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Zapping the Taxpayer Through the Backdoor

posted in: Weekly Commentary 0
By Lowell L. Kalapa

Recent efforts by state officials and lawmakers to stimulate a dormant economy left devastated by the tragedies of September 11th focused largely on the expenditure of funds for a variety of purposes, everything from additional spending for visitor promotion to more spending on state capital improvements.
While a lot of discussion focused on providing tax relief for businesses, little was done to alleviate the tax burden on businesses and individual taxpayers. Tax credits were adopted for homeowners and hotel owners, but there is no tax relief unless those taxpayers spend on renovations or new construction. Water carriers and motor carriers will have a one-time cost savings and those taxpayers with limited liability under certain taxes will not have to make payments as often. But no where to be found is the word “reduction” in the tax picture.
You see, lawmakers like spending those tax dollars and with the prospect that a downturn in the economy will curtail tax revenue growth in the near future, they were not about to give up any more than they had to give up. With shrinking resources lawmakers will turn to other ways to raise the money they like to spend. This was the pattern they adopted the last time the state ran into a financial crisis in 1995.
At that time the word went out, let every department find ways to raise additional revenue for their programs. And revenue did they find. For example, the business registration division jacked up fees and in the first year produced a $14 million surplus. Perhaps the worse culprit was the health department which adopted regulation after regulation which required all sorts of permits and fees. The bottom line is that taxpayers ended up paying more for government but in the form of fees and other charges instead of taxes.
Now that the outlook for state revenues is a lot more pessimistic, lawmakers and state officials will no doubt look for other ways to raise money from the beleaguered taxpayer. What lawmakers and other state officials don’t seem to understand is that taking money away from that taxpayer, regardless of whether or not it is in the form of taxes or in the form of fees or user charges, has the same impact on the economy. Taking money out of the taxpayer’s hands is taking money out of the customer’s hands. With less money circulating through the economy there is less money to create jobs, to reduce the inventory so that more products will have to be made, and keep people employed.
Lawmakers may argue that the money they will collect will go back into the economy because it will be spent on public services. However, as everyone knows, the dollar given to government is a whole lot less when it finally reaches the market again.
Lawmakers already have a proposal on the table that will insure that money is taken out of the economy. While it almost made it all the way through the legislative process last session, it failed to clear the last legislative hurdle because there were just too many questions about the economic impact of the proposal. The proposal would impose a new fee on all bottles containing beverages. Note well it applies only to beverage containers.
Cloaked in the self-righteous disguise of cleaning up the environment, this measure is nothing more than another means to generate money for yet another bureaucracy in state government. The proposal would impose a “deposit fee” on all beverage containers with the theory that it will encourage consumers to return the containers for recycling in order to get back their bottle deposit. What about salad oil containers?
The problem is that there is no economic market for either plastic or glass beverage bottles. As a result, the fee will eventually have to be increased to cover the cost of either destroying the containers or shipping them out of state. So what is a rather minimal fee has promise to increase.
Ah, but what is the most hidden of facts is that a new state office will be created and paid for with the proposed fees to administer the recycling programs. Just what taxpayers need, another state office to administer yet another program. It appears that the proponents anticipate that not all of the deposit fees will be claimed by consumers and those fees will be used to pay for this new state bureaucracy.
And perhaps they are right. Based on the experience of dozens of states the highest rate of return is 70% which means if the program worked as well, there would be at least 30% of the deposit funds to run this office. And there goes even more money out of the economy and right into another state program. So much for stimulating the economy.

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