Idaho’s Reverse New Deal

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Today I sit at home at my living room table, a scarf, hot tea and afternoon sun keeping me from feeling the cold of the house– which we keep in the low 50s except when the wood stove is burning. We are trying right now to avoid buying another cord of wood from our favorite man with an axe. If things felt more hopeful economically we might spring for it. But In this environment, we all have our own ways of being frugal.

Tomorrow, Idaho's economic outlook committee will meet deep in the polished underground wings of the Capitol. We'll make wild guesses as to how much money Idahoans will pay in taxes in the year ahead. I've served all 8 years of my 4 terms in the Idaho legislature on this committee. I have a record of regular closest "guesses" at total tax revenues, a fact that's pleasing in good years but grim in years like 2009 when Idaho's economy began to take its dive.

The number we pick in the next week will set a limit for how much money we have to spend in our next state budget. We all know the number gets good when more people are employed and buy goods and services. Businesses do better then as well. And from it all, the state collects tax revenues which will fund elementary schools and community colleges, parks and drug treatment programs.

Does anyone think this year the Idaho legislature will suddenly re-consider our current strategy of telling every single state agency, "This year, no building anything, no hiring anyone, no replacing broken items or taking on new projects?" No. This three year austerity strategy has cost Idaho over 3000 state jobs. And somehow the Governor still seems proud of it.

When America had its last great depression, rather than paying unemployment for laid off workers, government paid them to do jobs communities needed to have done. Idaho has closed parks, health department offices, scaled back mental health treatment programs, laid off school teachers, increased class sizes in schools colleges and universities and much more.

Yet I'm sad to say I suspect those who loathe government will have their way with our economy again. They will continue the austerity in spite of the fact that it's hurting the very people who cry for lower taxes. Business owners. It all cycles around. Even 2000 jobs would do a lot for the Idaho economy, for builders, retailers, restaurants, and those who sell cord wood or consumer services. If we resisted the urge to deepen tax breaks and exemptions and focused instead on creating the most needed of state jobs, we might just inspire a few business owners to do a bit of hiring themselves. Imagine that.

 

Unthinkable

There come moments when, as busy as I am this year, the absurdity of this place strikes me and I want to say something, I want to sit down and tap my frustration into this computer. Today is the worst of those.

Last night the co-chairs of the budget committee sent out letters to legislators saying that, as hard as the budget cuts last year were;

as hard as looking at intentionally increaseing class sizes to fund on line courses and lap tops has been;

as hard as contemplating cutting services to seniors and people with disabilities, contemplating risking their independence in their homes has been;

as hard as decimating state jobs and family incomes has been — we've go to to cut more. Like 5% more.

That's like another $80 million out of public schools. That's like laying off the 770 teachers Luna is already plotting to eliminate but not even pretending to replace them with on line courses & laptops — just cramming kids into classrooms with no new text books, no new desks, no lab equipment and just saying, good luck, we don't want to look bad to tea party voters who want government to vanish. So good luck.

Already we struggle knowing people are being denied mental health and substance abuse treatment and now we are contemplating making others with disabilities stay in their homes alone without help — without the services some might need to go to work or others might need to avoid ending up back in state hospitals.

And dry-eyed Maxine Bell and Dean Cameron say our only job is to cut more.

Where is the leadeship? Where is the vision that in past years brought our state through crisis without costing lives or risking the future of our children? Where is that sense of patriotism that pulls us together and has great leaders asking us to step forward and share the burden when there's pain to be had?

No, we are in a time of the most unthinkable of low aspirations. We will make children and the most vunerablle pay it all rather than giving up something of ourselves, paying a bit more sales tax or asking our well-to-do neighbors to join us in payng a bit more through the income tax. No, we will just cut, calling the pain we inflict "the new normal" as if there were no other option in the world.

 

Idahoans See Alternatives to Deep School Cuts

I thought I would share this set of results to a survey I have conducted over the past month to see how people feel about deep cuts to funding for state services, especially public schools. 

As you will see below, people from all over the state, a majority from outside Boise, answered the survey. The survey was sent to a list containing more democrats than republicans and was available for all to forward to friends. It was also posted on my web site as well as on facebook and twitter where I have quite a large number of friends and followers from all over the political spectrum.

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In the week ahead the Budget Committee will vote on school budgets. Currently Republicans have refused to discuss tax increases or changes in Idaho tax exemptions to protect education, but instead propose cutting public school funding for next school year by 7.5% or $128 million. Some extreme factions propose even deeper cuts. Either way schools now face policies that will eliminate more tutoring for struggling students, increase class sizes, eliminate teacher training, further reduce access to textbooks, decimate funding for science and other academic materials, all while making many academic and after school programs more expensive for Idaho families and their kids.


