Posted tagged ‘regressive tax’

Increasing Poverty and Homelessness: Who Benefits?

27 March 2014

Giving politicians the power to manage the economy causes all kins of problems. For one thing, they act in their own interest – just like anyone else. This shouldn’t be a surprise to anyone, but it seems to be. It’s time to get past the idea that politicians (or bureaucrats) are wise and altruistic overseers of the economy, taking necessary actions to correct imperfections and imbalances caused by, well, regular people.
A good example is the proposed legislation in the Maryland General Assembly to raise the state minimum wage by nearly forty percent. The purpose of this law is to make it illegal for a high-school dropout — let’s call him John — to agree to accept a $10 hourly wage from a shop owner.
The evidence clearly shows the likely result of this action. If the shop owner has a job, she will hire the best-qualified person she can. A person with a good work history, or a high school diploma or GED, will seem like a better bet than John. John, representing the lowest level of skills and education in our society, will be the loser from this legislation. He will become unemployed, and likely remain unemployed for the long term. An increase in the minimum wage almost always increases unemployment for that reason. Specifically, it increases the already abysmal employment prospects for those starting out in the job market (the 17 – 25 cohort), and even more so for the black and Hispanics in that group. An increases in the minimum wage ends up being a knife in the back of the least advantaged, the worst-off among us. When Montgomery County sought to raise the minimum wage, this was the advice they got from expert labor economists at the University of Maryland and Georgetown University. The deleterious effects, the economists testified, are more likely when the increase is large and when the unemployment rate is already high. Economist Stephen Fuller looked at the Maryland bill and concluded it would probably cause a reduced standard of living and higher costs.

But political management of the economy doesn’t pay any attention to those people at the bottom. When the high school grad with the increased wage gets his paycheck, he’ll thank the politicians who caused it. The politicians have no incentive, however, to be concerned about the people at the very bottom of the economy – the ones we should be most concerned about. John’s lost job or lost employment opportunity doesn’t have any political loss for them. They are seeking political support, and they get rewards for increasing the minimum wage — and also for increasing unemployment, poverty, and homelessness.

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Council and Executive Lay Higher Burdens on Montgomery Residents, Drag Down the Economy

4 June 2013

The County Council (last week) approved the budget for the upcoming fiscal year.  In a time of austerity, this budget represents a turn back to bigger government.  While the citizens are tightening their belts, this budget increases spending by 4.1% over last year.  The budget recommended by the county executive and now approved by the county council increases property taxes and increases energy taxes.  Combined with the increase in state taxes (including the jacked-up gasoline tax), this will be a draw down on the county’s economy.

There is a popular opinion that Montgomery County has not been affected by the recession, and therefore the government can increases taxes and spending willy-nilly.  But unemployment in the county is 56% higher than it was in 2008.  A report from the Sage Policy Group concludes that the 80% increase in the state’s regressive gasoline tax is likely to cause the loss of  959 jobs, and a loss of $124M to the economy.   The county budget is only likely to drag down employment and the economy even further.

What To Do About the Bag Tax?

7 April 2013

What do do about the bag tax?  The County Council is currently considering the question, including options for expanding the tax, increasing it, reducing the types of retail locations which must charge it, and banning plastic bags completely.
MoCo reports that the county has taken in about $2 million from the bag tax, much more than had been expected.  This demonstrates that some combination of the following conclusions is true:

(a) shoppers find bags to be convenient, and are willing to pay for them

(b) grocery shoppers have learned that plastic bags are a more sanitary way of carrying food, and are seeking to avoid the bacterial diseases associated with reusable bags

(c) the bag tax, in the end, has just been a way to raise revenues for the cash-strapped county government.

The negative effects of the bag tax are beginning to pile up:

Retail thefts and shoplifting have surged in areas where bag taxes are put into place, as it becomes much easier for shoplifters to pilfer merchandise and slip it into the shopping bags they are already carrying.  This phenomenon seems to be found wherever bag taxes (or bans) have been put into effect.

Council member Craig Rice has noted a corollary to this problem.  As department stores have become suspicious of people walking around with roomy bags, racial profiling leads to more black men being stopped and interrogated by store security personnel.

