 900,000. Police managed to solve 5.8 percent of them.
Bengt Svenson, the national police chief, defended his department saying: “There is often very little of value to work with. When it comes to theft, there are no witnesses, and victims often don’t know when the crime occurred. There’s really not much to go on and that obviously makes it hard to solve crimes.”
Justice Minister Beatrice Ask feels the figures are an unwelcome truth for a government that ran on a platform on crime reduction. When elected, the government promised to have 20,000 police on Sweden’s streets by 2010.
Ask feels that part of the problem lies with Sweden’s culture. “I think it has to do with the culture, the idea that there is simply nothing that can be done.” At any rate, Ask says she feels the statistics are rather disturbing and that the Swedish police could do more to clear up these cases.”
My comment: I agree, culture has something to do with crime.
Here’s the article: http://www.icenews.is/2008/11/15/swedens-unsolved-violent-crime-rate-at-95-percent/
And, the news outlet:
http://www.icenews.is/
Violent crime is about 5x higher in the US than Sweden. http://www.nationmaster.com/country-info/compare/Sweden/United-States/Crime
The issue was crime rates not how large a % of theft are solved. How many murders per million people in each of those countries. What about rapes and aggravated assaults. Roberies?
Would you feel safer in Syria, Russia, Brazil, or Mexico?
“It is often said that United States is a more violent nation than most European countries. Look at the murder statistics, and the statement looks like it has weight…Based on the murder rate alone, the US is indeed a more violent country than most Western European nations.
For my data I went to the European Union data information portal for both the European Unions and America’s violent crime rate so I hope that any European readers might not think this as a ‘statistical’ hit and run using questionable information.
First off, how crimes are recorded are different between each nation.
Second, when I created the violent crimes per 100,000 individuals I used the latest rounded census information I could find. This could potentially cause the data to be skewed because of varied population growth rates. However, outside of the US, population growth was relatively minimal. This does mean that violent crime rates will be understated for America coming up to the years approaching 2010; but realistically I don’t think it affects the data that much.
Lastly, I would have liked to find a break down of different types of violent crime, however, the EU data portal does not break the data down this far.
As we can see, when comparing the US to the EU, the EU has a far higher instance of crime. But using this data alone would be disingenuous since the EU has two hundred million more people than the US.
Having normalized the data we still see that there is a significant difference between the European Union and the US. The EU has a violent crime rate nearly a third higher than the United States. At this point we can say, assuming my data is in the ball park, that while the US has a murder rate far higher than the EU it has lower instances of other violent crimes relative to the European nations.
Scandinavia is well known as a collection of nations that are very safe to live in. I was surprised to see that their combined instances of violent crime was more than double that of the US.
Even more interesting is that the United Kingdom, known as the violence capital of Europe is comparable to the other Scandinavian nations. The data I have seen so far suggests that the UK isn’t as nearly as violent as portrayed…and this data warrants a deeper look at Europe as a whole because for some reason Europe has higher instances of violent crime than the US.
So is America really as violent as we in West believe? The data would suggest otherwise, though the murder rate here is intolerably high relative to European nations.
One final point needs to be made. The argument over which nation is more violent is largely academic. The point is that in most parts of Western Europe and the US you do not have to fear harm coming to your person. There are parts of cities across both sides of the Atlantic that would be foolish to reside in for very long after dark, but the fact is that the violence levels in both continents are far lower than they are in other parts of the world (save parts of East Asia).”
http://cogitansiuvenis.blogspot.com/2012/07/is-america-really-more-violent-than.html
What does this comparison of the US to Europe have to do with whether it’s a good idea to put a lot of people in jail?
And, the “War on Drugs” isn’t only about preventing and reducing expensive social costs, which include crime, lost productivity, traffic & work injuries & fatalities, health problems & drug treatment, mental illness, unemployment, domestic violence, child abuse, and other social services:
Theatre Reviews – Horsedreams
“Getting high looks like a lot of fun in Horsedreams. Until it doesn’t. And then it looks really, really ugly.
The drug use starts off casually enough.
The important part is the fun they have getting blasted together…and soon enough (or perhaps, too soon) Desiree and Loman are married and raising a baby in Westchester.
