Thursday, February 28, 2019

Foxconn - the only thing we know is that it's a really bad scam

Jon Peacock of the Wisconsin Budget Project on what we need to look at with the Foxconn contract,
Defenders of the Foxconn deal often claim that the contract protects state taxpayers because Foxconn won’t receive any credits if it doesn’t meet job thresholds. Although that claim is true in part, it’s also very misleading. More than a third of the planned subsidies — $1.6 billion — including the state and local infrastructure spending for the project, has little or no tie to job creation.

3. The state and local subsidies per job are much higher if Foxconn falls well short of the job creation targets.
Under the contract, Foxconn can get the maximum capital investment credits even if it falls well short of each year’s job target. For example, Foxconn can receive the maximum annual cash subsidy (“tax credit”) of nearly $193 million per year even if it employs only 520 people at the end of this year (25 percent of the target level) and 1,820 at the end of 2020 (which is just 35 percent of that year’s target of 5,200 jobs). Under that lower employment scenario, the job creation payments to Foxconn would be lower, but the investment subsidies are much less tied to the job levels.

In light of that factor, plus all the upfront subsidies that are independent of job creation, the total cost of state and local subsides will be much higher per job if Foxconn builds a smaller plant with fewer employees than initially promised. The huge subsidies for each job created are a concern for many reasons, including the fact that the revisions to Foxconn’s plans make it far less likely that project will have the purported employment benefits for blue collar workers and communities of color in southeast Wisconsin.
And one of the interesting things that Peacock predicts is that Foxconn might be the ones to want to change the deal we have in Wisconsin, especially as it appears that Foxconn will not hire anywhere near as many people as they claimed 18 months ago.
5. Foxconn has even more reason to renegotiate the contract than the state. Both the state and Foxconn have strong reasons to want to renegotiate the contract, but Foxconn has the greater incentive to strike a new deal. First, it now appears very unlikely that Foxconn can hit the minimum job targets that it needs to reach to be eligible for the payroll tax credits. Second, the changes in the type of LCD factory seem to make Foxconn ineligible for most of the investment tax credits it was expecting over the next several years. If anyone is initiating an effort to strike a new deal, it should be Foxconn.

If Foxconn truly intends to go ahead with revised plans for the Mt. Pleasant facility, it will probably seek a new contract that helps it qualify for a larger portion of the nearly $3 billion of cash payments authorized by Governor Scott Walker and the legislature. Whether the state should agree to any changes of that nature is an open question because a better option might be to cut the state’s losses. On the other hand, renegotiating the contract could be an opportunity to close loopholes and change other contract terms to make it a less costly and less risky deal for state taxpayers.
And even people associated with Foxconn don't seem to be sure about what's going to happen in Racine. Note these comments from Foxconn VP Bill Mitchell at a business event in Milwaukee last week, which shouldn’t make anyone feel better.
“I’m not saying this is true of Foxconn,” he said, “but for any company, if you wait until you figure out all of the details before you leave the runway, sometimes in this day and age with the advance of technology, you’re not going to be able to continue to be competitive.

“And so that’s from our perspective, or from my perspective personally, what I mean by that is you’re — we’re flying the airplane and we’re designing and building it as we go because the demands are changing constantly.”
If you read between the lines of the story, Mitchell seems like someone far in over his head, as he walks out of an interview sessions when a reporter asks him about Gov Evers speaking at the conference. Then Mitchell returns, and seems to speak out of turn over what’s actually happening at the Racine County plant, which the Journal-Sentinel’s Rick Romell connects the dots on.
Mitchell briefly talked about the television-set assembly operation Foxconn has launched in a leased building in Mount Pleasant while its planned manufacturing and research complex is under construction a few miles away.

He didn't have figures on production volume but said he believed the TVs being assembled in Mount Pleasant are under the Sharp brand.

What Foxconn is doing with those television sets remains an unanswered question. Foxconn has owned Sharp since 2016 but does not hold the rights to sell Sharp-branded TVs in the U.S.
So any TVs being assembled in Racine County are being sent out of the country? And when Romell asked Foxconn what they knew about this, they wouldn’t respond.

No matter what Potemkin Village Foxconn tries to construct, it’s pretty obvious that this will never be a major manufacturing plant. Which means the facility isn’t what was portrayed to to Wisconsinites, and certainly won’t come close to being the game-changer WisGOPs tried to portray it as.

The only thing “game-changing” is the massive taxpayer-fronted price tag that is already sunk into this scam, and the lesson that it gives to the rest of the nation on what not to do.

Wednesday, February 27, 2019

The market is up, while the real US economy stalls. What wins out in 2019?

After bottoming out on Christmas Eve, the stock market has gained back everything it lost in December in the last 2 months. Maybe it’s related to interest rates leveling off and dropping, or that we aren’t in a government shutdown any more, but it’s hard to figure out exactly why there’s been a 20% snapback. And CNBC was wondering the same thing this week.
Stocks' monster comeback coincided with a wave of downward growth and earnings revisions from Wall Street. In fact, while the S&P 500 comes roaring back, first-quarter earnings growth forecast for the S&P 500 firms has turned negative, a drastic cut from above 3 percent growth seen in late December. Consensus first-quarter GDP growth has also been slashed to below 2 percent.

"Either markets have to come down to where growth expectations are, or growth and earnings expectations have to move higher to justify current market valuations," said Torsten Slok, Deutsche Bank's chief international economist, in a note on Tuesday.

After the worst December since the Great Depression, the S&P 500 enjoyed its best January in more than 30 years and is set to finish February on a strong note. Many have credited the market driver to the growing optimism toward a trade deal with China and the Federal Reserve's more "patient" approach to tightening. However, growth expectations have not kept up with the market rebound and some economic indicators are pointing to more weakness going forward.
There definitely have been signs of a slowing economy for the end of 2018, including news from this week. For example, the housing market has definitely stopped booming.
Standard & Poor’s said Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 4.7% annual gain in December, down from 5.1% in the previous month. It is the lowest level since September 2015. The 20-City Composite posted a 4.2% annual gain, missing analysts’ estimates of 4.5%. The 20-City Composite is down from 4.6% in November.

“The annual rate of price increases continues to fall,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, in a press statement. “A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales. The monthly number of existing single-family homes sold dropped throughout 2018.”

Existing home sales continued to slide in 2019. During the past 12 months, sales have plunged 8.5%, according to the National Association of Realtors. Sales of existing homes declined to a seasonally adjusted annual rate of 4.94 million in January — the slowest sales rate since November 2015. The dip was attributed to ongoing affordability issues.

“Even at the reduced pace of 4.7% per year, home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%,” said Blitzer.
Separately, the U.S. Commerce Department said Tuesday that housing starts fell 11.2% in December from the previous month to its lowest level since September 2016. The dip indicates that developers expect fewer new homes will be sold this year. Housing starts have plummeted 10.2% over the past year.
While others are quoted in the article as thinking this is a good thing, because the slowing increases help with affordability in a time where employment and wages are rising, there’s another issue that might not make that so.

And that’s because younger adults are dealing with an increasing amount of other types of debt, which could be another reason that houses may not be getting bought.
Debt among 19 to 29-year-old Americans exceeded $1 trillion at the end of 2018, according to the New York Federal Reserve Consumer Credit Panel. That’s the highest debt exposure for the youngest adult group since late 2007.

Debt levels play a role in how young adults view their spending conditions, according to a University of Michigan survey Friday. Younger adults -- those under age 35 -- have reduced their spending compared with previous generations possibly because of weakened job prospects, delayed marriage and educational debt….

