This page was last updated on August 16, 2011.
Ways to get more revenue; Dan Sainovich, Jr.; Beaver County Times; August 14, 2011.
Confusion I had dealing with “Dan/Danny Sainovich” letters from Industry/Ohioville is over. After he read my last critique of one of his letters, Mr. Sainovich was kind enough to clear things up. In an e-mail note, Mr. Sainovich wrote, “I thought I would shed some light on Dan vs Danny Sainovich. Danny is my father and we both live in Ohioville. His name is Danny and mine is Dan - you are correct that we do have opposite views on politics. Actually there is no jr or sr but we have come to an agreement to use jr and sr so that folks don’t get us mixed up.”
Previous critiques of Mr. Sainovich’s letters are here, here, here, here, here, here, and here. Mr. Sainovich is an administrative organizer for SEIU District 1199P.
Below is a detailed critique of the subject letter.
“I did not vote for Gov. Tom Corbett, but those who did should reconsider that bright idea.”
[RWC] Some of the letter’s talking points were in Mr. Sainovich’s letter entitled “Corbett is double-talking on taxes.”
“He ran on the platform of no new taxes. His transportation commission looked to find additional funding for transportation (‘Commission maps out possibilities,’ Aug. 8) by raising fees and fuel taxes.
“Don’t get me wrong. I understand the need for additional revenue, and I am not complaining about the additional fees. I am one who actually is happy to see all the road construction in the area.
“The point I am making is that we’ll all be paying a little more to help cover the cost.”
[RWC] Neither the aforementioned BCT article nor Mr. Sainovich mentioned a chunk (about $428 million) of the revenue from “raising fees and fuel taxes” on drivers would go to fund government-run, taxpayer-subsidized bus/train systems like BCTA, PAT, SEPTA, et cetera. Funding for these systems should come exclusively from the riders of the systems via the fare box. Why don’t we all just pay our own way for transportation, et cetera? As individuals, we must be willing to pay for our individual life and lifestyle choices out of our own pockets. Nothing good comes from trying to pick another taxpayer’s pocket.
The article also failed to note PA could have received some help by tolling I-80 if those involved hadn’t been greedy. You may recall the U.S. DOT likely would have approved tolling I-80 as long as the tolls would have been used only for the “care and feeding” of I-80 as required by federal law. That wasn’t enough for PA, however. Even though they knew it was illegal, the Governor (then Ed Rendell), General Assembly, and the BCT wanted I-80 tolls to be used to transfer wealth from I-80 drivers to users of other roads and government-owned and -run bus systems like BCTA, PAT, SEPTA, et cetera. As I’ve written previously, I’m all for placing tolls on all limited access highways where practical. We’d use the toll revenue collected for a road or bridge only for the “care and feeding” of that road or bridge. For example, tolls collected on the Monaca-Rochester Bridge could not be used for the Vanport Bridge. This isn’t farfetched. Those of us old enough to remember will recall the Monaca-East Rochester Bridge was tolled from its opening in 1959 until 1973.
“Great idea, but why is it the residents of Pennsylvania are the only ones being hit and not businesses?”
[RWC] To begin, I oppose so-called “business taxes” for at least two reasons. First, corporation income taxes are double taxation. That is, the government taxes a corporation’s taxable income and then taxes the dividends shareholders [including pension plans, IRAs, and 401(k)s] receive. Second, business taxes are a scheme to hide true taxation from the ultimate taxpayers, you and me. In some cases, businesses are prohibited by law from itemizing taxes on their invoices. You see, businesses - like government - don’t have any money; it all belongs to the owner(s). One way or another, business taxes are paid by individuals - customers, employees, and owners. According to the Tax Foundation, the average U.S. taxpayer worked eight days in 2002 to pay federal income taxes levied on corporations. In addition, we worked a fraction of a day to pay other business taxes. Business taxes are approximately seven percent of our total personal tax burden. That is, seven out of 100 tax dollars we pay are business taxes.
“Much has been said about closing the Delaware loophole as well as a Marcellus shale extraction tax.”
[RWC] Note Mr. Sainovich’s use of the term “loophole.” A loophole is a legal provision of the tax code you don’t like, usually because you believe it doesn’t benefit you personally. For example, if you didn’t like the home mortgage interest deduction because you rent or your house is paid for, you would call it a loophole because the deduction reduces the tax liability of taxpayers who can use it. You would claim the deduction (loophole) allows some taxpayers to escape paying their “fair share” of taxes. That’s what Mr. Sainovich is doing with legal provisions of the PA tax code. To increase collections, Mr. Sainovich wants to eliminate certain legal deductions and/or exemptions. The result is to increase the tax rate on the affected businesses.
The reason provisions like the “Delaware loophole” exist is to help mitigate the problem of a high statutory tax rate. At a flat 9.99%, PA’s Corporate Net Income (CNI) tax is second only to Iowa’s top rate of 12% for income over $250,000. In addition, PA corporations must also pay the Capital Stock and Franchise (CSF) rate of 2.9 mills, fifth highest in 2010. Pennsylvania is one of a minority of states imposing both CNI and CSF taxes. As of 2009, Pennsylvania and Massachusetts were the only two states that ranked in the top 10 for both taxes.
As for the “Marcellus shale extraction tax,” the BCT editorial “Texas and taxes” said, “By the way, Texas has an extraction tax on natural gas. It also underwrites its system of higher education through a tax on oil at the wellhead, a tax that is paid by consumers across the country.” Likewise, a PA “extraction tax on natural gas” would be “paid by consumers across the” commonwealth and the rest of the country.
If you are familiar with BCT editorials, you are aware the BCT supports just about every proposed tax rate – and spending – increase that comes down the pike. Despite that history, even the BCT acknowledged “Raising taxes could slow the economy.”
According to the Tax Foundation in 2010, “If Pennsylvania were its own country, it would have the highest overall corporate tax rate in the world at 41.5% (federal plus state, accounting for the state-local deduction).” If you don’t care about PA’s position in the world, BCT editorial “Snow job” noted “[PA’s] business tax climate index ranks 26th in the nation for fiscal 2011.” If you want to put a “positive” spin on this, PA is #1 in the bottom half. If we were addressing the Steelers, would we consider finishing 17th out of 32 teams (the equivalent of 26th out of 50 states) at the end of the season a good situation?
The best way to increase tax collections is via an expanding economy, but higher tax rates – and more regulation – work against that goal. Cutting tax rates and excessive regulations increases economic activity because people get to keep more of what they earn. It’s simple human behavior; the more you get to keep, the more you will produce. As a result, lower tax rates result in greater tax revenue because the lower rate applies to a bigger pie. For example, 40% of a 10” pie is 25% more than 50% of an 8” pie.
“How about this idea? Look for items made in the USA. And maybe the next time you shop at a store, ask the manager what state the business is legally incorporated in? Maybe we should ‘buy USA, shop Pennsylvania.’”
[RWC] If we stop purchasing goods and/or services sold and/or produced by businesses not incorporated in PA, we’re not going to do a lot of buying. What about the jobs of the employees of these businesses?
© 2004-2011 Robert W. Cox, all rights reserved.