taxation

Alberta must find alternatives to cutting social spending

Published by Anonymous (not verified) on Fri, 05/07/2019 - 5:13am in

I have an opinion piece in today’s Edmonton Journal about Alberta’s current fiscal situation.

Points raised in the blog post include the following:

-The Jason Kenney government will almost certainly announce cuts to social spending in the near future.

-Yet, more than 80% of Alberta’s kindergarten through Grade 3 classes currently exceed the provincial government’s own class-size targets.

-Tuition fees as a share of university operating revenue have roughly tripled in Alberta over the last 30 years.

-Social assistance (i.e., welfare) caseloads have risen substantially in Alberta since the start of the economic downturn.

-Alberta still has, by far, the lowest debt-to-GDP ratio of any Canadian province.

-Albertans are also taxed less than any residents of any other province.

-Meanwhile, Alberta remains the only Canadian province without a provincial sales tax.

The link to the opinion piece is here.

Breaking free of neoliberal thinking to deliver progressive change

Published by Anonymous (not verified) on Sun, 30/06/2019 - 2:05am in

Man pushing the letters im away from the word impossible, leaving the word possibleImage by Gerd Altmann from Pixabay

What a week we’ve had. Or is that a decade?

After almost 10 years of cuts to public spending and their destructive consequences, the nation is weary. We are mired in controversy over Brexit.  We have a government in meltdown in which MPs are fighting like rats in a bag over a leadership race that shows every sign of descending into farce. And we should not forget the shameful behaviour this week of a Conservative MP at the Mansion House dinner and those who equally shamefully jumped up to defend his aggression or ignored it. The emperor’s nakedness is there for all to see in all its crude and tawdry coarseness.

We might feel slightly amused at the absurdity of it all if it weren’t so serious. Bemusement, head shaking and looking on in disbelief are natural responses to this on-going train crash come tragicomedy but looking at the candidates’ campaign promises, we can be reassured on one thing – it’s more of the same – only worse. Policies based on erroneous ideas of how governments spend and, of course, ideological preferences from tax cuts to help the rich and the corporations and diminishing the role of the state even further. And let’s not forget election promises also designed to garner support from the top end of town as if they haven’t got enough wealth stashed away in bank accounts and property already.

Boris Johnson defended his plan to cut income tax for those earning more than £50,000 as being ‘sensible’. The infamous ‘trickledown’ which harks back to Ronald Reagan and Margaret Thatcher’s economic dogma that prosperity for the rich leads to prosperity for everyone has been proved to be the biggest con ever. Tax cuts for the rich, as the 99% have discovered, don’t deliver; they just make the rich richer and the poor poorer.

The IFS (Institute of Fiscal Studies) was critical in its analysis of the plan on the basis that it wasn’t clear that tax cuts would be compatible with ending austerity or ensure prudent management of the nation’s finances thus and not unsurprisingly, maintaining the mainstream illusion of the state finances as a household budget where government needs people’s taxes before it can spend. They compounded their inaccuracy by a reference to the state of the public accounts as if they were an appropriate marker for measuring the government’s economic record. We balanced the books but hey we trashed the country!

Examining the pitch of the other contender for the leadership, Jeremy Hunt, is even less encouraging from the perspective of his ideologically inspired policies combined with his ignorance (or is that part of the strategy?) of how governments spend.   He is laying out his campaign stall with a variety of proposals from cutting corporation tax to reforming social care, raising defence spending and buying off students as if business start-ups were more important than providing trained nurses, doctors, teachers and other professionals.  His pledges he said were ‘designed to turbocharge the economy’ claiming that ‘by growing our economy we can afford to invest in our public services, support the lowest paid [and ensure] that debt continues to fall”. His aim, he said, was to tackle the £3.5 billion ‘black hole’ in social care which would see money taken out of the pay packets of working people to fund their care in later life. He wittered on about being a country ‘where people save for their social care’ promising that those that did the “right thing” would have their care costs capped. Carrots and sticks in abundance.