Student loans make up the majority of the $1,005,000,000,000 owed by this cohort, followed by mortgage debt. New mortgages among young adults today remain quite a bit below levels incurred in the early 2000s. This may suggest adults are waiting longer to buy homes and may opt to rent for a longer period of time than previous generations.

Mortgage debt makes up the vast majority of overall consumer debt but it’s not growing nearly as fast as student loan debt. Since 2009, mortgage debt increased 3.2 percent while student loan debt grew 102 percent.
Huh. Seems like student loan relief might lead to a lot of security and added consumer spending among those younger people, eh?

We’re currently in a backlog of economic data that was a result of the government shutdown in December and January, so we don’t know a lot about how the economy started in 2019. Even the Fed Reserve Chairman admitted today that there were “cross-currents” in the economy, where the stock market indicates the expansion still has room to grow, but the Main Street economy seems to be slowing if not outright heading toward recession.

A lot of that backlogged data comes public in the next 2-3 weeks, and I think it’ll tell a lot of the story of where we head after Q1 2019. Wall Street or Main Street will definitely make a turn in direction, my instinct is that it’s Wall Street heading down, but I’m not going to pretend that I know for sure, because I don’t get what’s going on today.

SALT in the wounds - $323 billion in deductions going away

As tax season moves forward, we continue to see that the (possibly) unforeseen side effects of the GOP’s Tax Scam keep coming back to bite a large numbers of filers.

Let’s start with a Treasury Department report from this week that quantified how the GOP Tax Scam is ending one particular deduction for a sizable amount of Americans.
The Treasury Inspector General for Tax Administration (TIGTA) estimated that if the $10,000 cap on the deduction had been in place in 2017, roughly 10.9 million taxpayers would have been unable to deduct about $323 billion in state and local tax payments on their federal tax forms.

TIGTA said that its estimate is based on examining 2017 tax filings whose itemized deductions exceed the standard deduction amount under the new tax law and identifying the number of returns that claimed more than $10,000 in SALT deductions.

Those who have claimed more than $10,000 in SALT deductions in the past may still be seeing a reduction in their tax liability under Trump's tax law. Some taxpayers are likely to have their limit on SALT deductions more than offset by the 2017 tax law's lower tax rates and larger child tax credit. And some taxpayers had their SALT deduction limited in the past by the alternative minimum tax but won't be paying that tax under the new tax law….

Blue-state politicians have amplified their calls to restore the full SALT deduction in the past few weeks, linking the cap on the SALT deduction to complaints from taxpayers about smaller refunds and higher taxes.

Trump has also expressed openness to revisiting the cap on the SALT deduction. But key congressional Republicans said they do not plan to reconsider the deduction cap, which largely impacts high earners.
The SALT cap is a big reason why many individuals are writing surprise checks to the IRS this tax filing season, because what used to be tens of thousands of dollars in deductions now is limited to $10,000, and if someone doesn’t have a large amount of mortgage interest on top of that, then they end up taking the standard deduction, which is already assumed with the paychecks that people receive (raises hand).

That fact makes these recent words from the Trump Administration all the more dishonest.
"There was absolutely no manipulation of the tables and no 'phantom windfall' in taxpayers' paychecks," J. Brady Howell, a senior adviser in Treasury's legislative affairs office, said in a letter this week to Senate Democrats.

The Treasury Department and the IRS released new withholding tables early last year to reflect the major changes in President Trump's tax-cut law, such as the lower tax rates and the increase in the standard deduction….

Democrats have argued that the administration designed the withholding guidance so that people would see bigger paychecks throughout the year last year ahead of the 2018 midterm elections, but that taxpayers then would find that they owe the IRS money instead of receiving a refund when they file their taxes this year. They argue that the administration should have not touched the withholding tables last year.
I disagree with that charge from “Democrats” – it was fine for the Trump Administration to update the withholding tables to reflect the new rates. But the Trump Administration failed to do 2 other things that led to the “phantom windfall” before the 2018 elections the surprise tax bills this winter.

1. The IRS didn’t inform individuals that took a SALT deduction of more than $10,000 about the changes (they obviously have the data), and that those people may want to take out more taxes in their paychecks because they were likely to have less income to deduct when they filed their taxes.

2. While the Trump Treasury Department changed the withholding tables to reflect the new rates, they didn’t change the number of exemptions for tax filers, and that was a main part of the Tax Scam’s changes. For example, married couples without kids could list 2 personal exemptions (a person and his/her spouse) on their W-4’s at work, and each were worth a reduction of $4,050 in their taxable income.

Once the Tax Scam was passed, those personal exemptions went away, but those individuals were not required to file new W-4’s that reflected the end of those exemptions, and the Treasury didn’t require them to do so. So many unsuspecting people (who care about 500 other things going on in their lives beyond filling out tax forms) ended up having thousands of dollars end up untaxed in their paychecks, and now is paying back that difference all at once during tax filing season.

How did this prediction work out?

Now that people are writing surprise checks for thousands of dollars, the Trump Administration and other GOPs are saying “Well, you should have known better.” How would the casual person have known better? The Trump Treasury didn’t let them or their employers know about it.

The only positive that the GOP Tax Scam might give in the coming months is that we might actually see a slight uptick in revenues compared to this time last year…because of more payments coming in and fewer tax refunds coming out (nearly $40 billion as of last week). So I suppose we may see the growing deficit level off for a few months.

But that's small consolation to a lot of middle-class and upper-middle class people, and all of the ads that I see saying "use your refund to buy things" sound very hollow these days. And you have to wonder how much these IRS checks are going to take out of consumer spending in a time when our retail sales and the housing market already seems to be slowing down.

Tuesday, February 26, 2019

Evers will try to put lid on voucher scam, which makes "small government" GOPs cry

I was heartened to read yesterday that Governor Evers will use his budget to step up and ask to do something that we haven’t seen in several years in Wisconsin - put a lid on the exploding costs of the state’s school voucher program and make them play by the same rules public schools do.
These proposals are part of a framework that allows Wisconsinites to have an honest conversation about the varied funding methods of voucher programs while not impacting enrolled students. They will also result in reduced property taxes. Currently, the state has two parallel systems of education that utilize public dollars and provides funds to about 600 schools it otherwise would not.1 Participation in the voucher program increased by 8.7% in the 2018-19 school year while the total cost increased 12.3% to an estimated $302 million.
Those numbers come from the Legislative Fiscal Bureau’s paper on the various voucher programs in the state, and the same paper also shows that more than $104 million is being taken out of public schools this year as a result of the voucher scam.

The amounts of money involved in school vouchers has consistently gone up since Scott Walker and the rest of the Wisconsin GOP took power in 2011 (with a boost from Betsy DeVos’s campaign contributions). In fact, over the last 7 years the tax dollars that are both going into vouchers and being funneled out of public schools has more than doubled.

Much of that $104 million taken out of public schools has been made up by increasing property taxes, because as we saw in a story from a couple of weeks ago about how smaller, more rural districts are being hurt by vouchers, you don’t close a public school because a few students in each grade are on vouchers.
But losing some students to private schools doesn’t necessarily mean a district has reduced costs, said Portage Community School District Business Director Peter Hibner. Since 2015, Portage has had more than 20 voucher students per year. Participation jumped to 36 this year, taking with them almost $300,000.

