In This Issue:
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1. Professor Pimps for
Higher Taxes
2. Gas Tax Ponzi
3. Hell Freezes Over
4. Pension Lawsuit Settlement
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PROFESSOR PIMPS FOR HIGHER TAXES
 In a brief appearance on Wisconsin Public Television, U.W. Applied Economics Professor Andrew Reschovsky advocated for 5 new tax increases to fix Wisconsin’s perpetually growing budget deficit.
For starters, Reschovsky wants to increase the capital gains tax which he predicts would not cause further harm to Wisconsin’s bleak employment picture. Reschovsky says capital gains taxes affect stocks, which have nothing to do with employment. Next, the Professor says legislators should increase the beer tax because he believes it would encourage people to quit drinking so much.
So Reschovsky doesn’t think capital gains taxes would discourage investments and job creation, but he does think people WOULD curb their alcohol consumption if the beer tax is increased?
Reschovsky would also like to increase the state income tax, because, and we're not joking, “it's a tax that's only paid by people that have jobs.” And he’d like to restore the estate tax, a tax on your right to transfer property when you die.
But perhaps the most telling portion of the Professor’s interview centered on his discussion of the state gas tax. Reschovsky bemoaned the fact that “the Legislature” did away with gas tax indexing in 2006 – failing to mention that it was Governor Doyle, who signed the bill into law. Reschovsky went on to say he’d be happy to pay an extra three cents per gallon of gas if it meant saving education, Medicaid, and the university system.
It is precisely because Governor Doyle raided the segregated transportation fund to pay for other programs that the legislature moved to eliminate the automatic gas tax in the first place. Doyle’s transportation fund raids and excessive bonding have greatly contributed to the state’s current $6.6 billion deficit.
Reschovsky says cutting education spending is “dangerous” for the state, as this would lead to bigger class sizes, and fewer courses taught. Yet he doesn't explain how state and local governments spending $1.3 billion a year for employee pension plans helps to educate children, or how wasting hundreds of millions of dollars on failed computer projects has helped Medicaid recipients.
Perhaps cutting an economics course or two at the UW isn't such a bad idea after all.
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GAS TAX PONZI
There are two reasons the Legislature and Governor are so insistent on raising the gas tax.
First, they need the tax reveune to back fill money they raided from the transportation fund over the past 8 years. To make matters worse, the Governor and the Legisture increasingly relied on debt to finance road projects.
Second, the state will need the new revenue to pay the intererst on the NEW bonds they will issue to plug the current budget hole. This is exactly how the state into its current budget mess.
From the Wisconsin State Journal (emphasis added):
Pocan and Sen. Mark Miller, D-Monona, said the state should consider turning to another source to help make up the shortfall — federally subsidized borrowing.
The stimulus bill, they said, provides that the federal government will cover 35 percent of the interest costs on so-called “Build America” bonds for projects such as road building. That might allow the state to use more bonding and fewer tax dollars for construction and other projects, in turn freeing up that money to plug the deficit.
Doyle called the bonding “a new tool that’s been given to us” and said his administration was looking closely at how such loans could be used.
Federally subsidized loans simply encourage more credit-card budgeting. The state will issue more bonds to free up one-time transportation money to plug the budget hole, then repeat the process in subsequent budgets.
In February, Doyle tried to blame the entire budget deficit on the national recession. Now, to solve the problem he's creating an even bigger deficit. Who will Doyle blame for Wisconsin’s next budget shortfall?
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HELL FREEZES OVER
For years, conservatives claimed reduced state aid to local governments would cause property taxes to rise. Municipalities and school districts, they argued, would make up for lost aid by raising local property taxes.
To remedy the problem, they offered several cost control measures preventing local governments from increases taxes beyond the taxpayers’ ability to pay. Each of these proposals was ridiculed and ultimately vetoed by Governor Doyle.
But now that declining revenue necessitates cutting state aid to local governments, some Democrats are beginning to see the light. Controlling both houses of the legislature and the Governor’s office, they understand that voters will blame them for double digit property tax increases likely to occur without cost controls.
According to Wispolitics.com:
Without changes to the revenue limits, the cuts to state aid that Doyle and lawmakers are considering could be backfilled with property taxes to make up most of the difference.
But sources familiar with talks going on between the administration, legislators and school officials said revenue limits on school districts could be tightened to limit the impact on property taxpayers, or there could be a reduction in the per pupil adjustment.
If Governor Doyle hadn’t vetoed every property tax freeze that came before him, property taxpayers would have saved millions of dollars less over the past six years. And while Democrats should be given credit for considering a freeze now, they should also be held accountable for opposing similar measures for the past several years.
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PENSION LAWSUIT SETTLEMENT
 Yesterday, the Milwaukee County Board unanimously approved a multi-million dollar settlement offer from Mercer, Inc., one of the largest human resource consulting firms in the U.S.
Mercer, a longtime financial advisor to the county, helped craft the 2001 pension enhancement plan that cost taxpayers hundreds of millions of dollars and lead to the resignation of Milwaukee County Executive Tom Ament as well as the recall of seven county board supervisors.
The $45 million settlement is one of the largest settlements involving a company like Mercer, and after attorney fees are paid $33 million will be deposited directly into the county’s pension fund.
According to the Milwaukee Journal Sentinel, County Supervisor Lynn DeBruin who voted against the pension deal said the settlement figure was an admission the firm "played a major role" in the deal’s approval, and was "one of the best outcomes you could have possibly gotten." A better outcome might have occurred if Ament and board members had been paying attention in the first place.
County Executive Scott Walker, a goverment reformer swept into office on the heels of the pension scandal, said the settlement is a positive outcome for Milwaukee County taxpayers. “These funds will be placed into the pension fund where they will offset expenses that would otherwise be paid for by the taxpayers of Milwaukee County."
Well done Mr. Walker.
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