Below, for your information, is a rough breakdown on where survey respondents came from.

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The survey is still available if you'd like to take it. In the coming week I will share results with my legislative colleagues.

Generosity

I went on Nate Shelman's show on KBOI on Friday. Forty Five minutes of people angry at me for talking about taxes.

Do I blame them for being angry? No. The idea of some amorphous tax increase frightens people who already struggle to pay their taxes. As someone whose small business some years earned as little as $5,000 to $10,000, I struggled one year to put food on the table. The tax bill I faced in April seemed staggering, impossible and frankly unjust.

So House Republican leader Mike Moyle and I agree on one thing, the income tax rates on the lowest of income earners in Idaho are way to high. The rates step up so quickly that people earning just over $25,000 pay the state's highest rate of 7.8%. People who make $100,000 pay that same percentage.

To me it defeats the purpose of tax brackets if the only real steps and reductions come to people earning $1,000 as opposed to $3,000 — incomes that are all staggeringly low. But some people earn money from investments and stocks and inheritance and I wonder why we tax the hard labor of someone who has no other income so much more intensely than money people may make with little or no effort of their own. 

I think Idaho could have more income tax brackets above $25,000. I think once the economy improves we could even use the revenue from upper brackets to pay to lower the rate on the lowest brackets. In 2000 the highest rate was 8.1% but it and all income tax rates were cut. I would propose we return to this rate for those with taxable incomes of $50,000 or more. Until the economy improves I think we should add two other higher rates at $100,000 and $250,000.

But the sales tax, not the income tax, will likely be the tax my republican colleagues will eventually choose to get us through this economic crisis and keep the wheels from falling off the basic services like education and health and safety now that Idaho has far more people in need and suddenly far less to offer them.

If I had my way for now I'd only offer the grocery tax credit to individuals earning less than $15,000. Right now the state absolutely should not be spending millions to send $40 checks to families like mine, that are doing ok still. The money should go to schools.

But all my rational for our generosity in having higher income people pay more taxes would not convince many of the callers to Nate Shelman's show. I like Nate a lot. Clearly though there is a fundamental difference in philosophy and maybe even a different sense of morality at play with some of his audience here. Caller after caller seemed mad at the very idea of paying taxes that might benefit someone besides themselves. To a few of the callers the idea of helping people who have less or who have fallen on hard times seemed repugnant. Clearly some feel no obligation to ensure that our neighbors are getting medical care, food or shelter from the cold. It is a set of values I can not answer to.

Yes, I'm used to my colleagues saying that churches, not governments should provide help to the poor. But what church can run Idaho's medicaid program providing medical and health care to thousands of people living with disabilities? What food bank could feed the never ending lines of people needing foodstamps now for the first time in their lives? What church could extend mental health treatment and support to all of Idaho's unemployed at a time when suicide rates are climbing from what was already one of the highest rates in the nation?

Our population has grown too big and too complex. While many may not trust government not to waste their money, the alternative is grim. And funny that it is the Constitution, the very document which some value above all else, which helps guarantee that we do not let people with cancer die in the streets.

People are suffering and scared, yes. But where is our compassion? The economy is thawing but not in time to save this budget, our schools and state. Where is our generosity now when we need each other most — when it will take our collective effort to get us all through this short difficult year ahead.

Who is Doing the Math?

Senseless policy passed in Health & Welfare rules hearing just now. In the Katie Becket Program we will take $1 million out of the pockets of families with disabled
children just to save $200,000 in the budget. This is only the beginning of what I
fear is going to be weeks or months of brutal senseless cuts. 

Look at some of this. $54 million cut from a set of Health and Welfare programs where the recipients of the state funds are all in the private sector. We took $54 million out of Idaho's economy and saved only $11 million in general fund state dollars. And we hurt people with disabilities, cut mental health treatment and left many families desperate. How many jobs were lost? How much expensive state crisis care did we create a need for?

Is someone taking out a calculator to look at what negative impacts some of these cuts will have on the economy? I'm going to be a broken record. A cut that eliminates jobs and dollars, wages, consumer spending and small business income has far more negative impact on the economy than raising income taxes on upper income earners. 

Who is asking the people of Idaho if cuts this deep are the best plan? I have a list of tax exemptions we can do away with. It might be more palatable than cutting our schools 10% to 15%. At some point you cut so deep that the wheels come off and things break. Kids fall behind.

With this seemingly blind frenzy to dismantle state government, who is figuring out where that line of diminishing returns is going to be? How long will it take and how much will it cost us, our kids, our economy, and our state to undo the damage that will be done if Republican leaders' only answers are to lead by severing limbs and cutting it all to the bone.