Here we have classic responses from a politician whose government has spent the last 9 years telling us that: a) there was no alternative to cuts because Labour had overspent and the country had to live within its financial means and pay down the debt, b) privatising public services was the only option to keep costs down and drive efficiency and c) drilling into the public consciousness the neoliberal narrative of personal responsibility, which has divided the nation through building a tale of spongers on the state versus hard-working people.

It’s worth reminding readers that this is an imaginary black hole fashioned out of nothing but a political desire to create a false narrative to justify reform. The pretence that public services, the NHS and Social Care are unaffordable and that the only alternative is to shift financial responsibility onto ordinary people is a disgraceful manipulation of the truth. Telling them that they must provide for themselves is an insult to the many who don’t even earn enough to keep their heads above the water today, let alone save for the future. It denies the realities of the power of a currency issuing nation to pay for public infrastructure, from health and social care to education and welfare. To explain it away as a lack of money is a shameful distortion of monetary realities.

Furthermore, the suggestion that investment in public services depends on a growing economy is an equally pernicious lie that fails to acknowledge the role that public infrastructure plays in ensuring the health and well-being of citizens and economic prosperity. A prosperous economy depends primarily on public investment in health, education, transport and all kinds of other publicly paid-for services both for today and the future. We need to restore the long-dead idea that government is elected to serve the nation rather than its corporate buddies.

Only two days ago, council chiefs were warning that as a result of cuts to local government funding, social services were ‘fragile and failing’ and despite an increase in funding further cuts to care services would be unavoidable. The lie of lack of government funds and unaffordability is being used to justify this shift towards personal obligation.

However, the nauseating truth is that we have a government that has chosen not only to leave our elders fending for themselves but also to leave people working in social care on low incomes and in poor working conditions. This can scarcely be said to be a recipe for human well-being or a prosperous economy.  Austerity has always been a political choice and bears no relationship to the state of the public finances. It is designed to fulfil an ideological agenda of a diminished state which has abandoned democracy and public purpose to serve the interests of global corporations.

Again, in its analysis of Hunt’s plans, the IFS plays to the household budget narratives of how government spends by claiming that spending in other departments could suffer without tax rises or risk higher borrowing which would ‘amplify the long-run challenges facing the UK public finances’.  The IFS and other institutions like it reporting on poverty and inequality always do so in the context of the public finances being the measure of economic health and what spending options it leaves open to government. Building a picture where government has to rob Peter’s government department to pay Paul’s, raise tax or the spectre of more borrowing. All illusory narratives with no application to a sovereign currency issuing government.

All these promises by prime ministerial hopefuls won’t sit well with the Chancellor and the pervasive belief that the public accounts and the economy are safe in Conservative hands.  It would be interesting to be a fly on the wall at Number 11 as the candidates threaten his and his predecessor’s thrifty, penny pinching approach to public spending. Even Theresa May, the outgoing Prime Minister who was aiming to splash the cash on education as part of her leaving legacy, is having to reign in her expectations after discussions with the occupant of Number 11.  It’s astonishing how spending promises, or tax cuts coincide with elections, isn’t it! The magic porridge pot that just keeps on giving to suit political agendas.

In the light of this disarray and the realities of the impact of government policies on UK citizens, it makes perfect timing for left-wing progressive parties like Labour to shift the language framing about how we pay for a progressive agenda towards one that represents an accurate description of how money actually works. It is regrettable on that score that the household budget and tax and spend mythologies are part of the discourse. Fixating on sound finance and Fiscal Credibility Rules, both indicative of a neoliberally inspired household budget framework, do the concept of delivering a progressive agenda a disservice.

Just a quick search on the internet shows how these household budget descriptions have been, and still are, dominant narratives amongst left-wing progressives and shadow Chancellors.

“…the Tories’ tax cuts plans would mainly benefit the wealthy few, as well as depriving public services of much needed resources.

“[we] will properly fund our public services and ask the wealthiest and corporations to pay more to fund it.”

 “The budget deficit can be sorted if we set up a fair tax system which tackles the tax avoidance by the big companies and the very rich that costs us £100billion a year.”

 “We are embarking on the immense task of changing the economic discourse in this country. We are throwing off that ridiculous charge that we are deficit deniers,”

“We are saying, tackling the deficit is important but we are rejecting austerity as the means to do it.”