“Let’s say you have 30 kids district-wide under that program,” Hibner said. “That might only be a couple at each grade level, so it’s not like we can have less staff for anything else because we have a couple less students.”
So how will Evers propose to stop this voucher theft? Basically by using an old GOP strategy – “cutting it” by stopping its growth in funding or students.
Voucher Payment Indexing: This provision ties indexing for per pupil payments for voucher programs to positive revenue limit adjustments and increases in per pupil aid payments rather than increases in revenue limit adjustments and increases in categorical aid per pupil. Under the current system, the growth in voucher payments is unsustainable and increases property taxes. Reforming voucher payment indexing ensures that our public school districts can be fully and fairly funded.

Milwaukee Parental Choice Program Reestimate & Freeze: This proposal freezes the number of slots available in the Milwaukee Parental Choice Program (MPCP) in FY21, based on the FY20 pupil headcount. As students graduate, new spots in the program will open for new students to enroll. This will save the state $3 million in FY21. Preliminary numbers indicate there are 129 schools and 28,067 students in the MPCP in the 2018-19 school year. Wisconsin and Racine Parental Choice Program Reestimate & Freeze: This proposal freezes the number of slots available in the Wisconsin and Racine Parental Choice Programs (WPCP and RPCP) in FY21, based on the FY20 pupil headcount. As students graduate, new spots in the program will open for new students to enroll. Because most students in these programs are funded through general aid reductions, for which a school can increase property taxes to recoup their lost state aid, this proposal will reduce property taxes by $24.9 million in FY21.

Preliminary numbers indicate there are 26 schools and 3,242 students in the RPCP and 213 schools and 6,878 students in the WPCP in the 2018-19 school year. The total state general aid reduction and resulting property tax impact, attributable to pupils in the WPCP and RPCP in the 2018-19 school year is $68.3 million.6 Special Needs Scholarship Policy Changes & Restrictions: This proposal prohibits new students from enrolling in for the Special Needs Scholarship Program (SNSP) beginning in FY21. Through this program, private schools can receive a 90% reimbursement for special education services while public schools only receive a 25% reimbursement. The total state general aid reduction attributable to pupils in the SNSP in the 2018-19 school year is estimated at $8.4 million. This provision will reduce property taxes by $4.6 million in FY21 compared to current law.
Evers also wants to freeze all new charter and “virtual” schools for the next 4 years, and would force all voucher schools to have full accreditation along with the same teacher licensing rules that public schools have. Lastly, Evers would include a line item on property tax bills throughout the state that shows just how much state aid is taken away from a property owner’s local K-12 public school district.

Naturally, this angers a Wisconsin GOP that has relied on those DeVos donations to be sent to them through convicted criminal Scott Jensen and other right-wing front groups. These guys have gradually increase voucher funding and enrollment so that casual voters don’t make the connection between vouchers and the bad effects that follow. If nothing else, Evers is making them bring that fact out into the light.

Gotta give Fitz credit for honesty, I guess.

I also love how the GOPs and their allied voucher front groups are doing their typical sob story about how “you’re not letting poor kids have choices.” In addition to not being true (vouchers still exist, and the kid can attend any public school he/she likes under open enrollment) it is quite a rich statement coming from Republicans. Those race-baiting regressives have constantly cut public education and local services, and have rigged the state’s economic system to increase the already-wide disparities in outcomes and opportunities that plague Wisconsin.

I think most Wisconsinites see through the voucher scam these days. It’s likely a reason why suburban Milwaukee turned more towards Democrats in 2018 than anywhere else in Wisconsin, costing pro-voucher Scott Walker a 3rd term in which he certainly would have further privatized K-12 education.

Sure, Evers’ plans on vouchers are unlikely to get through the gerrymandered GOP Legislature, especially with a bought-off crook like Robbin’ (De)Vos running the Assembly. But it throws down the marker, forces the GOPs to justify this absurd expense of money and explain why we have 2 separate, tax-funded school systems. It will also make the Republicans reveal what needed services and programs should be cut to keep pumping more tax dollars to these “Jesus rode a dinosaur” schools.

And maybe a few voters in those gerrymandered areas wake up and realize that their GOP legislators aren’t giving a damn about investing in education in their community, but instead are using our tax dollars to kick back money to their campaign donators. And if so, the Milwaukee suburbs might not be the only traditionally red area of the state that turns bluer.

Monday, February 25, 2019

A few questions Walker won't answer on 1130

I see our fair ex-Governor is paying back Hate Talk 1130 for all their years of support by sitting in for the stroked-out Mark Belling a couple of days this week.

I'm guessing this will be much like other "public" appearances for Scott Walker - a lot of scripted, cherry-picked BS comment and no ability for the everyday person to show up and ask any real questions.I won't waste a minute of time to listen to Scotty's crap, mostly because there's nothing interesting that Governor Dropout would ever say.

But if we did have an ex-Governor that would operate on the level, here are a few of the questions I would have liked to have heard.

"Hey Scotty- If your reforms made us "open for business", why do you think Wisconsin has had 29 straight quarters in the bottom half of job growth in the US?"

"Hey Scotty- Why did Minnesota add 80,000 more jobs and 180,000 more people than Wisconsin during your 8 years?"

"Hey Scotty- Why were the jobs numbers from your Department of Workforce Development constantly revised down when subjected to the "gold standard" Quarterly Census on Employment and Wages? Including a misfire of nearly 20,000 jobs right before the election?"

"Hey Scotty- With a record number of dairy farms closing in Wisconsin, do you think you needed a better policy than "Eat more cheese!"

"Hey Scotty- Do you think it was worth it to give away over $1 billion to manufacturers in a tax cut, when Wisconsin still has the worst manufacturing wages in the Midwest, and trails most of our neighbors for jobs in manufacturing?"

"Hey Scotty- What made you think Terry Gou at Foxconn would actually deliver the jobs and products he claimed he would when you and WEDC cooked up the deal on the back of a cocktail napkin?"

"Hey Scotty- If adding money to K-12 education doesn't improve outcomes, why have you more than doubled the amount of tax dollars going to voucher schools, and why did you desperately add so much money to K-12 before the election?"

"Hey Scotty- You refused to raise state vehicle registration fees to fix our roads, but allowed local wheel taxes to go up by $13.6 million between 2011 and 2017. Why didn't you try to prevent that?"

"Hey Scotty- When you send over $1 billion state tax dollars a year to replace property taxes, do you call that a tax cut, or a shell game?"

"Hey Scotty- Why did you pick a homophobic bigot like Brian Hagedorn to be your personal lawyer, and why did you appoint him to the Court of Appeals?"

"Hey Scotty- Do you think money-laundering is free speech, like the Wisconsin Supreme Court claimed to let you off the hook in John Doe?"

"Hey Scotty, what do you think about the GOP's committing ekection fraud with absentee ballots in NC-9? You'd never do that kind of thing in Wisconsin, would you?"

"Hey Scotty, any thoughts for your friend Maria Butina as she heads to court on Tuesday?"

And lastly-

"Hey Scotty- How often would you give talking points to the hosts on AM 1130 to fuel racism and resentment as a way of stirring up the rubes who listen to this trash-hole of a station?"

"Hey Scotty- Do you think it impresses people when you share what you ate this afternoon, or when you tweet-storm absurdities about national issues?

"Hey Scotty- Did you ever come up with an idea of your own that wasn't based on a poll?"

"Hey Scotty- What schemes were you planning to surprise is with if this state would have been stupid enough to re-elect you in 2018?"

