Friday, June 21, 2019

Screw me once, shame on you. Screw me twice...

Brett McRae is the Chairman of the Eaton County Democratic Party. He recently ran an op-ed in the local papers titled Let's just 'Fix the Damn Roads'.

The backstory is that the Democratic party just swept the Michigan statewide offices in the recent election. The new governor's campaign theme was 'Just Fix the Damn Roads' and she implied that the Republicans were incompetent, corrupt and incapable of managing budget to get basic services delivered.

Milliseconds after being sworn in, the new Govenor said, "Hey, I gotta raise taxes. Not much...just an additional $0.45 a gallon gas tax. Lemme get back to you next year. That might not be enough."

There was pushback from the electorate. She implied that she was going to fix the roads by eliminating corruption and incompetence. She never said she intended to raise taxes before the election.

Now the local spear-carriers for the Democrats are making the sale pitch: "The unhappy fact is that it's going to take some serious money to fix the roads."

McRae then goes on to write that it will require an additional $2.5 billion every year. He gives us choices: Raise the state income tax 25% or increase the tax on businesses by 325% or increase the sales tax by 22% or increase the gas tax by forty-five cents a gallon.

Let's look at them one at a time
The state income tax is a flat tax. Flat taxes are considered regressive because people with less income have much less discretionary income. A flat tax makes the margin even tighter. So the Democrat's proposal for raising the income tax is regressive.

The Democratic proposal for raising taxes on businesses by 325% is a job killer. Approximately 58% of Michigan's 9 million residents do not have jobs so that might seem like a winner of an idea but that 58% depends on the people who DO work. Raising business taxes by +300% is a case of saying, "Here, Illinois, hold my beer."

Increasing the sales tax is considered regressive for the same reasons raising the income tax is. Furthermore, people who have more means are more likely to pay for services (not subject to sales tax) or spend big money outside the state on things like vacations.

Increasing the tax on fuel is both regressive and transfers resources from rural and suburban areas to urban areas. Most of the damage to roads is due to weather. Urban areas get more dollars per mile of road than rural areas while rural drivers often drive as much as four times as many miles per year.

In summary, the Democrat's proposals are REGRESSIVE, JOB KILLER, REGRESSIVE and REGRESSIVE.

The shell game
The big sales pitch when the lottery was introduced was that every cent was going toward education.

What they did not tell us is that there would be zero incremental funding of education. Education was defunded dollar-for-dollar and the incremental increase was be seen in the general fund.

It is a mathematical certainty that the identical thing will happen with any funds raised "for roads."

The State of Michigan pension funds are approximately 60% funded and the bull market in stocks is at the extreme geriatric stages of expansion. In plain language, the pension funds did not catch up when times were great and unless a miracle happens it never will.

That miracle will be for politicians to get voters to agree to tax increases between 22% and 325% with the expectation that more work will be done on the roads. Stupid voters. That money will simply free up funds to backfill the ever-growing pension shortfall. There will be no net increase in road funding.

Rather than being transparent and saying that the State mismanaged the pension promises and asking voters to approve funding for pension shortfalls, the politicians are promising road repairs (a tangible benefit) knowing full well that none of the $2.5 billion a year will result in a single additional pothole being fixed.

They know that is a very, very tough sell because most public pensions are more generous than private sector pensions and it will be tough to get people who are looking forward to eating cat food in retirement to vote to take more dollars out of their wallet and give them to public sector employee pensions.

Remember, money is fungible. It is not possible to say "This dollar went here" after the dollar is inhaled by the state.

2 comments:

  1. Thus my contention that ALL taxes are immoral, because they eventually end up with the very dilemma we have on our hands today. It extends even farther than you describe: Why do I have to pay rent to the government to live in the house I own? Why do I have to pay rent to the government to drive the car I own? The list goes on and on. I don't really own anything - the government does. They just let me think I own it, as long as I pay them for the privilege.

    Sorry Joe - don't mean to threadjack here, but this has been stuck in my craw for a long time.

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