Dumb Ideas

With some certainty I can now say that sometimes, with repeated attempts, legislation gets worse, not better. The recent idea of spending general fund dollars on roads is about as bad as it gets. Proposing to increase budgets for roads out of the money we would be
spending on schools, when we have cut budgets for every part of state
government, including schools, is beyond unbelievable.

Rep. Marv Hagedorn has a great break down of ITD/road funding on his blog. He estimates that, counting stimulus and GARVEE and all the dedicated and carry over funds, almost twice as much money is available for roads in the 2010 budget as there was in the 2009 budget we passed last year.

But if someone thinks that I and others are going to vote for a gas tax increase this year, just to avoid a really stupid idea like taking from schools to build roads, they need to have their heads examined.

I don't hate gas taxes. I live in an urban area where things are not
all that far away. I am guessing that my friends in Challis and other
very remote rural areas might like them less. But if you want to charge
people for how much they impact roads, gas taxes are still pretty fair.
Fuel efficient cars tend to be lighter, less impact. Driving more means
more roads impacted. Pretty fair.

But it is true, voters don't want their taxes raised this year. Conservative voters especially. And they will probably never, not in any year, like the idea. Some voters, and it is no small number, are more concerned about the economy and see it as the reason we need to go home now and stop pretending we want to accommodate Otter's urgent desire to pass $80 million in tax and fee increases now in the depths of the most severe depression in modern history. Still others are bothered by the priorities demonstrated by cutting education budgets while raising taxes for roads. They might accept some kind of tax increase when the economy and state budget is in trouble, but not for roads.

Perhaps those many Republicans in the house who don't care about public schools are thinking this spending general funds is a great idea because it gives more funds to roads without raising taxes. Brilliant. Except that again and again, polling in Idaho shows that Idahoans care A LOT about public schools and education. It consistently ranks number one in spending priorities. If Republicans want to do this, and I hope they don't, voters are suddenly going to have uncanny insight into what really matters and doesn't matter to the Idaho Republican party. I suspect such a revelation might be a great gift to Democrats in the 2010 elections.

If having Idaho stuck down in the lower third in the nation on many indicators for the quality of our public schools was not enough, maybe we want to ensure we are at dead bottom in the years to come and that our kids have no option but to stay here to work in Walmart and all the chain stores that will represent the last of Idaho's increasingly narrow and stunted economy. 

But I hope this dumb idea fails and that we all look around and find ourselves at the end of our ropes very soon. I hope we get annoyed and finally vote to
override the Governor's frenzied vetoes tomorrow or Monday so we can stop wasting millions and go home.

Deducting Property Taxes

If you own a home and you've already done your state taxes, you might want to look into
getting a form to file an amended return… you may be able to subtract more from the
the amount of income the state taxed you on this year.

Over the last few weeks, we amended a House bill one way and
then back the other way in an attempt to decide what was better for tax
payers. We call it "going to the 14th order" here in the Senate when we
amend a bill. Senator Hill as chairman of the Senate tax committee
patiently spoke first for and then against letting more people NOT pay
income taxes on the money they spend on property taxes.

Obviously
this is good for modest income homeowners who might not be able to deduct a
bunch of charitable donations on top of big mortgage interest, medical
bills and the like. What it does though is take $2 million out of
budgets that will mean deeper cuts in state employee pay, lost jobs or
larger class sizes in schools or college classrooms.

Not a fun
choice for any of us to make. As a property tax payer who does not have
enough spending to itemize, I might have benefited from a yes vote. As
a member of the budget committee who has watched the knives fall into
place, slicing through parts of state budgets that Idahoans depend on
for jobs and medical care… I was one of ten Democrats and Republicans who couldn't vote yes.

I'm still torn. Most the time it is clear as the desk in front of you, on occasion though some people gain while others clearly lose. But as you sit there on the Senate floor and the Senate secretary calls your name, you have to choose one word: yes or no.

Asking More Than Grit

On the first day of the legislative session, the gavel falls on the wooden disk and we answer roll call, one by one, in thirty five different voices. We don't press a button on our computers as we did in the House. We pledge allegiance and then are expected to pray in the name of Christ before breaking for lunch and then loading buses to BSU for the Governor's state of the state address.

We waited in on of the Spec Center's Green Rooms like badly dressed, super boring rock stars and then filed into the auditorium in order of seniority. Unlike the house, we filed in in seniority that ignores party affiliation. To my surprise on my first day in the Senate I had three Democrats and four Republicans behind me in line.