"Hey Scotty- What did you think when you saw your old hometown of Wauwatosa vote overwhelmingly for Tony Evers last November?"

"Hey Scotty- Aren't you secretly happy that you got booted out of office before this state completely collapsed due to your negligence, and that Evers has to spend years cleaning up your mess?"

Sunday, February 24, 2019

Severe, costly winter is more proof your property taxes pay for too much in Wisconsin.

It seems like Wisconsin hasn't gotten a break from brutal winter weather over the last 6 weeks. Over 1/3 of the state's counties are under a blizzard warning today, and it seems like ongoing cycle of cold/then warmer so it snows/cold again keeps happening.

Madison was just warm enough to avoid most of the snow in this latest storm, but city trucks had to dump a lot of salt to avoid ice being all over the roads yesterday, and there will likely be more costs throughout the state as we drop below zero and see more snow in the coming week.

Channel 27 in Madison recently had this report that shows the city is already being stretched to its budgetary limit to keep things running during this awful winter.

The City of Madison sets aside $6.2 million for snow removal operations every year, according to [Finance Director David] Schmiedicke. He said that would cover five and a half snow storms per year.

However, barely two months into 2019, the city has already spent nearly half that amount: $2.8 million.

“That includes staff out there operating vehicles. Those vehicles have to be repaired by other staff and we have to augment what we have with city assets with private companies so we can clear streets,” said Schmiedicke….

Mother Nature may make the ultimate decision, but with every storm that dumps about five inches of snow, it costs Madison roughly $230,000, according to Schmiedicke.

The city will take money from a reserve fund to cover the extra cost, according to Schmiedicke. The reserve fund currently has a balance of $1.9 million. He doesn’t predict the city should need that much, but if it happened another reserve fund would be tapped.
Even in a growing city like Madison, it's difficult to find enough money to take care of these snow-removal needs and handle all other needs and services over the next 10 months of the year. And other municipalities in Wisconsin are having it worse than the Mad City.

That ties in to a report released last week by the Wisconsin Policy Forum on local government funding. That report showed that while local governments in Wisconsin are in the middle of the pack in the US for spending and taxes, the way they collect that money is quite different than communities in other states.
According to U.S. Census data compiled by Willamette University, in 2015 Wisconsin municipalities received 42.2% of their revenues from the property tax but only 1.6% from sales and income taxes combined. Nationally, municipalities got only 23.3% of their revenues from the property tax with an additional 21.3% from sales and income taxes.

• Wisconsin municipalities rank seventh nationally among states for being the most reliant on the property tax for their revenues. No other Midwestern state relies so heavily on the property tax and so little on other taxes to pay for municipal services. (See Figure 1 on page 4.)

• The state ranks much lower nationally for its reliance on municipal sales taxes (43rd) and total municipal taxes (26th). The combined state and local sales tax rate in Wisconsin (5.44% on average) is also the lowest in the Midwest.

In addition, the Policy Forum says that the State of Wisconsin has had to pay more for “in-house” duties, and has been particularly hit by the increasing costs of Corrections and Medicaid. Add in the increased usage of state money to give tax cuts (either with tax credits or through a shell game that reduces property taxes paid by homeowners and businesses), and there is a squeeze on how much money can be passed down to the local level.
State aid to municipalities also has declined as a share of the state’s overall spending from its general fund, or main account. To show that, we looked at three forms of general aid to local governments: shared revenue to municipalities and counties, expenditure restraint (state aid that rewards municipalities for limiting spending increases), and payments for municipal services (state payments to defray the cost of local services for and around state properties). Data from the Legislative Fiscal Bureau show that after adjusting for inflation these state aids to local governments fell 40.9% between 1998 and 2018. The share of the state’s general fund devoted to these local aids also dropped from 8.5% to 4.5%.

Put those two facts together, and the Policy Forum notes that property taxes have increasingly replaced state aids as the method to pay for local services over the last 30+ years.

An extra complication is that the Wisconsin GOP has limited the annual increase in a community’s property tax levy to the amount of “net new construction”, as part of a strategy to claim property taxes are going down. But many communities don’t have much new construction, especially rural communities in Northern Wisconsin. So they have no ability to have the funding available to fix the roads and pay for services in their community outside of imposing a new wheel tax. And as the Policy Forum reminded us last May , many communities have indeed done that, to the tune of $13 million in additional taxes levied between 2011 and 2017.

So if the contract has been broken between the state and the locals, maybe it’s time to allow local governments to raise more of their own money. Some of this may be remedied through higher revenue caps, so communities aren’t as reliant on new construction and are allowed to keep up with the cost of inflation. And it is also time to realize that the revenue sources local communities can choose is something to be opened up and shifted.

By law, only Wisconsin counties can levy a local sales tax in most places, and even then, it’s limited to 0.5%. There are some minor exceptions, with a few tourist-related small towns like Wisconsin Dells, Eagle River and Bayfield being designated as “premier resort areas”, which allows them to add an additional sales tax of up to 1.25%.

But that leaves out the overwhelming majority of Wisconsin, including its largest city. Milwaukee would be uniquely positioned to benefit from a higher sales tax, as Milwaukee County is the largest draw of tourism dollars in the state by a wide amount, and also has had sizable amounts of state aid taken from it over the years.

Even with residents paying $50 in wheel taxes, there are many needs that go unmet in Milwaukee, and a whole lot of people who use the amenities and services of the city that don’t pay a lot toward them. Oddly, the local sales tax on restaurant sales to pay for the needs of all of Milwaukee County is no larger than the one that goes to the handful of blocks and facilities that make up the new Bucks arena district.

At the same time, the City of Milwaukee has no direct sales tax that pays for cops, fire fighters and street repairs. I know the Bucks are playing well, but that seems out of wack.

That allowance for more local revenues could also apply for the rest of the state, particularly since it’ll be difficult to add to local aids when the state has to catch up on aids for K-12 and higher education, fix the Scottholes, and deal with the increased needs of social services such as the shortfall in caregivers, public defenders and prison guards (yet another reason why taking the expanded Medicaid money would help, by the way).

Many areas would probably consider reducing or removing their wheel taxes if they had more of an ability to get the money in another way, making for a win-win that legislators and local officials could both take credit for.

Lastly, the GOP Tax Scam is keeping many Wisconsinites from being able to write off their property taxes on their federal 1040 return, due to the limiting of the SALT (State and Local Tax) deduction and the increase in the standard deduction. So the net cost of property taxes has just gone up for a lot of Wisconsin residents, which seems to make substituting sales taxes or charges at the local level a better option.

I'd like to see Tony Evers admit that our system of funding local government in Wisconsin has broken down, and use the budget that he releases this week as a place to ask for reforms that remove the handcuffs that WisGOP has placed on local government since 2011. And our severe and volatile winter is yet another reason this needs to happen sooner than later.

In the process, Evers could also start a return to local government funding and autonomy. What a great change after 8 years of big government GOP rule!

Saturday, February 23, 2019

Lower revenue and lower refunds shows why WisGOP tax plans are reckless

Friday afternoon, the Wisconsin Department of Revenue came out with their figures for January 2019. And the bad figures in December didn't get much better in the first of the new year. These numbers are not adjusted for the 1.6% rate of year-over-year inflation.

Wisconsin tax revenues, January 2019 vs January 2018
Income taxes +0.7%
Sales taxes +0.7%
Corporate taxes +32.6% ($28.5 mil vs $21.1 mil)
Excise taxes -5.3%
Other taxes -1.1%
TOTAL +0.9%

Which means that Wisconsin is up 2.3% on revenues for the year, well behind the projections of 3.3% revenue growth given by the Legislative Fiscal Bureau last month. If we fall short on revenues, then there's less money to carry over into the start of the 2019-21 biennium.