– Theft of supermarket grocery baskets has increased. Apparently, people figure that they need a convenient way to carry their purchases, but don’t want to pay extra for bags.

– Most distressingly, researchers are finding evidence of illnesses associated with these bans.  This was predictable, as shoppers are carrying fresh meat, vegetables, and fast food fried chicken and hamburgers in these bags, over and over again.   Even beyond microbial contamination, reusable bags often have toxic materials, like lead, that leach into the food people carry. Senator Charles Schumer of New York has called for a federal investigation of this problem.

One-use bags are also more sanitary.  Since people tend not to wash their reusable bags, they increase the risk of food-borne illness.  Studies of San Francisco, which banned plastic bags in 2007, reported that after the bag ban there was a spike in the number of E. coli cases and increase in deaths from foodborne illnesses.  Another study found that 8 percent of all reusable bags contained E. coli and doubted how often shoppers actually wash their bag.

– Finally, the environmental impacts of the bag tax are at question.  There is anecdotal evidence of reduced bag litter in the county’s waterways, but increased litter from bottles and food packaging, which is harder to carry without a bag.  The bag tax, in effect, creates an incentive for increasing this kind of litter.  Not only that, but the tax increases total resource consumption.  People tended to reuse plastic grocery bags for dog waste, lining trash baskets, etc.  The National Black Chamber of Commerce notes that consumption of store-bought plastic bags increased by 400 percent in Ireland, after that country implemented a bag tax.

The bag tax is a classic example of unintended consequences of legislation.  (OK, that’s a generous term.  I’d say it is an example of a failure of policy analysis).  Unless bringing in more revenue for the county government was the main purpose,  the tax is doing much more harm than good.  Certainly expansion of the tax (or a ban) would be even more harmful.

Fiscal Year 2013

13 August 2012

Montgomery County has launched the new fiscal year, and the budget is as scary and precarious as ever.

The budget includes a 6% increase over last year’s spending, even though revenues are down.  (Surprised?).

There’s money in the budget for more buildings at Montgomery College, recreation centers, and twenty new schools (twenty?).  Disturbingly, the budget also calls for expenditures to alter the southern entrance to the Bethesda Metro station.  That expenditure isn’t being made because there’s anything wrong with the entrance, but rather to facilitate the Purple Line.  The Purple Line isn’t coming soon (if ever); why spend this money in vain?  At least wait until the funding for the Purple Line is secure.

This all means new borrowing, when the county is already laying out over $300 million annually to cover existing debts.

How to pay for all this?  The despised energy tax increase was cemented permanently into place.  That measure initially jacked up the taxes by 155%, but was sold to the public as being “temporary” (again — surprised?).   An energy tax is a regressive tax, because it takes a larger proportion of income from the poor than from the wealthy.   That’s an inconvenience for some people, but likely a health hazard for the elderly and lower-income populations, who will have to turn down the air conditioning at a time of record heat.  And, of course, the weighted property tax rate goes up almost 5%.

 

Taxes and Diet Food

4 August 2008

A politician’s heaven would be taxes without guilt; even better would be taxes with praise.  Council member Nancy Floreen has been pressing an increase in the energy taxes for Montgomery County.

Now, no one likes another energy tax.  But, if we call it a carbon tax, why, that must be different.  The average person doesn’t think of herself as using “carbon”, so it must not affect me.  And — even better — we can say that it’s going to stop global warming.  And bring in more money for pork at the same time!

It’s like a dieter seeing angel food cake that has no calories!  Woo hoo! Dig in, Nancy!  Have another slice.  And another! No need to apologize for raiding the citizens’ wallets. Hell, stuff your face.  Shove it all in there.

Feel better now?

“I am pleased that we adopted my carbon surtax which takes some of the burden off property tax payers by generating about $11 million from all users of power, including those who do not pay property tax such as the federal government.”

If it actually “takes the burden off property tax payers”, then you must be advocating reducing property taxes, right, Nancy?  No, I didn’t think so.  It’s just more money for the council to play with.  Not only doesn’t it take the burden off anyone, but it increases the overall burden, because we all use carbon, every day.  A carbon tax is highly regressive, too, because it hits the poor more than anyone.  People who can barely afford to fill their gas tank, or heat their home, now will have to pay more for those “luxuries.”