But Desiree, who couldn’t make it through her wedding or her pregnancy entirely sober, can’t quite leave the good times behind as a suburban mom. She starts sneaking a line of coke on the weekends, then more during the week, before she graduates to speedballs—mixing her coke with heroin. By the time her son Luka is three, she is a junkie shooting up horse, until she overdoses, needle in her arm on the floor of the bathroom, while her husband sleeps in the next room.
Left to raise a son on his own, Loman moves back to the city and hires a nanny to watch Luka. Mira, a 40-something black woman living in the projects in Harlem, first sees Loman as a rich white guy—an Upper East Side lawyer taking limos around town while someone else raises his kid.
But she quickly realizes what they have in common: Addiction has ruined both their lives. He’s been left widowed and lonely; she’s lost her father and brother to drugs, and has to work at a job that makes poor use of her obvious intellect to support herself and her alcoholic mother. Mira knows the horrors of addiction.
In the end, addiction is addiction—consuming, relentless, devastating. Heroin destroys a rich white man’s life just as surely as it destroyed a poor black man’s life.”
The war on drugs has sent a lot of people to prison. What else has it accomplished? And why doesn’t it include our most destructive drug, alcohol?
wouldn’t it be better if in the war on drugs, you sent addicts to rehab rather than prison? it is not obvious that prison is a cure for the addict. remember many of these folks are in prison for possession of drugs, not a criminal act of violence, etc.
Baffling, they’re not in prison just for drugs, unless they were trying to sell a ton of marijuana, for example.
Typically, they’re charged with multiple crimes and they often plead guilty to lesser charges.
Or, they’re convicted of both drug and non-drug crimes.
The Japanese have been effective in drug rehabilitation:
“The Japanese in 1954…inaugurated a system of forced hospitalization for chronic drug users. Under this policy, drug users were rounded up in droves, forced to go through cold-turkey withdrawal and placed in work camps for periods ranging from a few months to several years.
This approach to drug users, still in force today, is seen by the Japanese as a humane policy focused primarily on rehabilitation. By American standards, however, these rehabilitation programs would be seen as very tough.
The Japanese from the very beginning have opted for a cold-turkey drug withdrawal. Thus, every heroin addict identified in Japan is required to enter a hospital or treatment facility, where they go immediately through withdrawal.
Conviction through the criminal justice system is not necessary for commitment. Any addict identified, either through examination by physicians or through urine testing, is committed through an administrative process.
As a result courts are not burdened with heavy caseloads of drug users, drug users are not saddled with criminal records and punishment for drug users is swift and sure.
These policies dramatically and rapidly cut drug use. Within four years of the 1954 amendments, the number of people arrested for violating the Stimulant Control Law dropped from 55,654 to only 271 in 1958.
Japan began experiencing serious problems with heroin. By 1961 it is estimated that there were over 40,000 heroin addicts in Japan…tougher penalties against importation and selling, and by imposing a mandatory rehabilitation regime for addicts.
The results of Japan’s tough heroin program mirrored those of its successful fight against stimulants. The number of arrests for heroin sale and possession fell from a high in 1962 of 2,139 to only 33 in 1966 and have never risen above 100 since.”
“We know from the most recent survey of inmates in state prison that only six percent (6%) of prisoners were for drug possession offenders, and just over four percent (4.4%) were drug offenders with no prior sentences.
In total, one tenth of one percent (0.1 percent) of state prisoners were marijuana possession offenders with no prior sentences.
Federal data show that the vast majority (99.8 percent) of Federal prisoners sentenced for drug offenses were incarcerated for drug trafficking.
Federal prisoners… represent 13 percent of the total prison population.”
http://www.whitehouse.gov/ondcp/frequently-asked-questions-and-facts-about-marijuana
Why is drug “trafficking” different or worse than drug possession?
Howard, alcohol is legal.
Most people don’t get drunk on a glass of wine.
However, they can get high on a marijuana joint or a small dose of another drug.
Also, alcohol in one hand and marijuana in the other is a powerful combination.
Crime is expensive and government spending is needed to reduce crime – to catch, convict, and keep criminals in jail.
Drug use not only creates drug-related crimes, e.g. violent and property crimes, it harms society in other ways.
For example:
“As more and more addicts were created, Emperor Dao guang (1821-1850) of the Qing Dynasty became alarmed. He ordered that Guangdong (Canton), the only port then open to foreigners, be closed to all opium traffic.
But British captains evaded the edict by smuggling opium into China with the help of local pirates.