Which is yet another reason Tony Evers was right to veto the Wisconsin GOP"s unfunded tax cut this week, because THE MONEY MIGHT NOT BE THERE. If you assume that we stay at the same amount of year-over-year growth in tax revenues that we have so far in FY 2019, and then use the same rate of growth that the LFB assumed for the next 2 fiscal years, note how the hole in the budget grows That's even if corporate revenues continue to improve (I'm also going to assume the other taxes and revenues end up in line, which they generally are at this point).

It doesn't look like much, but that's a gap of more than $120 million in each year. If that holds over the course of the budget, it's about $375 million. Given what we're already seeing in this tax filing season, things may be much more in peril than what that chart shows. The IRS dumped their latest information on tax refunds for this year, and the gap between 2019 and 2018 keeps growing.

Federal tax refunds, early 2019 vs early 2018
Average refunds- DOWN 16.7% (-$529)
Number of refunds- DOWN 26.5 (-8.45 million)
Total refunds amount- DOWN 3.8% (-$39.3 billion)

That last stat is the one that jumps out at me. Nearly $40 billion hasn't gone back into the hands of consumers, and is instead being used to pay off the debts that have resulted from the GOP Tax Scam. And a decent amount of that money will be out of the hands of Wisconsinites, which will likely limit consumer spending in our economy in the coming months.

But while the smaller refunds might "raise" tax revenues at the Federal level, that does NOT apply at the state level. As someone in state government has reminded me, "Federal and state tax codes are different", and some of the deductions that Wisconsinites won't take advantage of at the federal level (like mortgage interest and charitable donations) are things they can use at the state level. Which means Wisconsin could have a typical amount of refunds in the next few months, which lowers overall revenues.

So as a result, we should hold off on any tax policy until the new LFB projections come out in May, and do it through the regular budget process. Because I'm starting to think that things may be a lot more tenuous than what was projected a month ago, which would make it foolish to dig a deeper hole on the underfunded services and infrastructure that the last governor left us with.

Thursday, February 21, 2019

GOPs have to make up a study to oppose Medicaid expansion. They can't do it honestly.

I want a bit of space to discuss the recent WisGOP push to claim that expanding Medicaid in the state wouldn’t work out and hurt Wisconsinites. These memes are the result of a report that claims while Medicaid expansion would save tax dollars, it would actually raise premiums on those people that are currently insured, because the insurance companies would charge them more to make up the difference.

There’s a lot wrong with that idea, and not just because it’s a cynical “divide and conquer” framing designed to make the currently insured resentful of people that would get insurance through Medicaid. But I’d rather talk about the people making these claims, as they are not operating on the level, and the claims of “higher costs and premiums under Medicaid expansion” are specious enough on its face.

You can read the bilge for yourself, but let’s keep in mind the authors of this “study”. The Wisconsin Institute for Law and Liberty is well-documented as a Bradley foundation front group that seems to exist for no reason than to spread GOPper-ganda and file lawsuits to promote WisGOP’s cause.

How does this building avoid paying property taxes to Milwaukee?

As for the "academic", Noah Williams is a charlatan whose entire current existence at UW-Madison is based on outside funding from similar right-wing oligarchs. Let’s go back to August 2017, after Williams had advised the failed presidential campaigns of Scott Walker and Marco Rubio, to an article in the Capital Times that described how CROWE was set up.
Professor Noah Williams is director of the Center for Research on the Wisconsin Economy, established in July. It operates out of the Social Sciences Building, 1180 Observatory Dr.

Funding for the center includes $240,000 from the Charles Koch Foundation and $100,000 from the Bradley Foundation, according to a proposal for the center approved in March by the UW-Madison College of Letters and Science’s Academic Planning Council…

A member of the UW-Madison faculty since 2008, Williams was previously on the faculty at Princeton University and received his Ph.D. at the University of Chicago. (known for its backing of right-wing doctrines for decades).

Williams’ analysis of the controversial Foxconn plant proposal, made public on Aug. 17, concluded that the high-tech plant could return nearly $4 for every $1 of a proposed $3 billion state tax subsidy.
Oooh, that analysis is not aging well, Noah. Even Robbin’ Vos is admitting that Foxconn isn’t going to end up anything like it was promised to be.

The “findings” of the report were rebuked by an actual UW academic who, unlike Williams, isn’t paid to make up stuff to support a certain conclusion.
The conclusions drew sharp criticism from Donna Friedsam, health policy programs director of UW-Madison’s Population Health Institute.

“This study has several methodological and analytical flaws that substantially compromise the validity of its conclusions,” Friedsam said.

Friedsam in an email said the study omits evidence of better health outcomes associated with previous BadgerCare expansions, and pointed to mathematical errors and problems with the study’s conclusion that health care spending is higher in Medicaid expansion states.

She added most economists reject the reasoning that private sector health care costs would increase because health care providers would pass on costs from low Medicaid reimbursement rates to consumers.
Let me also forward you to a summary from John Peterson at Democurmudgeon, who frequently discusses health care in detail, and includes in his recent post a list of findings from the Kaiser Family Foundation on states that have expanded Medicaid.

I won’t go over all of those items from the KFF like John did, but a few that are relevant here are:
3. Economic measures: No significant increases in state spending from state funds as a result of the expansion through 2015 ... Medicaid expansions result in reductions in uncompensated care costs for hospitals and clinics as well as positive or neutral effects on employment and the labor market.

4. Medicaid expansion is having a disproportionately positive impact in rural areas in expansion states, where growth in Medicaid coverage and declines in uninsured rates have exceeded those in metropolitan areas.
Let me note that the 2 Congressional districts in Wisconsin that have the largest number of near-poverty individuals that get their insurance from the ACA exchanges are in rural Wisconsin, and especially Northern Wisconsin. This map has darker colors for the areas with the most people that get health insurance through the Obamacare exchanges.

Those are the individuals most likely to benefit from Medicaid expansion, and many are “represented” by Koched-up Republicans that keep them from getting the increased care and options that Medicaid expansion would give them.

Let me also relay a couple of other findings by the Kaiser Foundation via the Democurmudgeon.
8. Found expansion to be associated with improvements in disparities by race and income, education level, and employment status

9. Significant reductions in out-of-pocket medical spending. Multiple studies found larger declines in trouble paying as well as worry about paying future medical bills in expansion states relative to non-expansion states ... significantly reduced the percentage of people with medical debt, reduced the average size of medical debt, reduced the average number of collections, improved credit scores, reduced the probability of having one or more medical bills go to collections in the past 6 months, and reduced the probability of a new bankruptcy filing, among other improvements in measures of financial security.

10. Documented provider reports of newly eligible adults receiving life-saving or life-changing treatments that they could not obtain prior to expansion.
All 3 of these realities are conveniently ignored by Williams and the Bradleys. They are wrong to think costs will go up because under Medicaid expansion, people will be more likely to maintain their health with more regular doctor’s bills, and insurance companies won’t have to make up for as many people that go bankrupt and can’t pay their bills.

It’s obnoxious to see Republicans and their oligarch funders lie through their teeth to avoid saving Wisconsin taxpayer dollars by not expanding Medicaid. But the fact that they have to make up this garbage is more proof that they know they’re on the wrong side of public opinion and reality.

