This page was last updated on March 20, 2011.
Money matters; Editorial; Beaver County Times; March 20, 2011.
I’m glad I’m not holding my breath waiting for spending cuts the Times can get behind other than symbolic cuts by the General Assembly on itself and the executive branch on itself. Despite all the editorials we read professing to abhor deficits and debt, nowhere did this editorial seem to find spending cuts of which the Times approved. This is just more evidence the Times merely cries crocodile tears when it “complains” about deficits and debt (here and here).
Predictably, the editorial continues the Times ongoing drumbeat for increasing and/or new taxes.
Let’s look at the tobacco taxes the editorial appears to advocate. It’s likely the Times would like us to forget its editorial “Lighten up” from 2009. In that piece, the Times wrote, “In a sense, tobacco users are right to be upset about the astronomical increases in federal taxes on the products they buy. They have been and continue to be singled out as a special niche of the American public that can be taxed with impunity by federal and state governments, in large part because most Americans are in favor of so-called sin taxes. … While sin-tax revenues might address short-term needs, they are little more than Band-Aids when it comes to stopping the hemorrhaging gap between revenue and spending that state and federal governments are facing.” Sorry, I forgot to issue a whiplash alert.
FYI, after poking around with Google for a bit, it appears the Smokefree Pennsylvania cited in the editorial is a one-man Pittsburgh operation run by William T. “Bill” Godshall without even a website. In all the hits I got for “Smokefree Pennsylvania,” Mr. Godshall was the only person mentioned or quoted. I’m sure the Times vetted its source, however. <g>
Now let’s look at the Marcellus shale natural gas severance tax. While I’m not unalterably opposed to such a tax within limits, it doesn’t represent “found” or “free” money. For example, why should a tax on Marcellus gas go for anything other than covering regulatory costs? Anything else creates a slush fund for politicians to spend as is/was the case for Medicare and Socialist Security taxes. Texas taxes natural gas production at 7.5% of market value plus a regulatory fee of $0.000667 per thousand cubic feet, with variances for natural gas that’s expensive to produce. I’m not an expert, but a lower tax rate than Texas and some other states may be appropriate due to the higher costs of producing from formations like the Marcellus shale. Keep in mind, though, natural gas consumers (you and I) will ultimately pay any severance taxes via our gas bills. It’s true for all so-called business taxes. Opponents of Marcellus gas production tend not to mention that little fact.
The editorial says, “Meanwhile, the Pennsylvania Budget & Policy Center estimated the state lost $100 million in revenue in 2009 because it did not have a severance tax. And that $100 million loss is just the start.” Riddle me this; how can the government lose something it never had? This is the same entitlement thinking that results in “big government” types – whether lefties or wayward “Republicans” – trying to convince us that because one year’s spending increase is lower than the previous year’s, it’s a really spending cut.
Now let’s look at the magnitude of the new taxes relative to the overall budget and the projected deficit without doing anything. The editorial’s $254 million is a lot of money, but it needs to be put in context. $254 million is only 0.95% of the proposed General Fund (GF) budget ($26.8 billion) and 6.2% of the budget deficit ($4.1 billion) had we done nothing. Suddenly, $254 million doesn’t seem like a lot. That’s why the editorial didn’t give context.
Note, just as projected government spending estimates invariably understate what really gets spent, projected revenue estimates for new taxes and increased tax rates tend to overstate actual collections. I’ll get into that at the end of the critique.
Now let’s look at the spending side. The Times clearly doesn’t like spending cuts for education and healthcare. What the editorial doesn’t tell us is even in the proposed budget, GF spending on education and health & human services are 38.9% and 43.5% of the total, respectively. That’s 82.4% of the GF budget.
To most of us, focusing on increasing tax revenue an optimistic 0.95% vs. cuts to programs that make up 82.4% of the GF budget would seem silly. One month ago exactly, so did the Times regarding a similar situation with the federal budget. In “Quick hits/NUMBERS GAME” (2/20/11), the Times took President Obama and Republicans to task for proposing relatively small “cuts [that] are coming out of just 12 percent of the budget.” The editorial concluded, “Don’t be fooled. Both sides are playing with numbers, and neither is addressing in a serious manner the budget deficits and the shared sacrifices that would be needed to do that.” Isn’t this exactly what the Times did in this editorial? Let’s hope the glass house the Times lives in has rock-proof windows.
Previously I mentioned projected revenue estimates for new taxes and increased tax rates tend to overstate actual collections. Lefties seem to live in a static world in which increasing tax rates doesn’t change taxpayer behavior. That’s why leftist revenue estimates from increased tax rates rarely materialize. When confronted with higher tax rates, we greedy taxpayers take actions to minimize our tax liability. This lefty blind spot is odd given they seem to know increasing the tax rate on something results in less of that something. Isn’t that the reason we get for the already outrageous tobacco taxes, to cut tobacco usage, and why Smokefree Pennsylvania would support more tobacco taxes? (No, I don’t use tobacco products.) The other thing lefties want us to forget is the money paid in taxes isn’t “found” or “free;” it comes from somewhere. When we pay new taxes and/or higher tax rates (even when hidden in higher natural gas bills), we have less to spend on other goods and services. For example, if you need to spend more for gas to heat your home, you’ll have to spend less on clothing, food, entertainment, et cetera. The result? Less overall economic activity (Think fewer jobs.) and cannibalism of other taxes associated with those economic activities.
“Culture shock” told us, “a study of more than 2,300 undergraduates found 45% of them showed no significant improvement in the key measures of critical thinking, complex reasoning and writing by the end of their sophomore years.” It’s important because people who lack sufficient ability in the areas of “critical thinking [and] complex reasoning” can easily fall prey to editorials like this.
© 2004-2011 Robert W. Cox, all rights reserved.