“We will make sure the debt is falling at the end of five years.

Transforming the way capitalism operates by continuing to frame the progressive discourse in the context of how we can pay for the radical root and branch change we need will end in disappointment, if not disaster. It certainly won’t happen by making compromises with it. The progressive left can’t have its feet in both camps on the basis that that’s the best way to fight fire. There’s only one winner in that scenario.

Addressing the twin evils of poverty and inequality, combined with the challenges of climate change will never be a quick fix. It will require strong national governments utilising their currency issuing powers for the long-term to ensure that the planet’s productive capacity does not exceed its resource limitations.

The progressive left needs the courage of its convictions to recognise the currency issuing powers of the state to deliver an agenda which serves both national and local needs, enabling citizens and the communities in which they live to address the challenges we face and create economies which are sustainable and a planet on which its passengers can flourish.

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The post Breaking free of neoliberal thinking to deliver progressive change appeared first on The Gower Initiative for Modern Money Studies.

Ten things to know about this year’s Alberta Alternative Budget

The Alberta Alternative Budget (AAB) is an annual exercise whose working group consists of researchers, economists, and members of civil society (full disclosure: I’m the Editor). Our general mandate is to create a progressive vision for Alberta to boost economic growth and reduce income inequality. This year’s document was released today, and here are 10 things to know:

  1. The NDP government of Rachel Notley government made important advances with respect to childcare, but much remains to be done. Specifically, the Notley government introduced a $25/day childcare pilot project and increased the provincial childcare budget by 27% since taking office. However, gender equality and women’s labour market participation in Alberta could be improved even further with universal childcare. This year’s AAB proposes that important steps be taken to get that done by investing an additional $1.65 billion in childcare over the next year.
  2. More than 80% of Alberta’s Kindergarten through Grade 3 classes currently exceed the provincial government’s own class size targets. What’s more, almost half of the province’s Grade 4 through Grade 12 classes exceed the government’s class size targets. And in high schools across the province, roughly half of all core subject classes exceed the Alberta Commission on Learning (ACOL) targets set in 2003. The AAB therefore recommends substantial increases in spending on k-12 education while also recommending that Alberta’s provincial government reduce funding for private schools (which are currently subsidized at higher rates than those in any other province).
  3. When it comes to gender and public policy, Alberta has a long way to go. Women in Alberta face the largest employment gender gap of any province. They are over-represented in lower-paying careers and their hourly pay for full-time work is only 80 cents on a man’s dollar. Further, Alberta lacks pay equity legislation. The AAB recommends that the annual budget of Alberta’s Ministry for Status of Women be increased by 30%, and that the provincial government create a pay equity task force to both investigate the reasons and propose solutions for the large gender pay gaps across industries and occupations in the province.
  4. There are nearly 6,000 reported cases of wage theft (i.e., unpaid wages) in Alberta each year. Further, in 2017/18, only 41% of wage-theft complaints were resolved within 180 days. And it’s generally accepted that formal wage-theft claims represent a small fraction of all instances of wage theft. The AAB therefore proposes that 75 additional employment standards officers be hired in the province, in order to prevent and remedy wage theft.
  5. One in 5 Alberta workers will be injured on the job this year; one in 11 seriously. This year’s AAB will therefore invest an additional $70 million in enforcement of Alberta’s occupational health and safety laws in order to make workplaces safer.
  6. Tuition fees as a share of university operating revenue have roughly tripled in Alberta over the last 30 years. The Notley government did freeze tuition fees in 2015, and recently introduced legislation that would tie tuition fee increases to inflation; but those measures alone don’t cut it. The AAB proposes a five-year ‘phase out’ of tuition fees, starting with a 20% reduction in tuition fees for all post-secondary students, including international students.
  7. Alberta still has, by far, the lowest debt-to-GDP ratio of any province. Alberta’s net debt-to-GDP ratio for 2018-19 is projected to be 6.5%. The next lowest is British Columbia’s, which stands at 15.2%. Though Alberta’s net debt-to-GDP ratio has risen quite quickly since the slump in oil prices, it’s hard to make the claim that the province is living beyond its means.
  8. Albertans collectively are taxed less than residents of any other province. According to Alberta Treasury Board and Finance, if Alberta’s provincial government adopted a tax structures similar to the next lowest-taxed province in the country (British Columbia), Alberta would generate an additional $8.7 billion in annual revenue.
  9. Alberta remains the only Canadian province without a provincial sales tax. The AAB Working Group estimates that the implementation of a 5% provincial sales tax in Alberta would generate approximately $5 billion in new revenue annually. What’s more, even after the implementation of this tax, Alberta would remain Canada’s lowest-taxed province!
  10. This year’s AAB further proposes that a new provincial sales tax be harmonized with the federal Goods and Services tax. The federal government already collects a 5% sales tax in the form of the Goods and Services Tax (GST). Following the lead of several other provinces, we propose that Alberta introduce a Harmonized Sales Tax (HST), which would allow the province to generate its own share of the revenue collected by the federal GST. Introducing a 5% provincial portion of a HST would still leave Alberta with a combined HST of 10%.