Evers should absolutely include Medicaid expansion in the budget next week, make the Koched-up GOPs continue to flail with absurd reasons to oppose it and come up with $400 million + to cut to make up the difference. And if Dems keep slapping back hard on these fake think tanks and the GOPpuppets that hide behind their “research”, maybe they can put some holes through the Bubble of RW BS that envelops far too much of Wisconsin these days.

Not feeling the "Trump Boom"? That's because much of the country isn't having one

When I was looking at Wisconsin’s bad performance in the “gold standard” Quarterly Census of Employment and Wages (QCEW), something else jumped at me in the press release. I noted that a lot of many states seem to be left out of the alleged “Trump Boom” of 2018.

If you go top the end and check out the state rankings in job growth, you’ll see a whole lot of states with less than 1% job growth in a time period when the US had much faster job growth as a whole (1.63%). And that was especially true in the Midwest.

Job growth, QCEW Sept 2017 - Sept 2018
Number of states at or above US rate of growth: 14
Number of states below US rate of growth: 36
Number of states with 1.0% job growth or less: 25
Number of Midwest states in bottom 1/2 of job growth: 7 out of 7.

Ehh, don't be so sure.

In addition, we recently found out that the “manufacturing rebirth” that Trump promised blue-collar Americans isn’t as robust as what we were first told. At the end of 2018, the Bureau of Labor Statistics said that 284,000 jobs were added in manufacturing for that year, and 491,000 in the 2 years Trump had been in office. But if you look at the now-benchmarked numbers, that number is noticeably less.

Manufacturing job growth, US. Original report vs revised benchmarks
2017 reported +207,000
2017 revised +190,000

2018 report +284,000
2018 revised +264,000

Total revisions -37,000

That’s still pretty good - in fact, 2019 had the biggest one-year growth in manufacturing jobs that we’d seen in the US in 22 years. But it’s not as good as we were told, and conversely, the lower-wage “leisure and hospitality” sector (generally hotels, restaurants and bars) had their job gains revised UP by 43,000 for 2018.

Moving into 2019, economic reports on manufacturing that dropped on Thursday indicate that this 2-year uptick is growth may be leveling off.
The headline index from the Philadelphia Fed’s Manufacturing Business Outlook Survey registered a surprise decline of 4.1 in February, below expectations for a reading of positive 14, as both new orders and shipments indices dropped. This was the index’s first negative reading since May 2016. Firms included in the regional Fed’s survey, however, did report increases in employment for the month, and an index measuring future conditions showed firms were generally optimistic abut the next six months.

The U.S. manufacturing purchasing managers’ index released by IHS Markit registered a decline to 53.7 in February from 54.9 in January, coming below expectations of a reading of 54.8. While the reading above the key level of 50 still indicates expansion in the sector, this was the slowest improvement in business conditions since September 2017, IHS Markit reported.
Combine these statistics with the generally subpar job growth in the Midwest, and Trump’s big talk to rebuild the Rust Belt isn’t quite working out in the real world. Now combine that reality with the increasing understanding that the Trump-signed GOP Tax Scam is making many Americans write checks to the IRS while the US budget deficit continues to blow up (the deficit was up nearly 50% in the last 3 months of 2018 vs the same time in 2017, and income taxes from individuals and corporations were down a combined $25 billion).

And a disproportionate amount of those check-writers who will be screwed over by the Tax Scam’s limiting of the State and Local Tax (SALT) deduction are concentrated in Wisconsin and other Midwestern states.

The anger over the Tax Scam is already bubbling and becoming apparent, and a 30-cent increase in gasoline in the last month can’t help when people are already seeing less money in their pocket than what they’re used to. Keep an eye on whether the significant drop in retail sales for December is a sign of other slowdowns in consumer spending for 2019.

So if you’re confused about why the stock markets keep going up and the economy is alleged to be on strong footing, you may have good reason to be, because your part of the country is likely being left out of it. You wonder when it sinks in that the GOP’s claims of a strong economy are met with a giant response of “BULLSHIT” in the parts of the country they can’t afford to lose in 2020, and drives Trump’s already-low approval ratings even lower.

Wednesday, February 20, 2019

Yet another subpar Wisconsin quarter, and more proof Walker Admin inflated jobs totals

Today featured the release of the topline numbers for the “gold standard” Quarterly Census of Employment and Wages for the 3rd Quarter of 2018. As usual, it showed Wisconsin to be falling behind the rest of the nation, but also we were behind the claims of the now-departed Walker Administration.

For the 29th straight quarter, Wisconsin was in the bottom half of US job growth, this time at 32nd (based on this table from the Bureau of Labor Statistics with a paltry rate of growth of 0.77% (22,000 jobs). (FYI- I'm going by the CSV files and comparing the two time periods. The PDF release had Wisconsin as low as 36th)

This placed Wisconsin around the middle of the pack for our part of the country, as part of 4 states in the Midwest that grew jobs at a rate less than half of what was happening in the rest of the country.

Total job growth, Sept 2017-Sept 2018
U.S. +1.63%
Ill. +1.00%
Ind. +0.93%
Wis. +0.77%
Ohio +0.76%
Mich +0.74%
Minn +0.74%
Iowa +0.58%

The job figures are lame enough, but the lack of wage growth in “Open for Business” Wisconsin is more alarming, as we were 32nd in this nationwide and smack dab in the middle of the Midwest (4th out of 7) for this as well.

Worse, our wage gap with our better-compensated neighbors continued to grow. Especially with our neighbors across the St. Croix River.

Average weekly wage, Midwest Sept 2018
Ill. $1,087 (+$30 vs Sept 2017)
Minn $1,074 (+$44)
Mich $991 (+$27)
Ohio $947 (+$27)
Wis $901 (+$25)
Iowa $887 (+$32)
Ind. $883 (+$22)

The QCEW jobs figures also confirm something I strongly suspected before the November 2018 elections - the Walker Administration was badly overestimating job growth. Take a look at the last jobs release that came out less than 3 weeks before the election, which talked up “the strength of the Wisconsin economy.”

The "gold standard" tells a different story.

Wisconsin total job growth, Sept 2017- Sept 2018
Walker DWD +41,700
QCEW +22,000

The same press release also claimed that the state added 22,800 manufacturing jobs over that time, and while there wasn’t a breakdown of individual industries in today’s QCEW report (that’ll come with the full release in 2 weeks), past history strongly suggests that will be revised down as well.

I think it’s well past time to have new DWD Secretary Caleb Frostman take a look at the statistical methods that have been used to find out why Wisconsin continues to get these totals revised down when subjected to the “gold standard”, don’t you?

This report also shows that when Republicans in the Capitol ARE LYING when they claim “we’ve left Wisconsin in great fiscal and economic shape.” The deteriorating infrastructure and services show that the fiscal part is BS, and this QCEW report offers yet another quarter of subpar job and wage growth.

This state needs a different strategy beyond “give it all away to the rich and corporate and hope it comes back to the average Wisconsinite…somehow.” So let’s see what Governor Evers has in his budget next week to try to end the underperformance Wisconsin has been plagued with during the GOP-dominated Age of Fitzwalkerstan.

Tuesday, February 19, 2019

WisGOP comes around to giving more to public defenders. So what will they cut?

Once a Dem wins the governorship and steps up on criminal justice issues, it’s interesting to see how quickly Republicans at the Capitol start to care about not having a third-world legal system in Wisconsin.
Their plan would cost about $50 million over two years, according to Republican Rep. Mark Born of Beaver Dam, who sits on the budget-writing Joint Finance Committee.

