Telling Reasons to Object to Tax Cuts

I’ve got my reservations about Governor Carcieri’s tax proposals on the grounds that they don’t go far enough, especially in extending their effects to middle and working class residents. But some of the objections from the other side should inadvertently direct Rhode Islanders’ attention to the underlying problems of the state:

Karen Malcolm, executive director of Ocean State Action, a coalition of labor unions and advocacy groups, said previous state tax cuts have not worked. “The policies we’ve been following have not brought the promised jobs,” she said.
Instead of phasing out the corporate income tax, for example, Rhode Island should instead seek changes to local property taxes, which represent the single greatest tax burden for business, she said.

Of course, local property taxes are so high in part because the unions — especially the teachers’ unions — have been more successful at pumping up their members’ remuneration packages from that stream. Witness:

Malcolm goes on:

And to improve Rhode Island’s overall business climate, the state should focus on other areas, such as fixing crumbling roads and bridges, she said.

Of course, infrastructure repairs are more expensive than they would be absent union rule and the related regulations. (It’s quite a thing to drive by a roadwork site and witness the two flag-bearing women standing next to each other, flags down, chatting while the mandatory police officer chats on his cell phone, back to the scene.) Moreover, the fact that the state typically allocates 0.0% of its General Revenue to transportation suggests that Malcolm is seeking to raise additional taxes to direct toward labor.
Then there’s the other side of the problem:

Rick Harris, executive director of the Rhode Island chapter of the National Association of Social Workers, said Carcieri’s proposals would drain away tax revenue at a time when it is most needed for education, health care and other programs. “If you’re taking more money out of the system, how are we going to meet this need?” he said.

Directing the wealth of productive, working Rhode Islanders to those who are otherwise — even if the intention is to make them more productive — is part of what created our current hole. If we’re to have any hope of turning things around, we must reverse our focus and increase activities that create revenue, rather than expend it.

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Pat Crowley
12 years ago

of course, Justin’s “theory” has been widely disproved but that hasn’t stopped him from repeating it over and over and over again. Sorry Justin, numbers don’t become FACTS just because you say so.
Hey, how many tax payers “fled” the State…go back to that argument.

Robert Balliot
12 years ago

Justin – over that period the cost of health care benefits increased by 100% : historic cost analysis . So, although renumeration as a whole to teachers may have gone up, the proportion attributed to the inefficiency of the health care system with double digit inflation represents much of it. The teachers technically do not have more, they have simply maintained coverage.

Now, insurance rates are set for yet another double-digit increase. If we look at health care and education as essential public goods – where is the outrage at double digit inflation in a system that builds skyscrapers for the people who merely pay the bills?

chuckR
chuckR
12 years ago

The health care system is broken. So is the public school industry. The former adds to the latter’s expenses, but can’t explain more than a fraction of the teacher cost increase. Neither can inflation, which has been modest over the period.
Where is the outrage over inflation in health care insurance? You got it right here, buddy, from someone who has paid for his own for 30+ years. I also paid for private schools for my kids, so this public school grad is outraged about the need to pay for private schools, too.
We are threatened with a government controlled health care system. Will government implement provisions forbidding pain and suffering and loss of consortium rewards, in fact, all non-actual damages/costs of continuing care rewards? Will it tightly cap lawyers fees as it does doctor’s Medicare payments? Will it penalize people who use rescue and fire services as taxis to the emergency room, for visits that aren’t emergencies? Will it provide for private competition with the government’s minimal standard of care health coverage plan? Will it devise a more streamlined system, pushing care decisions back out to the providers – or will the clerks who now OK procedures just change employers from private insurers to the government?