In Sum. In addition to providing a costed-out public policy alternative to the status quo in Alberta, each AAB chapter also provides a primer on the public policy topic in question. I think the document makes for excellent reading for researchers, educators, students and non-profit leaders. The media release, along with a link to the full document, can be found here.

Ten things to know about this year’s Alberta Alternative Budget

The Alberta Alternative Budget (AAB) is an annual exercise whose working group consists of researchers, economists, and members of civil society (full disclosure: I’m the Editor). Our general mandate is to create a progressive vision for Alberta to boost economic growth and reduce income inequality. This year’s document was released today, and here are 10 things to know:

  1. The NDP government of Rachel Notley government made important advances with respect to childcare, but much remains to be done. Specifically, the Notley government introduced a $25/day childcare pilot project and increased the provincial childcare budget by 27% since taking office. However, gender equality and women’s labour market participation in Alberta could be improved even further with universal childcare. This year’s AAB proposes that important steps be taken to get that done by investing an additional $1.65 billion in childcare over the next year.
  2. More than 80% of Alberta’s Kindergarten through Grade 3 classes currently exceed the provincial government’s own class size targets. What’s more, almost half of the province’s Grade 4 through Grade 12 classes exceed the government’s class size targets. And in high schools across the province, roughly half of all core subject classes exceed the Alberta Commission on Learning (ACOL) targets set in 2003. The AAB therefore recommends substantial increases in spending on k-12 education while also recommending that Alberta’s provincial government reduce funding for private schools (which are currently subsidized at higher rates than those in any other province).
  3. When it comes to gender and public policy, Alberta has a long way to go. Women in Alberta face the largest employment gender gap of any province. They are over-represented in lower-paying careers and their hourly pay for full-time work is only 80 cents on a man’s dollar. Further, Alberta lacks pay equity legislation. The AAB recommends that the annual budget of Alberta’s Ministry for Status of Women be increased by 30%, and that the provincial government create a pay equity task force to both investigate the reasons and propose solutions for the large gender pay gaps across industries and occupations in the province.
  4. There are nearly 6,000 reported cases of wage theft (i.e., unpaid wages) in Alberta each year. Further, in 2017/18, only 41% of wage-theft complaints were resolved within 180 days. And it’s generally accepted that formal wage-theft claims represent a small fraction of all instances of wage theft. The AAB therefore proposes that 75 additional employment standards officers be hired in the province, in order to prevent and remedy wage theft.
  5. One in 5 Alberta workers will be injured on the job this year; one in 11 seriously. This year’s AAB will therefore invest an additional $70 million in enforcement of Alberta’s occupational health and safety laws in order to make workplaces safer.
  6. Tuition fees as a share of university operating revenue have roughly tripled in Alberta over the last 30 years. The Notley government did freeze tuition fees in 2015, and recently introduced legislation that would tie tuition fee increases to inflation; but those measures alone don’t cut it. The AAB proposes a five-year ‘phase out’ of tuition fees, starting with a 20% reduction in tuition fees for all post-secondary students, including international students.
  7. Alberta still has, by far, the lowest debt-to-GDP ratio of any province. Alberta’s net debt-to-GDP ratio for 2018-19 is projected to be 6.5%. The next lowest is British Columbia’s, which stands at 15.2%. Though Alberta’s net debt-to-GDP ratio has risen quite quickly since the slump in oil prices, it’s hard to make the claim that the province is living beyond its means.
  8. Albertans collectively are taxed less than residents of any other province. According to Alberta Treasury Board and Finance, if Alberta’s provincial government adopted a tax structures similar to the next lowest-taxed province in the country (British Columbia), Alberta would generate an additional $8.7 billion in annual revenue.
  9. Alberta remains the only Canadian province without a provincial sales tax. The AAB Working Group estimates that the implementation of a 5% provincial sales tax in Alberta would generate approximately $5 billion in new revenue annually. What’s more, even after the implementation of this tax, Alberta would remain Canada’s lowest-taxed province!
  10. This year’s AAB further proposes that a new provincial sales tax be harmonized with the federal Goods and Services tax. The federal government already collects a 5% sales tax in the form of the Goods and Services Tax (GST). Following the lead of several other provinces, we propose that Alberta introduce a Harmonized Sales Tax (HST), which would allow the province to generate its own share of the revenue collected by the federal GST. Introducing a 5% provincial portion of a HST would still leave Alberta with a combined HST of 10%.