"These initiatives are tough but smart on crime," Born said at a news conference in the state Capitol….

Wisconsin pays private attorneys $40 an hour to represent criminal defendants when the State Public Defender's office can't handle the work. That's the lowest rate in the nation and many attorneys say it doesn't cover their overhead costs.

The plan Born announced Monday would raise the pay to $70 an hour. That increase would cost taxpayers about $33 million over two years, according to state records.

Because of the existing rate, private attorneys often refuse to take cases, leading to delays in getting defendants representation.
In addition, the GOP package would allow counties to hire 61 more assistant attorneys and increase pay for prosecutors and correctional officers. All of these are great ideas, but it begs the question “Where were the GOPs on these things the last 8 years?”

It’s not like low pay and understaffing in these offices is something that just cropped up. 2 years this week, the GOP-controlled Joint Finance Committee received a report showing how much Wisconsin courts were relying on private defenders, and that even at the paltry fee of $40 an hour.

In the 2017-19 budget, the Public Defender Board actually had funding for its own public defenders cut by $2.9 million, but the amount farmed out to private defenders was increased by $6.8 million, admitting that this need and related funding had been underestimated in the past. But the rate paid to private attorneys did not increase.

It was clearly not enough, as the FY 2018 Fiscal Report indicates that the Public Defender Board has to use more than $2 million in fees and other redirected money to pay all the bills for last year. As a result, the Public Defender’s Board asked for $49 million in this next budget in additional money, noting that nearly 40% of cases involving a public defender has to be outsourced to private attorneys due to understaffing and conflicts of interest.

The Legislative Fiscal Bureau explained (on Page 122 of its summary of budget requests) than nearly $40 million of that increase is to bring the pay of private defense attorneys up to the $70-an-hour rate the GOP proposed.
4. PRIVATE BAR ATTORNEY COMPENSATION. Request $16,612,700 annually and modify current law to increase the rate at which private bar attorneys are compensated from $40 per hour to $70 per hour. In addition, grant the SPD authority to modify rules to reflect the changes in the rate. Under current law, private bar attorneys are compensated at a rate of $40 per hour for time spent related to a case, regardless of the case type. The increase in hourly compensation would apply to cases assigned on or after July 1, 2019.

5. PRIVATE BAR COSTS Request $3,036,200 annually as an estimate of funding to pay private bar attorney costs. The State Public Defender employs trial and appellate attorneys who represent clients who qualify for SPD representation. However, staff attorneys cannot represent all clients who qualify for SPD representation. Overflow cases and cases in which staff attorneys may have a conflict of interest are assigned to private bar attorneys throughout the state, at a rate of $40 per hour for time spent related to a case, and $25 per hour for travel. Base funding for private bar and investigator reimbursements is $25,354,100.
In addition to their avoidance of action on this real problem for several years, there’s another reason WisGOP looks dumb and desperate with this announcement yesterday. Where’s this extra money coming from? These guys just passed a $338 million a year unfunded tax cut last week, but they now claim there’s magic money lying around to fund this budget request.

Let me remind you that if that if Gov Evers were to sign off on that unfunded tax cut (which he won’t), there would have to be $1.5 billion in additional money to pay for every budget request in the 2019-21 budget.

So if we’re going to give the Public Defender Board the money they ask for (and deserve to get), what requests aren’t getting funded? WisGOP needs to be forced to answer that question. This can likely be answered in the full budget, but WisGOP clearly feels the heat from what those answers would be.

Which is why they wanted to get in front of the media with an image of “see, we’re dealing with this problem and can be bipartisan”. Too bad their earlier decisions and buck-passing make it less likely that they can do what they claim they want to do. And even if they do the right thing, it’s more costly in 2019 to do it, and they don’t get a cookie for trying to make up for their past neglect now that we have a governor who actually cares about governing.

Monday, February 18, 2019

WMC makes an idiotic comment on weed

I know Wisconsin Manufacturers and Commerce are right-wing lowlifes, but what they said today left me dumbfounded.

There's a lot wrong with that take.

1. IT IS ILLEGAL AND FIRABLE TO OPERATE EQUIPMENT WHILE HIGH. Whether that substance is booze, opiods, weed, or other prescription medications. How would allowing marijuana to be legal with a prescription change that reality?

Wisconsin's Lieutenant Governor found it odd that WMC isnt concerned about a more common type of impairment in our state.

2. Given how many people get hooked on much more addictive and damaging opiods to deal with pain and keep working, and if they're hooked, they become unproductive if not outright dangerous in the work place. Wouldn't we rather have people self-medicating after work with a much less addictive drug like cannabis? Seems like a no-brainer to me.

3. WMC and other business groups have constantly complained about the "skills gap" and the inability to find qualified employees. Evers' initiative would expunge the records of some people with convictions for pot possession, and would only give a ticket to people in the future that get popped for weed, instead of having a criminal conviction on their record.

Both of these effects should increase the availability of qualified labor in Wisconsin, which WMC allegedly wants. In addition, having fewer people in prison and/or with limited job prospects reduces social and fiscal costs, which theoretically can allow for lower taxes or a better use of resources that improves goods and services that businesses use.

As Evers notes, dercriminalizing pot could lower the racial disparities that have limited Wisconsin's economic and social growth.

You'd think that would be in the interests of businesses that want to succeed. So why isn't WMC supporting Evers' plans to change marijuana laws?

Because WMC isn't about improving the quality of the Wisconsin economy and making Wisconsin more competitive in the 21st Century economy, but instead they are GOP hacks who are rent-seekers that try to steal as many tax dollars and suppress wages by any means they can.

WMC's "business leaders" are a big reason why our state's economy got left behind the rest of the country over the last 8 years, and today's idiotic, partisan response to Tony Evers' proposals on marijuana are another example of why those regressive fools should be ignored at all turns.

Sunday, February 17, 2019

Was it a Trump/GOP scheme that'll make you end up writing checks to the IRS this year?

As people start to file their 2018 taxes, a hashtag of #GOPTaxScamStories has become a common fixture on Twitter, filled with stories like this.

The Trump/GOP response to the taxpayers' anger has been a cross between "But didn't you enjoy the extra mone in 2018?" and "You should have known better." These words from Sen. Chuck Grassley (R-Iowa) are typical.
Speaking to reporters on Feb. 13, the Senate Finance Committee chair was frustrated about the messaging around tax season.

"Isn’t it kind of stupid to look at a refund,” Grassley mused. “What your refund is — that doesn’t tell you what taxes you pay."

Though a refund would provide an indication of tax level in instances in which someone does not change their withholding after a change in the tax law, Grassley is right. A refund is not the same thing as a tax bill.

"What taxes you pay is: compare what you’re going to do in 2019 vs what you did in 2018. The bottom line is the answer," he said. "I’m frustrated that people as individual taxpayers may think their refund is the answer to how much taxes they actually paid.”
Except it seems likely that the instructions from Trump's Department of the Treasury are part of the reason too little money was taken out, because GOPs like Grassley wanted to get the tax cuts to show up in people's checks as soon as possible,
Prior to the Tax Cuts and Jobs Act, the portion of any employees’ pay that was excluded from withholding—that is, the employee’s total withholding allowance—was determined by multiplying the number of withholding allowances an employee claimed on Form W-4 by the amount of the personal exemption for that year. The personal exemption amount increased over time because it was statutorily indexed to inflation. The Tax Cuts and Jobs Act set the personal exemption to zero for tax years. beginning after December 31, 2017, and before January 1, 2026. The Tax Cuts and Jobs Act gives Treasury the authority to determine a new withholding allowance structure based on certain statutory factors.
But the problem is that the personal exemption was done away with in the Tax Scam, which typically allowed a two-income couple to claim 2 exemptions. There should have been either a requirement to have people re-file their W-4s, so they'd lower the number of withholding adjustments, or the tables should have been adjusted in 2018 to reflect the fact that more income was being taxed.