Opium presently became so widespread that by 1838, officials in Guangdong and Fujian were notifying the Imperial government that nine people out of ten in these provinces were addicts.
The Emperor responded by naming as High Commissioner to Canton Lin Zexu. Lin was given strict orders to rid the country of opium.
In a letter to Queen Victoria which was never sent, Commissioner Lin chided:
“… so long as you do not take it (opium) yourselves, but continue to make it and tempt the people of China to buy it, you will be showing yourselves careful of your own lives, but careless of the lives of other people, indifferent in your greed for gain to the harm you do to others: such conduct is repugnant to human feelings …”
After confiscating and destroying the opium stocks and pipes being sold by Chinese merchants, Lin put pressure on all merchant ships in the harbor carrying the drug to deliver their opium stores to him. Although these stores were publicly disposed of, it did not restrain the British as he had hoped.
One tension led to another, finally erupting in the war of 1839 to 1842, called the Opium War by the Chinese. It was an epithet bitterly resented by the British, who piously maintained that the war’s purpose was to teach the Chinese a lesson in free trade.
Just what kind of trade was meant was obvious from the swarm of opium boats which followed the Royal Navy upstream to Nanjing, where the Qing Dynasty was forced to sign a treaty opening China to trade.
Peace had barely been concluded when the opium boats began to hawk their wares: ‘Opium is on sale very cheap at Sui Shan – an opportunity not to be missed.’
to reduce crime – to catch, convict, and keep criminals in jail.
But, do we know taht jail reduces crime?? Jail looks like crime college to me.
Drug use not only creates drug-related crimes, e.g. violent and property crimes
Does *legal* drug use create crime?
There’s an easy way to increase the crime rate: make certain substances illegal. Voila: much more crime is created. Indirectly, consumers now have to go to illegal sources, put them on the wrong side of the law and exposing them to the underworld.
Criminalization dramatically raises their street price, thus making users in need of instant income, a motive to crime.
I’d say some alcoholics are crime prone and some aren’t.
The question is do we want more drug addicts, who are crime prone, and more drug addicts, who aren’t?
I certainly wouldn’t want to run a liquor store, in part, because they get robbed so often, at gun point. However, they’re legal.
There’s certainly more crime around marijuana medical dispensaries.
Does drug use cause crime or does crime cause drugs use?:
Is Illinois winning the War on Drugs?
Chicago Tribune
July 24, 2011
“Jack Riley, special agent in charge of the Drug Enforcement Administration in Chicago….About 70 percent of all crime can be traced to drugs, he said…They (law enforcement) believe in what we’re doing because they see the devastation drugs are causing.””
I suspect, legalizing drugs will create many irresponsible drug users, who will spoil it for responsible drug users.
THE EDUCATOR – Spring 1998
Drug Enforcement Works
“Strong drug enforcement in the United States is correlated with dramatic reductions in crime, drug use, and drug addiction rates.
Drug arrest rates are not an accurate measure of how tough the nation is on drugs.
There are three times as many alcohol related arrests than drug arrests. Is alcohol policy three times tougher than drug policy?
Permissive drug policy was an abject failure in the U.S.
A drug criminal was four times more likely to serve prison time in 1960 than in 1980 and the incarceration rate plummeted 79 percent.
This drug-tolerant era brought a doubling of the murder rate, a 230% increase in burglaries, a ten-fold increase in teen drug use, and a 900% rise in addiction rates.
From 1980-1997…the incarceration rate rose over four-fold and crime and drug use began a steady, unprecedented decline.
Murder rates fell by over 25 percent, burglary rates dropped 41 percent, teen drug use reduced by more than a third, and heavy cocaine and heroin use levels fell.
With peak drug incarceration rates, many cities such as New York, reached record low crime levels.”
****
National Organization of Black Law Enforcement (NOBLE)
September 2, 2010
“…the movement in California as outlined in Proposition 19 to legalize marijuana is not in line with NOBLE’s mission, history or stance on drugs in our communities.
As an organization, NOBLE does not support the legalization of marijuana. The true social and community impact that this type of legislation will have is speculative, however, history has shown that the impact of similar actions can be devastating.”
“NOBLE has and continues to be concerned about disparities in sentencing and treatment in the criminal justice system, however, this legislation will not eradicate that issue.”