The Governor seemed a bit off in my mind. Perhaps he was choking on his own proposal to raise taxes and increase budgets for roads of all things, while, in the same breath, proposing to cut budgets for schools. Odd priorities in my mind. Not many words of hope or sympathy for all those sitting at home on weekdays or out shopping resumes after decades at jobs or after moving families recently to Idaho hoping to call our mountains and rivers and sage brush deserts home.

I knocked on a lot of doors in Ada County, all over Ada County this past year and I know people were struggling to pay bills before the economy began to falter for real. I can not imagine the decisions being made in small businesses and over kitchen tables tonight. If we as a state are not careful, there will be no soon end to this time. We need to do more than ask for grace in girt. Idahoans have more to give than grace. We have generosity and sweat to lend to others, we have unpaid hours we are already giving at work. Some are giving up hours that make health insurance for the family possible, hours that make the mortgage payment, that were counted on to pay for a child's college education, heating bills, food.

For those of us who make more than enough to pay for basics, I think the governor, and we as a legislature, can ask for more. For those living close to the bone we have to be careful. Many are one step away form needing public assistance now and our actions could leave them desperate or needing our help in ways that will cost taxpayers and businesses more than the saving we intend. Keeping Idahoans employed, and Idaho-owned businesses working, keeping the most vulnerable families fed and strong was not a note the Governor hit. It is however a tone you will hear from me and from many others in here.

Raising taxes for roads but cutting schools, schools that already struggle to keep kids from getting lost in the crowds, the tests and the growing crises at home. Those are not the order of my priorities. I am sorry to see that they are the Governor's.

Agreeing to Disagree

Agreeing to Disagree


We use the term "holding harmless" to talk about making changes of law have as little adverse impact as possible on those we do not intend harm. It is an attempt to minimize collateral damage.

So interesting watching Reps Clark and Lake sit with Rep Killen and Sens Hill, Langhorst, and Stegner trying to pick apart the Senate personal property tax bill. The more that Senator Hill talks, the more clear it becomes that Senate has come back with an elegant, well crafted piece of compromise legislation. It looks much like Bill Killen’s proposed draft from earlier this year.

A conference committee is an odd creature that is born out of Mason’s rules and legislative history. It has unusual characteristics. The three house members vote and the majority within that three is counted separately from the three Senate members vote. One can imagine the house and senate being split again as Clark & Lake try to knock holes in this bill to give cover for killing what is now a simple $75,000 exemption from personal property tax for every business in the state. It now is kind of like the homeowners exemption except that the $15 million this now costs will be paid by the sales tax rather than by other property tax payers.

The question is then since small business benefits from a greater share of this version of the bill and is the class of business most likely to invest the benefit back in the community, wages and health benefits and thus the economy, is this then wise and equitable tax policy. I’d say yes. Far more so than the huge $120 million tax shift IACI almost forced through.

What is yet to be seen is whether IACI still has any hand on the reigns. From Alex LaBeau’s face there at the other end of the row from me, I suspect not. Unlike some Lobbyists in here, he works hard for a client that the small business focused House might love to hate. He and Rep. Clark turned a big industry dream bill into a bill about tracking staplers and tape and about mom and pop and the lady selling hot dogs from a cart in front of the statehouse. You’ve got to give them an A for effort and strategy.

Some Numbers

Some numbers:

  • Percent of Idaho businesses that are small businesses employing less than 50 people:  96%
  • Percent of Idaho employees working in small businesses with fewer than 100 employees:  66%
  • Percent of Idaho sales tax paid by businesses:  about 33%
  • Percent of the sales tax paid by families and individuals:  about 66%
  • Percent of the corporate and individual income tax paid by businesses:  .00015%
  • Percent paid by families and individuals:  99%
  • Cost of IACI’s HB599 tax exemption:  $120 million every year after the bill is fully phased in.
  • Where would more than 80% or $103 million of the IACI $120 million go:  To the 15% of Idaho’s largest businesses.
  • Tax exemptions these businesses already get and thus taxes they already do not have to pay on the personal property they buy:
    • –Idaho’s sales tax production exemption
    • –Investment Tax Credits
    • –179 Income Tax Deduction
  • Cost of a smaller $50,000 personal property tax exemption for all businesses:  $9  million
  • Percent of businesses which have less than $50,000 in personal property anyway :  aprox. 85%
  • Percent of all Idaho businesses that would benefit from a $50,000 exemption:  100%
  • Percent of benefit of $50,000 exemption going to small business:  44%
  • Percent of benefit of $120 million IACI proposal going to small businesses:  less than 20%
  • Estimated tax shift from businesses to families and individuals if IACI bill passes:  roughly $80 million
  • IACI proposals which included a way for business to pay for this
    tax exemption through extension of another business tax which their
    members feel would be less onerous than the personal property tax:  0

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