Derek Peterson

Econ 101: Price Controls on Rent Would Cause Further Housing Shortages in CA

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Posted by Derek Peterson on Monday, July 29th, 2019, 9:20 AM PERMALINK

In a basic economics class, students are taught that price controls result in shortages and rationing. This is not just a theory, but a fact that has been well-documented throughout history.

Yet, price controls are exactly what some California lawmakers are hoping to impose on the hardworking people across the Golden State. If implemented, Assembly Bill 1482, which was recently approved by the Senate Judiciary committee, would make it illegal for property owners to raise rent by more than 7 percent, plus the Consumer Price Index in a given year.

While it is no secret that the cost of renting in California is among the highest in the country, AB 1482 is a feel good “solution” that does not address the root of the problem, and would result in negative consequences.

Basic economics teaches that when demand for a good or service is high while supply is low, prices increase. This is what is currently happening in the California housing market. Demand for housing is high, but the supply of available housing is low. As a result, the price of rent has skyrocketed.

AB 1482, which “treats” the symptoms, would actually exacerbate California’s housing supply problem. Under the status quo, it is more costly and complex to develop properties in California than almost every other state.

Just look at the permitting process, for example. In San Francisco, it takes an average of 3.8 years to obtain a permit for a project that would build ten or more units. Meanwhile, the national average for projects of the same size to receive a permit is just 2.1 months.

The tax burden in California is also a major deterrent to investment. California’s top marginal corporate income tax rate ranks among the highest in the nation, at 8.84 percent, and its top marginal individual income tax rate of 13.30 percent is the highest in the nation.

As such, placing an arbitrary ceiling on rent in California, which would make it even more difficult to recover the cost of development, would result in even less investment. Indeed, there is widespread agreement among economists about the harm that is caused by rent control. Economist Assar Lindbeck, who chaired the Nobel prize committee for 14 years, said rent control is “the most efficient technique presently known to destroy a city—except for bombing.”

Rather than imposing rent controls on landlords, California lawmakers should focus on reducing barriers to housing development. Getting government out of the way and allowing for increased supply and competition is the best way to naturally drive down costs without risk of negative consequences.

Photo Credit: Don McCullough


NJ Gov. Murphy Loses Budget Showdown

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Posted by Derek Peterson on Tuesday, July 2nd, 2019, 1:04 PM PERMALINK

Three decades after the infamous 1988 heavyweight championship boxing match between Mike Tyson and Michael Spinks in Atlantic City, there was once again a high-stakes showdown in the Garden State, this time taking place in Trenton.

Democratic legislators landed an uppercut of their own when they passed a state budget that did not include the tax hikes on millionaires, guns, or opioids that Gov. Phil Murphy had so desperately been seeking. Murphy threw in the towel Sunday when he signed the $38.7 billion budget into law, using his line-item veto to trim a few items.

It’s no secret Murphy sought to impose massive tax hikes to keep fueling cost drivers like tuition-free community college and a $15 minimum wage. He centered his gubernatorial campaign on his “Millionaire’s Tax”, which, had it been implemented, would have driven even more people out of New Jersey in droves.

In a unique turn of events, his proposed fee and tax hikes were surprisingly met with strong resistance from his own party.

Senate President Steven Sweeney and Assembly Speaker Craig Coughlin, both Democrats, were the leading forces behind the budget that was ultimately signed into law. Both rejected Murphy’s calls for higher taxes on New Jersey residents, arguing the state is already overtaxed.

This marks the second year in a row in which Murphy has held the state government hostage over his tax hikes. Last year, he fought for the same millionaire’s tax, and struck a last-minute deal with legislative leaders to apply a top marginal tax rate of 10.75 percent to income over $5 million, not the $1 million he was seeking. 

There is a lot of depth to the political maneuvering that led to this happening, by no means are Sweeney and Coughlin reliable defenders of taxpayers. Their budget significantly increased spending, and Sweeney earlier in session was supportive of tax hikes on corporations. However, avoiding massive tax increases and turning to focus on pension reform is as good an outcome as Jersey taxpayers could have hoped for in the moment. 