NOBLE joins a growing list of law enforcement organizations legal professionals who recognize the flaws in the measure and the harmful effects it will have on California and are opposed to Proposition 19, including: the California Police Chiefs’ Association, the California Narcotic Officers’ Association, the California District Attorneys Association, the California District Attorney Investigators’ Association, the California Peace Officers Association, the California State Sheriffs’ Association, the Los Angeles County Police Chiefs Association, and the Peace Officers Association of Los Angeles County, as well as 40 County sheriffs, 32 police chiefs and 31 district attorneys.
Other groups opposed to the initiative include: Mothers Against Drunk Driving, the California Chamber of Commerce, the Association of California School Administrators, the League of California Cities, the California State Firefighters’ Association, Californians for a Drug-Free Youth, Crime Victims United, gubernatorial candidates Jerry Brown and Meg Whitman, Attorney General candidates Steve Cooley and Kamala Harris, and many more.”
Legalizing Marijuana Not Worth the Costs
CNBC
20 Apr 2010
“State governments are exploring convenient fixes for overcoming massive debts burdening their states… some legislators are proposing the legalization of marijuana to boost tax revenue.
…findings from a white paper by the California Police Chiefs Association’s Task Force on Marijuana Dispensaries: California legalized “medical” marijuana in 1996, and dispensaries where the drug is handed out – to pretty much whoever comes in with a doctor’s note – have become catalysts for serious crime.
According to the white paper, dispensary operators have been attacked, robbed and murdered. Also, “drug dealing, sales to minors, loitering, heavy vehicle and foot traffic in retail areas, increased noise and robberies of customers just outside dispensaries” are all criminal byproducts resulting from California’s medical marijuana distribution.”
A drug criminal was four times more likely to serve prison time in 1960 than in 1980 and the incarceration rate plummeted 79 percent. This drug-tolerant era brought a doubling of the murder rate, a 230% increase in burglaries, a ten-fold increase in teen drug use, and a 900% rise in addiction rates.
Do you have any links for data to support this?
It’s not obvious on the face of it that a reduction in the number of prisoners would reduce prison costs by much. Prisons have large fixed costs, guards’ salaries, electricity and water, building depreciation, maintenance, that don’t depend much on how many people are imprisoned. You’d have to make some really, really big reductions, to the point where you could close two or three facilities, to have much effect. Also, I don’t know, does Wisconsin “outsource” their prisons? In other words, are the prisons run by private corporations? If so, then the state is probably contractually obligated to either keep the prisons full or pay penalties.
Wisconsin does not have private prisons at this time, although it’s worth noting that Gov Walker tried to open the door to such a thing when he was a legislator during the “tough on crime” 1990s.
And selling off the prison management would be straight out of the ALEC handbook that Walker and other WisGOP legislators live by – moves that don’t save taxpayer dollars or run services better, but funnel money away from public servants and toward corporate campaign contributors
Labor (correctional officers) is the big thing. You don’t have to close building, just internal units, which is where the staffing happens. Each unit has about 5 officers to staff it around the clock, and might have 15-50 inmates. Reduce the population by the number in a unit, close the unit. Straightforward.
Of course, it’s always better to demolish buildings if they’re not needed, because there’s always a temptation to use them if they exist. “Build it, and they will come”.
‘Thus, freezing spending in 2015-17 at the current level would not be a painless exercise; it would require significant cuts in areas like … higher education….’
Which seems always to be the real gripe about Wisconsin, with Menzie.
Patrick R. Sullivan: I am still waiting to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
Menzie, as I HAVE ALREADY STATED, the remark I made about the depth of Canada’s recession was peripheral to my actual point that there is no evidence that Scotland had much to fear from the ‘currency’ issue. Perhaps you remember that I asked you a question, prefaced by stating that even if I conceded your point–and there are different ways to gauge the severity of a recession–your conclusion (that Canada’s example was important for Scotland) made no sense.
So, until YOU reply to my question, I’ll be happily continuing to conclude that you changed the subject to avoid admitting that you (and Krugman) have no argument re: a common currency between independent nations.
Patrick R. Sullivan: I will continue to ask to hear you admit you were in error regarding depth of the downturn in Canada vs. US during the Great Depression. As you recall, you stated unequivocally:
And this statement is wrong.
Actually, the point about GDP drop was central to this issue about currency regimes.
Patrick R. Sullivan: I do not impugn your motives, but I guess when you have run out of (or never had) any fact-based arguments, you will resort to ad hominem arguments.
