Fri, 23 Jun 2006

New issue out

Featuring:

• What is the historic tax credit, what does it do and how much does it really cost us. -By Mike Lozano, of the Greater Elmwood Neighborhood Services
• Changes in federal budget practice since 1980. What did the Reagan Revolution really bring? (Surprise bonus: I agree with the director of the Cato Institute, though I'm not sure he agrees with me.)
• Laws to benefit individuals. Where are they? And does the constitution deserve amendment for a Casino?

Didn't you mean to subscribe?

11:42 - 23 Jun 2006 [/y6/jn]

Thu, 15 Jun 2006

The Shape of the Starting Line

The policy review on improving education in Rhode Island can be found here (or here).

It is widely acknowledged that education in Rhode Island isn't working well for all children. Even partisans of the public education system acknowledge that the costs are high and performance seems low for the investment. This is especially true in the kinds of comparisons to other states that are commonly made. A litany of statistics makes the point: teacher salaries here are high compared to the median wage, school test scores are low compared to national averages and so on. The statistics are made familiar by endless repetition on talk shows, in political speeches and in the newspaper.

Under this blizzard of numbers lie some troubling truths. Yes, it is true that many urban schools in Rhode Island do not perform up to national averages. And yes, it is true that schools in Rhode Island are on average more expensive to run relative to many other places.

Unfortunately, these facts, in combination with the preconceptions of the legislature, city and town councils and the public, have helped to create an environment where the schools that need the most help get less and less of it every year, creating, in essence, two Rhode Islands. In one Rhode Island, high property values and relatively lower taxes allow the schools to get the support they need, or at least close to it. In the other Rhode Island---where 35% of our children live---a dwindling tax base and concomitant high property taxes combine to create a situation where schools struggle to provide the basic services, let alone perform to the high standards enshrined by new laws like No Child Left Behind. In recent years, school performance all over Rhode Island seems to be improving, if slightly, but the gap between the richest school districts and the poorest is not shrinking, and the urban districts remain far below the state average while the wealthier districts are above the national averages.

Read more here.

11:19 - 15 Jun 2006 [/y6/jn]

Mon, 12 Jun 2006

Blame is not a policy

From an article in Salon by Walter Shapiro (sub. req.):

Yes, the invasion and occupation of Iraq was a terrible mistake, undertaken by the Bush high command for paranoid reasons and conducted with stunning and willful incompetence.

But, in political terms, there is little to be gained by constantly looking backward to 2003 with a sense of self-righteous vindication. Don Baer, who was Bill Clinton's White House communications director, shrewdly points out, "Saying 'I told you so' is not an action plan."

Yes, but saying, "Saying 'I told you so' is not an action plan." is an action plan for keeping people who were right in 2003 from having any chance to share their opinions now.

12:24 - 12 Jun 2006 [/y6/jn]

Sat, 10 Jun 2006

Maybe they'll believe the Census Bureau

According to the Census Bureau, Rhode Island's taxes per capita are quite a bit lower than our neighbors. On their list, we're twelfth, behind Vermont (1), Connecticut (4), and Massachusetts (7).

Regular readers will know that I'm skeptical of rankings like this—this is state taxes only, and there is no accounting for the distribution—but it's still good to remember that state taxes in Massachusetts are higher than they are here.

15:39 - 10 Jun 2006 [/y6/jn]

Wed, 07 Jun 2006

Do tax cuts reduce the size of government?

The June issue of the Atlantic Monthly contained an article (subscription required, but you can read the first two paragraphs free) about a forthcoming article by William Niskanen, the director of the libertarian Cato Institute. In it, Niskanen reviews the theoretical foundation behind the idea that cutting taxes is a sensible step in reducing the size of government, as well as the practical history since the beginning of the Reagan administration. What he finds is that the theoretical foundation has been pushed by economists who ought to know better, and by people who choose to ignore what has actually happened since 1980. In short, neither theory nor practice support the idea.

So what has happened since 1980? Well, as taxes have fallen, spending has risen, and when taxes have risen, spending has fallen. This sounds odd, but it's true. Reagan and the Bushes have given us bigger government with higher deficits, and Clinton gave us smaller government with a surplus (Bush I did make a stab in this direction, and was crucified by his own party for it.)

In other words, there is a fundamental dishonesty associated with campaigns that promise to "cut taxes" but won't tell us what programs are to be slashed to pay for the cuts. In a nutshell, the risk is if you cut the taxes first, what people see is that government appears cheaper, and they demand more of it. Furthermore, this is as true in Rhode Island's budget as in the federal budget. RI can't run deficits, but we can pass phased-in tax cuts, where the deficit is next year, and borrow inappropriately, and both of these activities have been part of unsuccessful efforts to rein in the cost of government over the past fifteen years.

Remember, this is a finding by the director of one of the Republican party's favorite think tanks.

More to come.

09:08 - 07 Jun 2006 [/y6/jn]

Sat, 03 Jun 2006

A reply to Carol Mumford

Rep. Carol Mumford feels free to criticize me for an argument I did not make and an opinion I do not hold. The article she criticizes is below. Should she have looked at the article just before the one she criticizes in issue 18, she would have seen data that clearly support her contention that Rhode Island tax policy is unkind to the firefighters, police and merchants on whom the health of our communities depends.

The proposition we should be debating is the one put out by the Finance Committee this year: does the data support their contention that cutting the income taxes on the top 1% of Rhode Island taxpayers will improve the economy, our tax collections, or the lot of working people in Rhode Island? I'd like to see a defense of that proposition, instead of attacks on people who wonder whether the happiness of the rich is really the key to prosperity for everyone else. She doesn't make that defense, but settles for attacking me for opinions I don't hold instead of replying to the actual arguments in the actual article I actually wrote.

