Monday, February 20, 2006

Thought Experiment No. 4

Opponents of the WTPA are making much of the fact that it caps revenue increases through the use of the CPI rather than growth in personal income. This, oh horror, will result if government becoming a smaller part of the state's economy. We ought to at least ensure that government gets a stable share of state income, need it or not.

There seems to be some dispute over whether state and local spending has outstripped the growth in personal income. Reschovsky argues that state revenues have declined as a percentage of personal income (although a more reasonable way of putting it is that it increased, declined and has now more or less returned to the 1985 level). A 2004 study by Richard Chandler for the Wisconsin Policy Research Institute, on the other hand, claims that state and local spending increased as a percentage of personal income between 1986 and 2002.

The idea that government is "entitled" to a constant share of personal income is problematic. Generally, in managing personal and organizational finances, one tries to reduce all expenses as a percentage of income. But this is a thought experiment, so let's put that aside.

What if the WTPA allowed revenue increases commensurate with the growth in personal income? The party of government would retain its tribute and the rest of us would at least know that the state will not grow larger without our express approval.

Wouldn't that solve the problem?

Any liberal and Democrat readers can leave their endorsements in the comments section.

3 comments:

Seth Zlotocha said...

Your assertion that amendment opponents claim the government is "entitled" to a constant share of personal income is completely unfounded--which makes your thought experiment largely baseless.

Amendment opponents think governmental units should be allowed to maintain enough flexibility year-to-year to respond to the needs and wants of the public. That could mean growing faster some years and slower during other years, which has been the reality in our state throughout its history.

Since we have a very diverse state with a very diverse set of needs and wants, our budgetary procedures should remain flexible and probably even become more flexible, not more rigid, to respond to the public interest in our varying regions.

Amendment opponents also largely believe that budgetary decisions should privilege the discussion of the actual services provided by governments, rather than putting cost as the primary dictator of public policy. Cost should certainly be considered, but any constitutional amendment that caps the growth of public services is not putting those public services first.

That said, I will note that changing the formula from inflation to personal income growth would make the amendment more reasonable. But, again, it still wouldn't make it desirable.

Clint said...

I will agree with Seth on one very small detail...

Your assertion that amendment opponents claim the government is "entitled" to a constant share of personal income is completely unfounded...

The pols in Madison and [Insert the name of your town here] believe that the money is not personal income because it never belonged to the citizens, it was always the governments. Don't forget this limits all types of income the state collects not just personal taxes but also Corporate taxes, gas taxes, estate taxes, etc.
I work for a company that at one point was headquarted out of Milwaukee. About 10 years ago, when they created a data disater site in AZ, they also changed the Corp charter to AZ. Since then as corp services/business lines expanded or changed, they have expanded in favor of AZ. AZ at one point had 10 employees, now they have over 1000.

How many companies have left WI for tax friendlier states? How many jobs have been lost because Harley Davidson, Master Lock, Rockwell etc have expanded somewhere other that WI?

If the pols had been responsible with our tax money for the last 20 years, we would not be fighting for TPA/TABOR now. But then again the pols never thought of it as our money.

Seth Zlotocha said...

Milwaukee_id10t,

You might want to check out the reality of the corporate friendliness in Wisconsin:

* The state of Wisconsin just approved today giving Logistics Health Inc., run by former gov. Tommy Thompson, $4 million in tax credits to build a facility in La Crosse

* The City of Milwaukee just a couple weeks ago gave Manpower Inc. a $25 million city financing package to bring its headquarters downtown

* A La Follette School conference found that Wisconsin businesses pay less in taxes than all of our neighboring states including Illinois, Indiana, Iowa, Michigan, Minnesota and Ohio

And there are many more examples of the friendliness of Wisconsin to corporations. Plus, companies know they benefit from a highly educated public here in Wisconsin, which is due to our exemplary K-12 public school system and the top-notch UW system.

Sure, some companies will leave Wisconsin just like many companies are leaving the US with the deindustrialization movement of the last quarter-plus century, but we still have our fair share. And the government is looking for ways to bring in more, such as through the biomedical field in conjunction with UW-Milwaukee, but the last thing we should do is adopt a constitutional amendment that diminishes the place of government in the state economy.