April 19, 2014

A Thought on Political Ignorance

"Voters cannot hold officials responsible if they do not know what government is doing, or which parts of government are doing what. Given that 20 percent thinks the sun revolves around the Earth, it is unsurprising that a majority is unable to locate major states such as New York on a map. Usually only 30 percent of Americans can name their two senators. The average American expends more time becoming informed about choosing a car than choosing a candidate. But, then, the consequences of the former choice are immediate and discernible."

~ George Will

SOURCE: His January 1, 2014 "Price of Political Ignorance" Column in which he reviews Ilya Somin's book, "Democracy and Political Ignorance: Why Smaller Government is Smarter"

P.S. Your humble scribe will not be growling for the next several days. Have a Happy Easter.

April 18, 2014

A Picture of the Federal Income Tax's Progressivity

Yesterday we growled about tax confusion, based upon a report by Ross Kaminsky in the American Spectator.  In the "thought," which we excerpted, Kaminsky pointed to a Gallup Survey, noting "61 percent of Americans continue to believe that their upper-income friends pay too little."

In an effort to clear up that tax confusion, we point to George Mason University's Mercatus Center's website where Veronique de Rugy has posted a chart, which clearly shows the average effective federal tax rates by income quintile, a statistical measure of five equal proportions. Here's the chart:

 

You can read Ms. de Rugy's complete explanation of the above chart, but she makes this important point:

"Whether one thinks that the current system is fair, unfair, or just right, there can be little debate that federal income taxes are indeed progressive." (emphasis added)

If you want to see just how much income has been redistributed by the administration of President Obama, compare the above chart to the comparable 2009 chart (here). You will note that four of the income quintiles have seen lower average effective federal tax rates, e.g., a 6% decrease for the middle income quitile, while those in the top quintle have seen their average effective rates increase 7%. According to State of the USA, the income cutoff (in 2009 dollars) for the  20th percentile, or lowest quintile is $20,000; 50th percentile is $50,000; and 80th percentile, or top percentile, is $100,000.

So the next time a liberal and/or progressive politician starts spouting their class warfare rhetoric about the rich not paying their "fair share," you'll be armed with the facts. Kudos to Ms. de Rugy for adding to taxpayers' knowledge about who pays income taxes, and at what rate. She posted two other informative charts the same day -- 1) trends in EITC spending and number of beneficiiaries (here), and 2) trends in after-tax income by household position in income distribution, 2000-2010 (here).

April 17, 2014

A Thought on America's Tax Confusion

"According to a Gallup poll released on April 14, 10 percent more Americans now think their taxes are too high than think their taxes are about right. That level has only been matched once, and only briefly, since the Bush tax cuts of 2003 that Democrats hate with such a passion.

"Not surprisingly, a majority of Democrats think their taxes are “about right,” whereas only 38 percent of Republicans share that view. Independents seem to be even more concerned about excessive tax rates (for their own taxes) than Republicans are — which should scare the bejesus out of Democrats going into the 2014 elections, as if they don’t have enough to worry about.

"But beyond the expected partisan differences in satisfaction with taxes, this week’s polling also shows a remarkable cluelessness among the American population when it comes to “who pays what” in federal income tax. It proves, sadly, that class warfare rhetoric, as spouted by President Obama and the great unwashed of Occupy Wall Street and many others, is having an impact (because the well-off are apparently too ashamed of success to mount a credible defense of economic liberty).

"Forty-nine percent of Americans, according to another Gallup poll, believe that the middle class pays too much in taxes. It is by far the highest number on this question since Gallup started asking it 15 years ago. A stunning 41 percent believe that lower-income Americans pay too much in taxes, this despite the fact that most of them are net receivers of tax dollars.

"Yet 61 percent of Americans continue to believe that their upper-income friends pay too little.

"A Rasmussen Reports survey released last year, offers an explanation: “68% believe middle-class Americans pay a larger share of their income in taxes than wealthy Americans do” and “only 24% think the wealthy pay their fair share.”