In Sum. In addition to providing a costed-out public policy alternative to the status quo in Alberta, each AAB chapter also provides a primer on the public policy topic in question. I think the document makes for excellent reading for researchers, educators, students and non-profit leaders. The media release, along with a link to the full document, can be found here.

MEDIA RELEASE: Alberta should increase social spending; cuts are not the way to go

(June 24, 2019-Calgary) With Alberta’s economy still facing challenges and vulnerabilities, the Alberta government should not be doling out tax cuts or cutting social spending, according to the Alberta Alternative Budget (AAB) released today.

“Alberta still has, by far, the lowest
debt-to-GDP ratio of any province,” says Nick Falvo, editor of the report. “We
are in a good position to increase spending on education, invest in affordable
child care, offer free dental care to Albertans under 18 years, and support
other programs that would help Albertans facing unpredictability in the job
market.”

The AAB is an annual exercise whose working
group consists of researchers, economists, and members of civil society. The
AAB  aims to create a progressive vision
for Alberta to boost economic growth and reduce income inequality.

Today’s report calls for the introduction
of a harmonized sales tax to reduce Alberta’s reliance on profit from energy
markets, that have always been volatile. Under the previous government,
important steps were taken to stabilize the economy through diversification and
social spending.

“The UCP government has already cut close
to $6 billion in provincial revenue by cancelling the carbon tax and cutting
corporate taxes, and this is the wrong direction,” says Falvo. “Instead,
investing in programs and infrastructure is what is needed to foster a vibrant
Alberta.”

Download the report.

-30-

Contact: Nick Falvo, falvo.nicholas@gmail.com, 587-892-7855

MEDIA RELEASE: Alberta should increase social spending; cuts are not the way to go

(June 24, 2019-Calgary) With Alberta’s economy still facing challenges and vulnerabilities, the Alberta government should not be doling out tax cuts or cutting social spending, according to the Alberta Alternative Budget (AAB) released today.

“Alberta still has, by far, the lowest
debt-to-GDP ratio of any province,” says Nick Falvo, editor of the report. “We
are in a good position to increase spending on education, invest in affordable
child care, offer free dental care to Albertans under 18 years, and support
other programs that would help Albertans facing unpredictability in the job
market.”

The AAB is an annual exercise whose working
group consists of researchers, economists, and members of civil society. The
AAB  aims to create a progressive vision
for Alberta to boost economic growth and reduce income inequality.

Today’s report calls for the introduction
of a harmonized sales tax to reduce Alberta’s reliance on profit from energy
markets, that have always been volatile. Under the previous government,
important steps were taken to stabilize the economy through diversification and
social spending.

“The UCP government has already cut close
to $6 billion in provincial revenue by cancelling the carbon tax and cutting
corporate taxes, and this is the wrong direction,” says Falvo. “Instead,
investing in programs and infrastructure is what is needed to foster a vibrant
Alberta.”

Download the report.