John
John
12 years ago

I’m just wondering whether the public sector unions or the poverty crew will be the first to suggest defaulting on RI’s debt as the best “solution” once the tax rates go up even higher and the revenues — surprise — go down not up.

oz
oz
12 years ago

“over that period the cost of health care benefits increased by 100% : historic cost analysis . So, although renumeration as a whole to teachers may have gone up, the proportion attributed to the inefficiency of the health care system with double digit inflation represents much of it. The teachers technically do not have more, they have simply maintained coverage.”
You’re comparing apples and oranges.
Teachers have historically paid zero toward their health coverage, with the taxpayers picking up the tab for any health insurance premium increases.
Only recently have some teachers been required to contribute something toward their health coverage costs, usually in the range of 5% to 10%.
I’ll wager that even with paying a 10% co-share, the average teacher receives enough in salary and step increases to more than offset the increase in health insurance costs.
And don’t forget the thousands in “buybacks” when their spouse already has coverage!

George Elbow
George Elbow
12 years ago

I see Pat “I struggle with basic math” Crowley is back at it. Recall Crowley’s preposterous claim back in Jan 2008 that “instruction expenditures” (which includes teacher compensation), as reported by the Rhode Island Department of Education (www.RIDOE.org), rose at a rate of 19.80% during a period of time when the inflation rate, as reported by Inflationdata.com, was 19.91%? He proudly wrote “Yes, you read that right: The cost of teaching has risen slower than overall inflation.” Not surprisingly, Crowley and his union propogandists were wrong on the facts. Specifically, he wrongly compared five years of spending growth (June 2001 to June 2006) to seven years of inflation (January 2000 to January 2007). Crowley was correct when he noted that instruction expenditures rose a whopping 19.80%, growing from $854,546,811 for the twelve month period ending June 2001 to $1,023,757,161 for the twelve month period ending June 2006. However, Crowley was incorrect when he claimed that the inflation rate over the same period was 19.91%. In fact, the inflation rate from June 2001 to June 2006 (the period over which the instruction expenditure’s growth was measured) rose 13.99%, which is no where close to the 19.91% Crowley claimed. In fact, despite Crowley’s usual attempt to fool the public, the cost of teaching had in fact risen far in excess of the rate of inflation …a mind-boggling 42% increase over the rate of inflation. The UNSUSTAINABLE spending was driven by Salary increases that ranged from 6 – 18% per year for everyone except Top Step. The other driver was their free (or near free) health-care. But the party is coming to an end. Cities and towns are finally awakening (call it the silver lining to the economic down-turn). Crowley, Bob Walsh, etc. no longer can fool the public with their false propaganda.… Read more »

George Elbow
George Elbow
12 years ago

Mr. Balliot,
Two points to consider:
1) A key reason as to why we have high health-care costs is due to the fact that so many Union hacks pay nothing, or next to nothing, for their health-care. Hence, they have no incentive to demand lower costs or to use health-care services in an economical way.
If they start paying their fair share, then they will have a vested interest in lower costs and more cost effective plans.
2) You seem to think that the Union hacks should be kept immune from the high cost of health-care. The rest of us in the real world have to pay a significant portion, if not all, of the cost of OUR health-care. And then we are expected to pay for almost all of the cost of the Union hack’s healthcare.
You say “The teachers technically do not have more, they have simply maintained coverage.”
They sure did …by riding on the back of the taxpayers like blood-sucking leeches.

Robert Balliot
12 years ago

George – I really am not sure what you mean by the ‘real world’. Wasn’t that a show on MTV?
The key reason we have high insurance costs is the insurance pool. Insurance companies are in the business of making sure that they will make profit. They are not in the business of providing healthcare – health care practicioners do that.

So, they insure the healthiest people at the highest cost that the market will bear. The rest of the pool is insured by us – the taxpayers. We insure the seniors and disabled and the veterans who are the least profitable. We insure through medicare, medicaid and other forms of taxes.

The middlemen spin by the insurers is well calculated to create the we vs them reaction about the ‘real world’ you profess here. But, the fact is we currently have socialized medicine for the biggest consumers of healthcare and the insurance companies use the rest of us to make a profit. Combine those pools, scale up the system and remove the middlemen profit and healthcare becomes affordable.

rhody
rhody
12 years ago

This General Assembly has given the corporate types every tax break they ever wanted. Where are the jobs they were to provide as part of the bargain?
Guess these mutual backscratchers didn’t want to jeoparidize their perks of power. ‘Nuff said.