~ Ross Kaminsky

HT His April 16, 2014 "special report," posted at The American Spectator. Kaminsky's fact-rich report is well-worth reading in its entirety.

April 16, 2014

Arlington County Voters Get a Dividend

At 10:33 PM, an e-mail from Arlington County's press release office floated-in over the proverbial transom bearing the news that the Arlington County Board reduced the real estate tax rate by one-cent in its so-called FY 2015 budget mark-up. Here are the four bullet-points from the press release:

  • One-cent cut in real estate tax rate
  • County budget increase limited to 3%
  • 4.7% increase in Arlington Public Schools funding
  • Modest 1% COLA for County employees

And here's the introduction from the county's press release:

"The Arlington County Board today directed the County Manager to reduce the real estate tax rate by one cent in the Fiscal Year 2015 Budget. The Board's action came during the mark-up for the budget, which the Board is set to adopt during its April 22 meeting.

"The Board had to make some tough decisions," said Arlington County Board Chair Jay Fisette. "In order to give some break to homeowners who have seen their assessments rise, we limited the growth of the County budget, launched no new major initiatives and focused on funding schools and maintaining our core services and existing infrastructure."

"The budget mark-up includes a real estate tax rate of $0.996 per $100 of assessed value, a one-cent decrease from the $1.006 rate in Calendar Year 2013 (including the sanitary district tax). This represents a $6.6 million reduction from the budget proposed by the County Manager."

Virtually almost all of the remainder of the press release expounds on the four bullet points listed above.

Could the County Board have given Arlington County taxpayers a larger "Vihstadt dividend," which is how Wayne Kubicki, Arlington's fiscal guardian extraordinaire termed it (see yesterday's Growls)? Could it have been as large as the 3-cents recommended by an Arlington County Civic Federation resolution passed two weeks ago by a 23-11 vote (see our April 2 Growls here)? The answers are yes and definitely yes, respectively.

Your humble Growler would merely point to the remainder of the press release for the answers. First, note that even by cutting the real estate tax rate by 1-cent, "The Board’s action means the overall tax and fee burden for the average Arlington homeowner will be 4.6% higher than in 2014, or about $27 a month."

Unfortunately, the Board and their press release writers repeat their mantra about having the region's lowest real estate tax rate. Obviously, no one bothered reading our Arpil 2 Growls where we pointed to the Washington Post graphic, which demolished that tired rubric.

Read the remainder of the press release, noting all the spending that will still be occurring after the one-cent cut. Those plus a thorough scrubbing of the budget would probably make even the 3-cent recommendation of the Arlington County Civic Federation seem small. While we won't question the additional spending of $52,000 for the sexual assault hotline or the $72,606 for the mental health coordinator to train first responders, other items on the list seem questionable at best, e.g, $300,000 to plow snow from bike trails.

Once again, congratulations to John Vihstadt for his victory in last week's special election, and kudos to Wayne Kubicki for providing a framework for the Arlington County Board to cut the real estate tax rate.

April 15, 2014

A Framework to Cut Arlington County's Real Estate Tax Rate

In a letter to the editor (LTE), posted today at the online Arlington Sun Gazette (now a part of InsideNoVa), Wayne Kubicki, Arlington's inestimable fiscal guardian, suggests the Arlington County Board return a part of their real estate tax windfall to its rightful owners, Arlington County taxpayers.

Kubicki points out the Arlington County Manager has now provided County Board members, and citizens, with both the mid-year and third quarter reviews of the FY 2014 budget (available here as items A-1 and A-9). These are among the final pieces before the Board adopts the FY 2015 budget on April 22. Here is Kubicki's analysis from his LTE:

"What did these two FY14 updates show? More available money – lots of it!

"While there are lots of numbers in those two reports – nothing unusual about that – they show a whopping net of $37.1 million of “extra money.” Major factors were real estate revenues being over budget due to the unexpected assessment increases ($25M) and releasing a prior reserve of $8M that had been previously set aside for “stabilization.”