Instead, the Trump Administration gave little to no outreach on the subject, and went ahead and adjusted the withholding tables before the changes could be incorporated into the payroll software companies had. They guessed at the amount of new income that would have to be taxed, but left it up to the everyday person to make the changes to their W-4 forms, even though they knew this would result in more people having to write checks to the IRS in early 2019.
Under the Tax Cuts and Jobs Act, Treasury had new discretion for 2018 to adopt rules under which the total withholding allowance is determined based on certain factors, rather than to tie the withholding allowance to the personal exemption. Treasury officials told us that, because of time constraints, they considered the value of the withholding allowance to be the only parameter Treasury could change to affect withholding for 2018. Treasury decided that the withholding tables for 2018 should be compatible with the existing Forms W-4 employees had already filed because there would not have been enough time for employers and payroll providers to accommodate larger changes in 2018 that may have required employees to file new Forms W-4. Representatives of an association representing payroll providers corroborated that payroll providers would need 6 to 8 months to incorporate major structural changes into their software, input new information, and ensure that employees updated their Forms W-4

Treasury recommended the $4,150 value because there was “no higher or lower value that was clearly better” for achieving the goals it outlined. Treasury’s simulation showed that any of the withholding allowance values it analyzed would decrease the proportion of overwithheld taxpayers and increase the proportion of underwithheld taxpayers compared to prior law. As shown in table 1, Treasury’s simulation found that for 2018, using the $4,150 withholding allowance value would result in a slightly lower proportion of overwithheld taxpayers and a slightly higher proportion of underwithheld taxpayers under the Tax Cuts and Jobs Act than would have been the case under prior law.
The estimation was only that 3% of tax filers would see a change from getting a refund to having to pay in, but that's still 4-5 million people. And I wonder if this figure will be badly underestimated when it is said and done. Yes, it's still early in the filing season, but these are not good signs.

Average tax refund, through early Feb
2017 $2,135
2018 $1,949 (-8,7%)

Number of tax refunds processed through early Feb
2017 13.52 million
2018 11.38 million (-15.8%)

Total $ amount of tax refunds, 2018 vs 2017 tax year through early Feb
2017 $28.86 billion
2018 $22.18 (-23.2%)

That's $6.7 billion that is being taken out of the pockets of US consumers, and often unexpectedly. You gotta think that'll hurt the economy in the coming months (and retail sales tanked in December, before the tax issue hit people).

We're a good example of how this is playing out. In 2017, we had deductions totaling more than $34,400, well above the $20,800 writeoff that came from the standard deduction + 2 personal exemptions that were likely assumed in the withholding tables. But when we file for 2018, the $10,000 limitation on the writeoff for State and Local Taxes (SALT) combined with the end of the $8,100 personal exemption means that it's more worthwhile for us to take the $24,000 standard deduction.

That's nice if you want a simpler tax system, but it also means more of our income will be taxed at the federal level. Combine it with the fact that many assumed withholdings and exemptions at the prior level, and that double-whammy explains the surprise checks being written to the IRS, especially in states that rely more on income and property taxes to fund government (like Wisconsin). Note this map for where the SALT limitation will bite the most.

Bottom line - it seems like a lot of the current mess was due to the cynical decision by the Trump/GOP to increase people's take-home pay ASAP so they'd "see" the impact of the tax cut before the 2018 elections, which likely inflated the amount of the actual tax cut that many people actually got. Now we're paying it back in early 2019, and a whole lot of people feel bamboozled, even more than they do with typical GOP trickle-down garbage.

Saturday, February 16, 2019

Weekend ramblings - Milennials and Boomers

I've been meaning to talk about this "Millennial Millions" skit from SNL last month.

Lots to unpack here- starting with one of the 20-sonething contestants, who is a contractor without health insurance.

Host: "What's the name of the start-up?"

Milennial: "Google."

And then someone comes out singing a song that sets the tone for the milennials' adversaries

"Well…their parents came home from World War II
And they had a lotta sex
And they had a lotta kids
And the kids grew up
In a prosperous time
Where America was the only superpower left.

Then...they played all the music
And they did all the drugs
And they had all the sex
And they all went to college
And they got all the jobs
And they made all the money
And bought all the houses


The goal of the game is for the Milennials not to yell at well-off Boomers who,complain about their situations.

Parrothead Boomer: "She worked as a banker for 30 stable years, and then she got a $8 million severance and moved to Key West."

Boomer: "I had to work. $8 million dollars is not what it used to be so of course I'm taking the Social Security."

Milennial: "You're taking the Social Security? Bitch you are rich!" (Milennial loses)

Milennial: "It feels so funfair"
Host: "Well, maybe you can tweet about it, that'll solve everything. (laughs) I'm just playing. I'm Gen X, I just sit on the sideline and watch the world burn."

Host" "This prize could pay off your college loans up to $100,000."

Milennial with Master's who works at Burger King: "Oh awesome, that'll cover like half."

Collector Boomer: "He spends his latter years acquiring everything he wanted as a youth. He owns 6 vintage cars and a wall of guitars. But somehow, he's only an orthodontist."

Boomer: "I'd love to retire and free up a job for a younger person, but we got the house in Jersey, the house out on the Cape which is a tax nightmare, and the Scottsdale place. It's too much! What am I supposed to do?"


Now, it's time for the final round.

Host: "Carrie, it's your lucky day. That means you get to play for the Boomer Birthright Bonanza...That's a full-time job, a starter home, no student debt, and we'll throw in the Social Security. In other words, you get everything the Boomers got, just for being born at the right time."

Except that Carrie has to withstand a lecture about student debt from her Dad. Which basically will fall along the lines of this "Old Economy Steven" meme.

If it wasn't an evil thing to do, and would lead to righties trying to wreck the program, I'd support lowering Social Security benefits through 2030. Not only would it save a ton of money and make Social Security solvent for the next 40 years afterwards, but it would also mean the "Me Generation" can finally start to pay the rest of the country back for the things they have taken. But I'm a big-picture guy and I wont do that.

Of course, making rich people pay the same percentage into Social Security as the rest of us would also solve this issue, and a 70% income tax and/or wealth tax on the ultra rich might stop the problem of the Collector Boomer who can't retire due to having too many homes and stocks to worry about.

CEO Howard Schultz is the manifestation of this Boomer "I took mine and I'm keeping it no matter what happens to you" mentality.

As someone in his mid-40s that never made enough money to benefit from the '90s bubbles and resulting income increases, I'm just shaking my head at the whole thing. We're off to the side as part of the Middle Children of history. At least we'll hold down the benefit costs in our golden years, since there aren't as many of us.

But you wonder why younger people don't have a lot of trust in capitalism and especially corporate America? When your parents have sold you a lie about how the working world REALLY acts, why should you buy into the rest of the "pay your dues and build wealth" social contract?

It also doesn't help that Boomers have voted really poorly for most of our lives, which left the country and many of the states in the mess we are in today. You can see why so many of us want to see them get off the stage that they've been allowed to command for so long.