Questions from Lisa Subeck at Madison: Go West and Turn Left.
1. Paul states that the problem with taxation is not the amount collected but that it is collected from the wrong people and that there is compelling evidence that government should actually spend more, especially for education. While I agree with Paul, I see a problem with where this leaves local governments and school districts. What are these local entities, lacking control over the tax structure set forth by the state and federal government, to do? Cut spending and reduce or eliminate vital services? Or increase property taxes to maintain services, knowing that this may be a hardship for some residents?
The problem emanates from a perversion on a hundred year old Progressive Era ideal. The idea was to collect income taxes, and subsequently sales taxes on a statewide basis, and then redistribute the money to the various municipalities, counties, and school districts that on a needs basis. If the redistribution formula was not a critical element, then the state could have passed on the taxation authority to the local units of government.
To this day, with the relatively recent exception to allow counties to collect a 1/2 cent sales tax, the state continues to reserve for itself all taxation powers that utilize the sales tax and the local income tax.
Unfortunately there are a sufficient number of legislators who either enjoy the power of making local units come to them and beg for revenues or who are untroubled by the formulas which are badly flawed. The formulas include elements that account for population and poverty, but they make a bad assumption: that the value of real estate in a community is correlated to the number of families and/or school children living in poverty.
The local entities Lisa refers to are challenged. First, lacking adequate state shared revenues, they must utilize the property tax to the maximum to pay for local services. Secondly, and this is critical, they must maintain a continued dialog with the state regarding tax reform. It should be noted that every commission and study in this area since the Kellett Commission some forty years ago has failed to provide proper reforms.
My own view is that it is necessary to go after every legislator who refuses to support reforms, regardless of party, and to run candidates in every district, no matter how dismal the prospects of winning.
The state controls the revenues, the state has the power to impose spending caps not tied to reality. For years Democrats and lefties have focused on individual pieces of legislation, which has led to death by a thousand nicks. The left must focus on the fundamental issue, which is reform of taxation, revenues, and distributions.
It is real simple: without sufficient revenues and fair taxation, government does not work.
Given the choice posed by Lisa, given that there are a number of property tax relief programs in Wisconsin, particularly for seniors, I favor, Or increase property taxes to maintain services, knowing that this may be a hardship for some residents? Keep in mind taxes can be raised both statewide and nationally without hurting either seniors or lower income families, or middle income families for that matter.
2. Paul suggests sales tax as a fairer and more progressive alternative to property taxes for school funding. Again, I agree. Those who spend more are typically those who have more to spend. How do we put the necessary pressure on higher levels of government to promote this or other more fair systems of taxation? Is this a realistic expectation in Wisconsin's current political climate? And how should local school districts function while waiting for such change?
We have to rethink our position on a number of taxation issues, including the sales tax. A study now over ten years old, conducted by the city of Madison, showed that replacing a portion of the property tax with a sales tax was equitable for most economic groups and in fact was more progressive than the property tax. The group that would be hurt the most, to the tune of $35 a year, was university dorm residents who would pay the sales tax, but would not see the property taxes on their housing decline, since there are none. (Something can be done for that, like lowering dorm fees $35 a year, a good idea in its own right.)
A sales tax with continued exemptions for housing, medical expenses, and food, is, as Lisa notes, a tax that effects those who 'spend more,' and it acts like an excise tax.
Now we are back to the original question. We have to change the legislature. We need more progressive representation to advance real taxation reforms, not phony tax-cutting handcuffs on local governments like TABOR and all its sloganeering progeny.
The prospects are grim but we have no choice. If a movement with the intensity of Madison's anti-smoking forces launched a campaign on a statewide basis, the reforms would take place. It is time to stop focusing on individual environmental, choice, and other progressive issues and focus on revenue reforms. A legislature capable of enacting the appropriate revenue reforms would probably do those other things as well.