-30-

Contact: Nick Falvo, falvo.nicholas@gmail.com, 587-892-7855

What are taxes actually for?

Published by Anonymous (not verified) on Thu, 16/08/2018 - 3:06pm in

We need to talk about taxation. I do not think it means what you think it means.

(This piece was originally published on Patreon)

While some of us are pretty conscious of the importance of using the correct terminology when it comes to issues of social justice, race, gender and sexuality, when it comes to addressing inequality, we are still using language straight out of the neoliberal handbook.

We need to be honest about how the tax system works and what it is for. To do so isn’t radical, or even progressive. It is simply the economics of reality.

What are taxes for?

In countries whose governments issue their own currencies, taxes do not pay for federal services.

Governments like those of the US, UK, China, Australia, Canada, etc run spend & tax economies, not tax and spend. They do not need your taxes to pay for anything. You might be angered to know that, actually, your taxes are not used for anything after you pay it. Not at a federal level. Your taxes are essentially destroyed upon receipt. Taxation is the act of taking currency out of the economy. Using your taxes to pay for public services would keep that money in circulation, thus serving the very opposite of its purpose.

There are some exceptions here which are important to underline: Taxes pay for services at state and local levels, but that is only because they are themselves inadequately funded by federal governments and therefore raising taxes becomes necessary to make up the revenue shortfall. Taxes also nominally pay for spending in countries whose governments adopt foreign currencies (most EU member states, for example), or peg their gold to a foreign currency.

So why pay tax at all?

Taxes are important. Just not for the reasons that are often talked about.

Taxes exist for a number of reasons:

- To maintain the value of the currency.

- To stabilise aggregate demand.

- To manage growth and distribute wealth. and, depending on what you think government is for and who it exists to serve, ensure prosperity and equality of opportunity for their constituents.

- To discourage bad behaviours (taxation on cigarettes, for example, are designed to discourage smoking and reduce the burden on health systems) & encourage good behaviours, (like promoting sustainability through a tax on carbon and investment in renewable energy).

- It also exists to accurately cost public spending requirements: infrastructure, education, health, public safety: police, fire, ambulance, defence, intelligence etc.

As economist, Professor Randall Wray recently pointed out: Governments do not need a single dime from the wealthy to address inequality. That is not how taxes operate, or what they are for.

“Taxes on the rich might take ‘resources’ from people who have too much — in that their demand deposit account is debited,” he writes for Naked Capitalism. “But taxation does not ‘give resources’ to people who have too little.”

“Rather, government spending directed to those who ‘have too little’ is what gives the poor access to resources. (They can use their demand deposit credits to buy food, clothing and shelter, etc). They are functionally two separate entities.

“Government can spend to help the poor without taxing the rich or anyone else.”

Buying into the myth

Nonetheless, the idea that taxes pay for government spending persists as an inaccurate bipartisan consensus, one of the greatest collective myths of modern capitalism.

When you hear politicians or pundits squawking about workers’ hard-earned tax dollars paying for this or that, you can almost certainly guarantee they have no idea about how taxes work either.

Our acceptance of this lie is, to quote anthropologist David Graeber, “collectively acquiescing to our own enslavement.”

The continuation of the status-quo depends upon the public’s ignorance or blind consensus as to the true nature of banking, finance, government spending, job creation and the nature of work itself.

The very myth that the vast majority of us have settled on is the very thing preventing full and gainful employment, and guarantees a future (and a present) where the only way to buy our way out of public squalor is through rising private debt.

In his recent book, Bullshit Jobs, Graeber describes modern day capitalism as a system of ‘Managerial Feudalism’, a form of social and political control achieved through corporate bureaucracy: the proliferation of middle-managers, supervisors, administrators all employed to ‘appropriate labor through usury’, stealing wealth, resources, opportunity and power from the working and middle class and transferring ownership to the political and elite classes and the idle rich.

“Marx appears to have been right when he argued that ‘a reserve army of unemployed’ has to exist in order for capitalism to work the way it’s supposed to,” he writes.

“…we are identifying with our rulers when, in fact, we’re the one’s being ruled.”

To truly address inequality and abolish austerity politics, we must start being honest about how taxation works and what it is for.