The new budget will make a $3.8 billion payment to the underfunded state pension system. It also makes a $400 million deposit into the state’s rainy day fund, which has been empty since 2008.

Sweeney and Coughlin delivered the decisive blow to Murphy and his tax hikes this go around. But there will be more battles to come. With the Democrats in full control, taxpayers have their futures on the line, but are ultimately spectators hoping for the best.

Photo Credit: Edwin J. Torres/ NJ Governor’s Office


It’s a Miracle. NJ Legislature Passes Budget Without Murphy Tax Hikes

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Posted by Derek Peterson on Thursday, June 20th, 2019, 4:11 PM PERMALINK

New Jersey taxes are so high even Democrat legislators oppose more increases. They sent a shocking message to Governor Phil Murphy Thursday by passing a budget that stripped out his tax hikes on millionaire’s, guns, and pain medication.

The legislative budget spearheaded by Senate President Steven Sweeney and Assembly Speaker Craig Coughlin is a $38.7 billion spending plan.

With only two weeks remaining until the start of a new fiscal year, Governor Phil Murphy has been sparring with legislative leaders over his “Millionaire’s Tax”. After hiking rates for income over $5 million last year from 8.97 percent to 10.75 percent, Murphy came back this year calling for additional tax hikes, not only on income, but also on gun owners, opioid manufacturers, and corporations.

The millionaire tax would apply the top marginal tax rate percent of 10.75 percent to income over $1 million, increasing the already-high tax burden on 18,000 state residents. This tax would cost taxpayers an estimated $447 million.  

The legislative budget also axes Murphy’s aggressive fee hikes on firearms. The fees for firearm permits, firearm identification cards, and a permit to carry a gun would have increased dramatically under his proposal. These taxes disproportionally affect low-income residents, effectively taxing them out of their second amendment right.

Opioid manufacturers would have also been subject to increased fees if Murphy was able to have his way. He has claimed revenue from the fee would be used to “support the fight against the opioid epidemic,” however the tax would punish those with a legitimate need for opioids through higher costs. His fee would make it more difficult for those with cancer or chronic pain to get the medicine they so desperately need.

Corporations were in Murphy’s crosshairs for the second year in a row, as he pushed to impose a $150 fee on private companies for each employee enrolled in Medicaid. This would create a massive burden on businesses and could lead to lower wages and fewer benefits for workers, or the employer leaving the state altogether. It is these types of policies that have given the New Jersey the unwelcome distinction as having the worst business climate in the nation.

Taxpayers in the Garden State have found surprising allies in Sweeney and Coughlin, both Democrats. They have both rejected Murphy’s calls for more taxes, arguing that the state is already overtaxed and stating they wouldn’t agree to tax increases without cost-cutting reforms.

Murphy has expressed disappointment that his long-desired tax hikes were not included in the budget, and stated “every option is on the table”.  He could sabotage the effort with his veto pen, or shut down the government – not an uncommon occurrence.

If Governor Murphy continues to push for tax hikes, even when his Democrat colleagues disagree, he’s putting his ego before doing his job.

Photo Credit: Flickr - Office of Governor Phil Murphy


Michigan Governor Committed to Massive Gas Tax Hike

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Posted by Derek Peterson on Monday, June 10th, 2019, 3:27 PM PERMALINK

Michigan Governor Gretchen Whitmer (D) still wants to impose a whopping 45-cent per gallon gas and diesel tax increase. Recently, on Mackinac Island, Gov. Whitmer took to urging businesses to support her efforts. Fortunately for the hardworking taxpayers across the Great Lakes State, the Republican-controlled legislature is not likely to let this happen.

Michigan taxpayers already face a heavy tax burden at the pump, as is illustrated below.

