John Augustine – 2/15/06

This page was last updated on February 25, 2006.

Blame GOP for tax inertia; John Augustine; Beaver County Times; February 15, 2006.

Below is a detailed critique of the letter.

“I wonder if the author of Monday’s letter to the editor ‘Where’s property tax reform’ remembers his high school civics.”

[RWC] I wonder if Mr. Augustine has a reading comprehension problem. You’ll see what I mean below.

“The executive branch of government (governor) does not pass legislation in our state or control what legislation comes up for a vote. That task is the responsibility of our Republican-controlled Legislature.”

[RWC] Here’s a direct quote from Gov. Rendell’s inauguration address of January 21, 2003. “I campaigned on a promise to reduce property taxes by increasing the state share of education funding. It is a promise I intend to keep.”

“So why did he place blame for no action on property tax reform on Gov. Ed Rendell when the real blame is with Republican lawmakers? Rendell has asked the Republican-controlled House and Senate to pass property tax reform, but they have sat on their hands and failed to do so.”

[RWC] Here’s why I wrote above that Mr. Augustine may have a reading comprehension problem. The author of the letter to which Mr. Augustine refers did blame the General Assembly. The author also assigned blame to Gov. Rendell because, as noted above, Mr. Rendell claimed he would “reduce property taxes.”

“Why? It is an election year and they don’t want to give Rendell another political feather in his cap. Do you really think they care about your struggle to pay property taxes that we know are not fair or equitable?”

[RWC] What political feathers in his cap does Gov. Rendell have? His claim to fame so far has been an increase in the personal income tax rate and increased business taxes.

Why are property taxes “not fair or equitable?” Mr. Augustine doesn’t say. I’m willing to bet Mr. Augustine is convinced dumping the property tax will shift his tax responsibility to someone else.

“As for the paltry minimum wage in our state, Republican lawmakers should be ashamed of themselves not only for failing to keep their word for a vote on minimum wages by the end of January but also their lack of moral values to address working families that are struggling at the poverty level in our state.”

[RWC] I’ve addressed the minimum wage issue previously. Go here for previous critiques.

“Lastly, I agree that the state corporate income tax is too high, and Rendell is proposing to lower it.”

[RWC] Look out for alleged business tax reductions. Last year politicians told us of tax cuts despite the fact business tax collections increased. How did they pull this off? Did they lie to us? Yes and no. Politicians reduced a statutory tax rate but changed the rules of what qualified as taxable income, thereby increasing the effective tax rate. Remember, simply reducing the statutory tax rate doesn’t mean you implemented a true tax reduction.

“But did you know that one reason it is so high is because 87 percent of corporations in our state pay no corporate income tax. Instead, they transfer their profits to Delaware through tax loopholes.”

[RWC] I haven’t checked Mr. Augustine’s allegation, but nothing in this letter gives me much confidence in his stated “fact.”

Even if his claim is correct, Mr. Augustine has it backwards. High effective tax rates encourage businesses to find legal ways to avoid taxes. That’s why businesses can afford to hire legions of tax experts. It’s simply cheaper to hire specially trained tax accountants and lawyers than it is to blindly pay the statutory tax rate. Lower the effective tax rate enough and businesses have no incentive to go to extraordinary means to avoid taxes.

“Not only is that unfair to the 13 percent that do pay this tax, but it is unfair to all taxpayers who have to pay more in income taxes.”

[RWC] Mr. Augustine is apparently one of those people who don’t understand that businesses actually pay no taxes. Because businesses pass along all taxes via product prices, lower wages, lower dividends, et cetera, individuals like you and me pay all taxes, not businesses.

“If you want to make a difference in November, please inform yourself of the facts before you throw folks out of office.”

[RWC] Here we get down to it. Mr. Augustine fears Lynn Swann as an opponent for Gov. Rendell.