Justin Katz
12 years ago

Robert,
Two thoughts in response to your first comment above:
First, your analysis is incomplete. That healthcare costs have gone up tells us only that they are a factor in the increase. With annual increases of at least 3% over the period on top of step increases, it is simply fallacious to deny the increase in non-health personnel costs.
Second, your point is irrelevant. If the cost of healthcare goes up, the value of having somebody else pay it goes up as well. The teachers’ benefit, in other words, is worth more, so they should see a commensurate decrease elsewhere.

Robert Balliot
12 years ago

Justin –
I did not deny increases in other costs. You are assuming an argument that is not there.

The second point is relevant – the health care benefit is the same (although co-pays may have increased). The benefits are not better, they simply cost more.

When $20 million is paid out as part of an influence peddling settlement and skyscrapers are built with the profits, the money has to come from somewhere.

The spin of we vs them – bad unions against the non-union tax paying working class – is a very effective divide and conquer strategy of the profiteers. It relies on jealousy and greed – easy things to manipulate.

George Elbow
George Elbow
12 years ago

Mr. Balliot writes: “The benefits are not better, they simply cost more.”
But he fails to address who bears the increased cost.
It isn’t the Union members, who go thru life thinking they are ENTITLED to free, or near-free, healthcare.
The bottom line that Mr. Balliot refuses to acknowledge is that Public Employee Union COMPENSATION has continued to grow at Unsustainable levels.
We compensate with Salaries, Vacation time, Health-care, Pensions, Holidays, etc. Yet Mr. Balliot would like to pretend that the value associated with the ever increasing cost of health-care should be ignored when totaling up the Compensation that is provided.
He prefers to divide and conquer, by distracting folks with the “blame the insurers” for the problem, in the hopes of focusing on the Entitlement-minded Union flock.
Sorry Robert, we will not be diverted from the real issue (i.e. Entitlement-minded Unions that drive Unsustainable Spending).
Cheers.

Tom W
Tom W
12 years ago

Propose freezing public sector pensions, and watch the unions scream bloody murder.
Propose getting public sector employers out of the health care business entirely, and that public sector employees pay 100% of their health care, and watch the unions scream bloody murder.
Obviously pensions and health care as part of their compensation are of considerable value to public sector employees.
As they should be, for they are of immense value, arguably worth more than their salaries.
When one consider that thousands of RI public sector employees could actually get a pension “paycheck” from us taxpayers for more years than they actually worked – an likely with a higher total dollar amount – the value as part of the compensation package becomes clear.
And then consider the lifetime subsidized healthcare (lifetime total healthcare in some instances, such as Newport’s teachers). Which helps explain why the roads in Newport are such a disgrace – the teachers are like a black hole sucking up every public sector dollar anywhere near the gravitational field of their hallowed “contract.”
Awfully sweet compensation for a tenured, part-time job that is unshackled from requirements for competence or performance.

Robert Balliot
12 years ago

Not dividing ‘George’ – I think I am multiplying and conquering
Assume a four year contract negotiated with a 20% co-pay on family health plan. Family plan Year 1 is $14K and rate of insurance increase is historical 16%:
Year 1: 14K
Employer Cost= 11200
Year 2: 14000 x 116%= 16240
Employer Cost= 12992
Year 3: 16240 x 116%= 18838
Employer Cost= 15070
Year 4: 18838 x 116%= 21853
Employer Cost= 17482
Assume 300 union members with family plan – the increase in employer cost for the health care line item from Year 1 to Year 4 = $1,992,600 or $6,642 per employee.
The $2 million increase in operating expenses is based entirely on historic rate increases.

Monique
Editor
12 years ago

“20% co-pay”
Robert, other than very recently and in a very few school districts, when has any teacher contract included such a high co-pay?

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