Tax Lawyer's Blog

If you don’t think last Tuesday’s Great Oregon Wealth Shift will have an impact on other states, read this article by John Hall, executive director of the Florida Center for Fiscal and Economic Policy:

Many of Florida’s legislators have begun to sound off about the state budget being developed for the fiscal year that will start July 1. House and Senate leaders are telling lawmakers not to raise taxes, using sound-bites like Senate President Jeff Atwater’s: “The people of Florida do not have one more dime to send us.” That’s very quotable and pretty popular too, since no one loves to pay taxes and many feel government is inefficient and doesn’t do a good job of helping the economy.

While pledging not to raise taxes, many legislators are fond of digging Florida’s financial hole deeper by continuing to hand out tax breaks for businesses while misleadingly calling them an investment in economic development and job creation. These “tax expenditures,” as they are known, cost money just the way appropriations from the state budget do. In fact, they amount to several billions of dollars in lost tax revenue each year.

And here’s Mr. Hall writing in November 2009 about a study that he says calls for an entire overhaul of Florida’s tax structure: 

[The Institute of Taxation and Economic Policy's] latest study found that nearly every state and local tax system in the country takes a much greater share of income from the low- and middle-income groups than from the wealthy – but only one state does so to a greater extent than Florida: the state of Washington. Nationally, the state and local tax obligation for all states averages 10.9% for those in the lowest income group, 9.4% for those in the middle, and 5.2% for those in the top income bracket.

At first blush, it all sounds fairly reasonable. But after a deeper reading one sees that it is classic tax-the-rich talk. Anyway you slice it, the elimination of a “tax break” is a tax hike because the person or entity no longer recieving the tax break will now have to pay additional taxes. And once the state starts justifying tax increases on the grounds that they benefit one class of citizens at the expense of another, smaller class of citizens, it embarks down the steep and slippery slope of across-the-board wealth-shifting.

I am not saying that tax policy shouldn’t be continually scrutinized and refined, but I am suggesting that it’s just a matter of time that state legislators, emboldened by the Oregon example, start ginning up public outcry for referenda that will allow the mob people to decide whether someone else should pay more taxes than they pay. After all, why not eliminate tax breaks for the guy behind the tree? As long as the additional tax burden doesn’t fall on you, right?

Final thoughts: Why is it that when economic analysts conduct studies like the one cited by Mr. Hall they never do parallel analyses of the discrepancy between what the rich give back to their communities in the way of volunteerism, job creation and charitable giving and what is given back by the poor?

It seems to me that when you cherry-pick just the tax burden portion of the overall “value to society” picture, you tell only a small part of the story. Perhaps if we had a fairer, more global analysis of the problem, we’d be inclined to put a companion referendum on the ballot that would require every state resident to create at least one job and donate at least four hours of their time each week to charity.

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