"By agreement between the County Board and School Boards, $9.6 million is transferred to the Schools, leaving $27.5 million of additional funds on the county side.

"Given this news, a major part of the budget finalization deliberations will be what to do with this $27.5 million.

"As expected, Ms. Donnellan has already put forth her additional spending “wish list” totaling $13.4 million, for such spending areas as affordable housing, street paving and maintenance capital. For the purposes of this letter, let’s assume this entire list is funded.

"That still leaves $14.1 million left over.

"To recap, the county manager’s proposed budget, plus nearly $10 million more to the schools, plus another $13.4 million of County spending, is now all covered – and $14.1 million is still on the table."

Mr. Kubicki even proposes a name for his 1.5-cent real estate tax rate reduction -- a Vihstadt Dividend. Having elected the independent John Vihstadt to the Arlington County Board last week, Arlington's taxpayers would get a timely dividend for their vote. Although my "wish list" would be to give back that "additional spending" to Arlington County taxpayers, I'm confident the "old" County Board wouldn't pay a dividend.

April 14, 2014

Biking at the Expense of Cars and Taxpayers?

Earlier this year, Kenric Ward of Watchdog.org's Virginia Bureau wrote that Arlington County "wants to get people out of their cars and onto bicycles, but the swap is costing millions of dollars — and making traffic more dangerous." Here's the remainder of his lede:

"Via a “Complete Streets” initiative, local planners are instituting “sharrows” for cyclists to share roads with motorists. (note, the link is 'broken")

“The county sees itself as a model for ‘livability and sustainability. In reality, it’s creating unsafe situations,” said Joe Warren, a member of Arlington’s Transit Advisory Committee.

"He charges that the county is pressing ahead without proper traffic studies.

"For the greater good?

"Arlington’s Master Transportation Plan states: “Our thoroughfares will bring people and communities together, rather than separating them. They will not be designed to speed traffic through the county.”

"The goal? Enable Arlington togrow without having to increase road capacity.”

"The county’s plan envisions benefiting “the greatest number of people and to maximize return on investment.”

"Neither of those objectives is being reached by bike.

"The county has dedicated more than $12 million in capital spending for bicycle projects through 2019. It’s earmarking millions more for the Capital Bikeshare program that rents out bicycles.

"But Warren, a cyclist himself, said bike ridership on Arlington’s major roads and streets remains “infinitesimally small.”

Ward also reported that Capital "Bikeshare's Arlington branch forecasts that its $304,356 operating deficit in 2013 will more than double to $687,230 by 2018."

Talk about the need for the Arlington County Board to learn about budget prioritization and to get back in touch with the core needs of all Arlington County citizens rather than just special interests, not to mention improving transparency on just how taxpayers dollars are spent.

The following picture showing so-called "so-called "sharrows" is from Kenric Ward's footnoted story. Ward has written three other stories about Arlington's traffic troubles, which you can find here.

  

April 13, 2014

Virginia Ranks 30th on Latest State-Local Tax Burden List

Liz Malm and Gerald Prante have prepared the latest, FY 2011 annual state-local tax burden rankings for the Tax Foundation. Their five key findings:

  • "During the 2011 fiscal year, state-local tax burdens as a share of state incomes decreased on average. This trend was largely driven by the growth of income in all states.
  • "In 2011, the residents of New York, New Jersey, and Connecticut had the highest state-local tax burdens as a share of income in the nation. In these states, residents have forgone over 11.9 percent of income due to state and local taxes.
  • "Residents of Wyoming paid the lowest percentage of income in 2011 at just 6.9 percent. They replaced Alaska, which had previously been the least-taxed for multiple decades, as the lowest-burdened state in the nation. After Wyoming and Alaska, the next lowest-taxed states were South Dakota, Texas, and Louisiana.
  • "State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, the twenty mid-ranked states, ranging from Oregon (16th) to Georgia (35th), only differ in burden by just over one percentage point.
  • "On average, taxpayers pay more to their own state and local governments (73 percent of total burden). Taxes paid within states of residence decreased on average in 2011, while taxes paid to other states increased, leading to a slight decrease in total burden. Some states deviated from these national trends, however."