As far as the question of whether rich people are leaving the state, which is what has everyone so worked up this year, maybe they are, maybe they aren't. The data I have says that tax policy may indeed be a reason the wealthy decamp, but it's the property tax at issue. (But it's not like we're actually losing rich people, though we're not gaining them as fast as Massachusetts.) But I wouldn't say I've seen data that makes the argument by itself. All I've seen is questionable statistics like the one that is the subject of the article below. Read it and decide for yourself.

Taking apart another statistic

Another statistic appearing in the tax debate this year is the claim that over the period from 1995 to 2002, the average income of the top 1% of taxpayers in Rhode Island appears to have declined, while the average income of that top o' the top in Massachusetts seems to have increased. This statistic comes to us courtesy the RI Economic Development Corporation (EDC), who deduced it from two reports published by the Institute for Taxation and Economic Policy (ITEP) in Washington. Unfortunately, the 1995 ITEP report was an analysis of all non-elderly married couples and the 2002 ITEP report was for all non-elderly taxpayers, so they don't quite match.

EDC told RIPR, in defense of this statistic, that there are so few taxpayers at the very top of the income distribution who are not married couples that the incompatiblity is negligible. This, of course, is absurd. The definition of where any percentile begins and ends depends not only on the members of that percentile, but also on all the other members of the set under analysis. If I have five balls in each of ten ordered bins, then the top ten percent is one bin's worth of five balls, and on average, they're in bin ten. But if I dump 50 more balls in the bottom bin, the top ten percent is now ten balls: two bins' worth, average nine and a half. The average value of the top ten percent has dropped, despite no change at all in those top bins.

After presenting the top 1% decline statistic in a hearing before the House Finance committee, EDC was cautioned by an ITEP economist not to compare those two reports directly, but they have continued to promote it in press releases and editorials. In fact, IRS data show that, between 1995 and 2001, the income of the top 1% of taxpayers in Rhode Island rose by about 51%. Further analysis by ITEP itself shows that the average income of the top 1% rose 78% between 1995 and 2005. (Their number for the 1995-2001 span was 54%.) Andy Cutler, EDC's spokesman, assures me that EDC stands by their analysis, but couldn't say why to prefer it over the contradictory IRS data.

This point of elementary statistics is important not just as a way of scolding EDC for carelessness and intellectual perfidy, but also as a valuable rule to remember when comparing percentiles: the movement of a percentile's average income depends not only on the members of that percentile, but also on everyone else. Looking at IRS data between 1995 and 2001, Massachusetts experienced higher growth among the very rich than Rhode Island did. But Rhode Island experienced substantially higher growth among people earning between $100,000 and $200,000 (well above the national average, too) as well as in many lower brackets. We simply added more taxpayers over that time than Massachusetts (up 6.9% vs 5.0%) and more than most states. This is exactly the same as adding balls to the bottom bin to lower the average of the top. IRS data says that our wealthiest taxpayers got richer as fast or faster than their counterparts in Massachusetts, but statistics that look at the top 1% won't catch that because the effect will be overwhelmed by the taxpayers Rhode Island added in the lower brackets.

Obviously, contradicting EDC's data analysis isn't the same as claiming that our roads are paved with gold and our sidewalks strewn with rose petals. Serious problems beset our state, and our tax system is among them. But RIPR continues to believe that our problems will only be solved through intellectually honest analysis, and that ignoring the available evidence is irresponsible and serves no one well.

The actual article in the actual newsletter accompanies this with a lovely picture and some other interesting articles, including a table that shows how much property tax people pay in every town, according to their income, and another article showing four steps our state could take to achieve universal health care coverage at a reasonable cost. Why don't you subscribe?

Update: Advanced to be at the top of the page when the Projo allows my reply.

17:38 - 03 Jun 2006 [/y6/jn]

Do you trust the results of the 2004 election?

It's always been hard to reconcile the faith in exit polls that led us (I mean the US government) to condemn the "election" of Victor Yuschenko's opponent in Ukraine with the widely expressed confidence that the best-financed exit polls around were all wrong during the 2004 presidential campaign here. What's with that? Do we trust the technique or not?

So go read Robert Kennedy's article in Rolling Stone this month. And then see if you can't think of the simplest possible way to reconcile the two.

Update: Choosing to focus on the narrow question of whether Republican machinations were responsible for the many irregularities, a writer at Salon writes that the Rolling Stone article is silly. But the question of trusting the results stands. Even if the only reason this was relevant is the fatuous interpretations of the last election results by the nation's pundits, that would be enough.

17:20 - 03 Jun 2006 [/y6/jn]

Fri, 02 Jun 2006

Revealing truths

A Nebraska City councillor is caught being honest about cutting taxes. (Read here.)

She plans to cut libraries, schools, bus routes, parks. This is awful, but at least she's being honest. Around here, people only propose these general "solutions" like the recently passed proposal to hold city and town property taxes down. Like the honest councillor in Nebraska, this law will cut services that lots of people like. Unlike her, the proponents of this law are fundamentally dishonest, because they won't say what is to be cut.

Anyone who says they support the tax limits should be asked: what will you cut? If they shrug, or say "it's up to the local councils" or otherwise fudge, you know they don't have the courage to say to your face what they really mean. Is that who we want running the show?

09:14 - 02 Jun 2006 [/y6/jn]

Thu, 01 Jun 2006

Does poverty breed dependence?

There is some evidence, but as usual, it does not comfort the "conservative" activists.

11:46 - 01 Jun 2006 [/y6/jn]

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