Please keep on commenting. Each and every comment provides another example which I can use as an illustration of mean-spirited anti-intellectual know-nothing-ness.
Wisconsin’s budget appears to be similar to most states, with the Big Two General Fund expenditures being Medicaid (the traditional part) and K-12 education. Both of those tend to grow at a population plus inflation plus a fudge factor rate (different fudge factors, but in both cases based on the type of service that’s being provided). Both are effectively entitlements and politically hard to cut, so when revenues fall most of the pain lands elsewhere. Higher ed and roads are the places with the least protection, so that’s where it usually falls hardest. The handwriting has been on the wall since at least the mid-1990s: in the long term, state funding for higher ed is going to be crowded out. I was working for the Colorado legislature’s Joint Budget Committee when revenues went south in 2007; at one point they required all of the state colleges and universities to submit written plans for dealing with possibility that the state would simply not fund higher ed. The flagship universities thought they could survive if the state’s other restrictions on their activities were removed; the community colleges said they’d have to close their doors.
I ran the numbers on this, and as you can imagine, the Republican legislators are assuming a scenario that will only happen in Fantasyland. In reality, the deficits are at least $1.4 billion even with revenue growth
You can’t just stop spending on items like Medicaid, Corrections and Higher Ed spending- at least without an act of the Legislature and a public debate on doing so (and that hasn’t happened).
As someone else brought up in that post, this MacIvered assumption is a lot like Paul Ryan’s film-flam where everything magically works out with unlimited growth without unemployment or other complications. In the real world, not so much.
Hi Jake, I read your blog regularly ( great insight into and coverage of economic issues), and I’ve meant to comment on your site, but I’m old and scare easily, so when it asks to log in with google, etc., I shy away. So this is great that you follow Econobrowser.
I’d like to add my perspective from years of tax experience, that the impact of the Manufacturer’s and Agricultural Credit has been woefully underestimated. First, the tax analysis assumed that the base of manufacturing and agricultural profits would continue from past patterns. However, what was missed (willfully or otherwise) was that creative tax planning (through the use of reorganizations into multiple-entity partnerships and LLPs) can concentrate and increase the profit in a deemed “manufacturing” or “agricultural” entity while group reporting the combined financial results of the related entities for federal purposes. What this means is that after the accountants get done, the profits that qualify for the credit are going to increase substantially, and the impact will be substantially greater than that originally estimated due to behavioral and organization changes. Witness the unexpected impact of the Kansas tax changes; since “business-derived” income is now free of state taxation guess what happened? The amount of business income increased dramatically although overall economic activity only modestly improved. Second, if some business owners find that they are unable to use all of their credits I fully expect that a syndication market is likely to pop up selling limited partnership interests whereby investor receive the rights to participate solely in the credits (you can do such things through a partnership agreement) in exchange for buying an interest. I haven’t seen such thing yet, but when the credit reaches full scope in a couple years I won’t be surprised.
«Witness the unexpected impact of the Kansas tax changes; since “business-derived” income is now free of state taxation guess what happened? The amount of business income increased dramatically although overall economic activity only modestly improved.»
It is the same game that has been played nationally with taxes on capital gains: when the taxes on capital gains were slashes a lot of compensation and profits became accounted for as capital gains. Therefore Romney paying as much as 12% federal tax on his vast yearly income (in the one year he has disclosed, presumably a lot less in other years), and startups granting backdated options instead of bonuses.
The proposal for a consumption based tax is based on the same logic. The best way to frustrate clever tax strategies is to tax a lot of different things at a low rate.
«since “business-derived” income is now free of state taxation [ …. ] overall economic activity only modestly improved.»
One amusing aspect of the fantasy claims about the theological power of tax cuts on rich property and business owners is that regardless the changes on state GVA has been modest in Kansas and Wisconsin, despite the Fed running the loosest monetary policy in centuries, if not ever.
Thanks for the kind words, Doc. I keep the passwords on to keep the trolls away, but it’s good to know the word’s getting around.
Good point on the corporate tax exemptions leading to nothing but paper profits and rent-seeking instead of real economic activity. It’s almost like that was the plan…..
Oh my, how quickly the GOP changes their tune when *they’re* holding the reins. It’s almost like that whole “OMG DEFICITS THE SKY IS FALLING” routine they’ve been putting on for the last 35 years in DC & the provinces has been a sham…