Per Table 1, the U.S. average state-local tax burden is 9.6% (as a share of state income). Two states have rates in the 12% range (New York and New Jersey). Three states are in the 11% range (Connecticut, California, and Wisconsin). Eleven states are in the 10% range. The two lowest tax burden states are Alaska (7.0% and Wyoming (6.9%). The District's tax burden is just above the national average -- at 9.7%. Virginia ranks #30 with a burden of 9.2%. It is closely bunched there, which means its ranking could change measurably if the General Assembly goes the least bit wild on taxes. (emphasis added)

An interesting point made by Malm and Prante is:

"An interesting observation is that many of the least-burdened states do without a major tax. For example, Alaska (49th), Nevada (43rd), South Dakota (48th), Texas (47th), and Wyoming (50th) all do without a tax on wage income. Similarly, Nevada, South Dakota, and Wyoming all lack a corporate income tax, and Alaska has no state-level sales tax (though it does allow local governments to levy sales taxes).[7] While this is an interesting correlation, it does not answer the question of whether levying fewer types of taxes leads to lower tax burdens or whether a political demand for lower taxes leads to fewer types of taxes being levied. Also worth considering is the possibility that opting to not levy a personal income tax causes a state to rely more on other forms of taxation that might be more exportable."

Meanwhile at Virginia's leading policy blog, Bacon's Rebellion, yesterday, Jim Bacon commented on Virginia's ranking, saying:

"Hopefully, we can dispense with the nonsense that Virginia is a “low tax” state that starves its public sector. We’re not out of control like the aforementioned big tax-and-spenders but we’re well within the middle of the pack, with very small percentages differentiating us from those immediately above and below."

Once again, we thank the Tax Foundation for shining the light of transparency on the taxes we pay.

April 12, 2014

Every Worker's Share of the Federal Debt is $106,000

The Washington Examiner's Paul Bedard, Washington Secrets columnist, reported on Wednesday that according to a Harvard study, all "American workers would have to cough up a one-time “debt reduction fee” of $106,000 to pay off the nation's debt that has grown 58 percent under President Obama." Bedard described the report this way (emphasis added):

"The 91-page report provided to Secrets pegged the nation’s debt at $16.7 trillion, up from the $10.6 trillion inherited by Obama. “The debt has grown so quickly because of large and repeated annual deficits in federal spending,” said the report.

"What's more, the Annual Report of the USA, from the student(s) at the Harvard Political Review and done in partnership with the American Education Foundation, found that food stamp usage has surged 77 percent during the recession and that Social Security benefits will be slashed 23 percent starting in 2033 unless Congress and the White House institute sweeping reforms."

Bedard notes it "is considered one of the nation’s authoritative independent (analyses) of federal spending. One of the best benefits of the report is that the authors try to put huge numbers like the debt in perspective." He also includes a 3-minute long video prepared by the students who prepared ARUSA. In addition, he reports other facts from the report.

At Harvard University's Institute of Politics' blog, these two paragraphs appear to come from the report:

"Fiscal year 2013 was a disappointing year in federal budget policy, with only small signs of hope in the compromises made since last fall’s government shutdown – and starkly reflected our elected leaders’ preference for inaction,” said Daniel Backman ’15, ARUSA student Executive Editor.

"By presenting essential budgetary information in an easy-to-understand format, the writers of ARUSA hope to help Americans keep their politicians accountable on the issues that matter.”

You c- See more at: http://www.iop.harvard.edu/blog/students-produce-fy-2013-annual-report-usa-debt-revenues-and-spending#sthash.slpTctVp.dpuf

The "Annual Report of the United States of America: What Every Citizen Should Know About the REAL State of the Nation," cover below, is available at Amazon.com.



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Items in Growls are written by individual ACTA members and do not necessarily represent the views of the Arlington County Taxpayers Association, Inc. Please send comments about Growls to The Growl Meister