Language is important. You can be as woke as you like about gender and racial politics, but using the wrong terminology for taxation is kryptonite for social justice. We cannot subvert the neoliberal playbook while continuing to use the very same language invented to ensure a permanent economy of inequality and austerity.

Thank you for reading. I couldn’t afford to continue my research, or write this book, were it not for the support of my generous sponsors. Support independent journalism, sponsor me on Patreon, starting at $3 a month, or throw some money at my PayPal.

The case against income tax

Published by Anonymous (not verified) on Thu, 05/07/2018 - 11:38pm in


“If income tax were really important, how come those who make the most often pay the least?

Income tax doesn’t really pay for government services federally. So why do we, the 99%, even need to pay it? Isn’t it just punishing people for earning?”

Me at Renegade Inc. on the case against income tax. Click here for the full schpiel.

Republicans help pass Illinois budget over Rauner's veto

Published by Anonymous (not verified) on Fri, 07/07/2017 - 4:37pm in

For the second time in as many months, legislative Republicans have turned on their Republican governor for his refusal to back tax increases to help balance the budget. Last month, supermajority Kansas Republicans revolted against Sam Brownback's six-year tax-cutting experiment, which brought the state persistent budget problems and two credit downgrades.

Tonight (July 6) enough Republicans joined with the majority House Democrats to override Bruce Rauner's veto of the Illinois budget (the Senate overrode on July 4 with one Republican vote), ending a two-year battle. Like Kansas, Illinois will now have tax increases, in this case on both the personal and corporate income tax, which are expected to raise $5 billion a year.

The budget also contains 5% budget cuts for most state agencies and a 10% cut to college education, according to the Chicago Tribune. Democrats had fought Rauner for two years over cuts and, as the Tribune reports, Rauner had refused to sign an income tax increase unless there was a property tax freeze and/or cuts to workers' compensation. Amazingly, the budget battle led to state universities receiving no state funding since January; colleges and universities are refunded in the new budget.

Like so many Republicans, Rauner simplistically blames all of Illinois' budget problems on Democrats and unions. His extreme policy proposals have been presented as the only way to tackle the budget for his entire term of office, and he refused to negotiate. As a result, key members of his own party abandoned him on absolute opposition to tax increases. We'll have to wait and see whether this mini-trend will spread to more states.

Kansas Republicans abandon Brownback; raise taxes over his veto

Published by Anonymous (not verified) on Sat, 10/06/2017 - 6:49pm in

Tags 

Kansas, taxation

Remember Kansas's great tax-cutting experiment under Governor Sam Brownback? (Me, sarcastic?) As always in Arthur Laffer and Stephen Moore La-La Land, cutting taxes leads to economic nirvana. Except when it doesn't, and it didn't in Kansas.

I recently wrote about the idiocy of Investor Business Daily's criticisms of California, and Paul Krugman carried the ball further, citing me and bringing in a comparison with Kansas (Brownback and Jerry Brown both took office in 2011). As Kansas cut taxes and California raised them, Kansas managed to raise employment by 5% from 2011 to 2017, whereas California's job growth was a rather more impressive 15% over the same period. As it turns out, Kansas's problems weren't limited to poor job growth.

As Alexia Fernandez Campbell points out at vox.com, one major change "eliminated taxes on owner-operated businesses, known as pass-throughs." This created an incentive for people to switch from being employees to being separate businesses providing exactly the same services. Tax avoidance reduced tax revenue by an estimated 1.7%, while the total reduction in tax revenue was 8%. With losses of this magnitude, Kansas ran into persistent budget trouble. For this, it was rewarded by Standard & Poors with credit downgrades in 2014 and 2016. By contrast, California saw its credit upgraded by the rating agencies several times. Both states now have an AA- rating from S&P, which is the fourth-best rating but below average for U.S. states.

By this week, the Republican-supermajority Kansas Legislature had had enough. Overriding Brownback's veto, the legislature passed a repeal of most of Brownback's tax cuts, including the pass-through provision mentioned above. Hopefully the state will now be able to begin repairing its six-year fiscal nightmare.

Do I have to tell you that Laffer and Moore are the main advisers behind Trump's tax plan, too?

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