  Gas  Diesel
State Gas Tax 26.30 26.30
"Other" Taxes and Fees 16.56 17.90
Federal Gas Tax 18.40 24.40
Total 61.26 68.60


To put this rate in perspective, the table below shows the current national average gas tax rates across the country.

  Gas Diesel
State Gas Tax 23.12 23.81
"Other Taxes and Fees 11.12 12.08
Federal Gas Tax 18.40 24.40
Total 52.64 60.29

 

Yet, Governor Whitmer wants Michigan taxpayers to cough up even more. Her proposed 45-cent per gallon fuel tax increase, which would nearly triple the current amount and give Michigan the unwelcome distinction as home to the highest gas tax in the nation, adds up to a $2.5 billion tax hike. Adding insult to injury, only $1.9 billion of this massive tax hike would actually be used to repair roads.

The Mackinac Center for Public Policy, a Midland-based think tank that advances the principles of free markets and limited government, ran a 45 cent gas tax proposal through the State Tax Analysis Modeling Program (STAMP), a Michigan-specific software package.

“The tax increases, it [STAMP] says, would cost more than 22,500 private sector jobs and raise just under $2.5 billion annually by fiscal 2022. It would also increase government employment by 6,300 jobs,” explained Michael LaFaive, Senior Director of the Morey Fiscal Policy Initiative at the Mackinac Center, of the impact that adding 15 cents to the current gas tax in October and then another 30 cents the following October would have on the economy.

Republicans in the House recently rolled out their own road-funding plan that, instead of imposing a massive net tax increase, would dedicate the 6 percent sales tax on gasoline to fund road construction.

Rather than asking the hardworking taxpayers across Michigan to hand over even more of their income at the pump, lawmakers should use existing revenue more efficiently.

Photo Credit: Robert Geiger


Illinois Legislature Passes Massive Tax Hike

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Posted by Derek Peterson on Monday, June 3rd, 2019, 12:36 PM PERMALINK

Who says you can’t tax a state into prosperity? A number of folks. But try telling newly-elected Gov. J.B Pritzker (D-Ill), he can’t.

Gov. Pritzker’s tax-and-spend approach to governing is not new. He centered his gubernatorial campaign on implementing a progressive tax system in the Prairie State to address the state’s $3.2 billion deficit. And now that he’s in office, he’s urging the Democrat-controlled state legislature to get behind his signature “Fair Tax” plan.

If enacted, the Fair Tax plan would eliminate the state’s 4.95% flat tax and would replace it with a 6-bracket progressive tax system via a constitutional amendment—with the 7.95% top marginal tax rate kicking in on income over $1 million. When Pritzker initially proposed this tax hike, he claimed that 97% of taxpayers would experience tax relief. Unfortunately for taxpayers, this is a claim he’s now walking back.

 “As you know, we currently live in a system in which the taxes can be changed at any moment so there's certainly no guarantees, but what I will tell you is that I am fighting for the plan that I put forward,” said Gov. Pritzker in a news interview in April.

While Pritzker campaigned on this proposal, the rates and brackets recently passed out of the Senate and House differ from his own. However, their intent remains the same: place Illinois taxpayers on the hook for the state’s $3.2 billion deficit.

The Senate’s bill raises the top rate to 7.99% and kicks in when income hits $750,000 instead of $1 million. The Democrat-controlled House of Representatives also voted along party lines on Memorial Day to approve the constitutional amendment and send the measure to the 2020 ballot. The rates and brackets also mirror those passed out of the Senate.

To become law, the measure must receive the approval of 60% of voters.

Illinois currently has a huge unfunded pension liability, totaling $134 billion. Pension-related expenditures consume more than 25% of the Illinois’ state budget. While it is obvious structural reforms are needed to these pension programs, Gov. Pritzker’s solution is taking the easy way out: higher taxes and more debt. While calling for income tax hikes, he has also called for issuing $2 billion in bonds to inject cash in the state’s retirement system.

What a novel idea. Paying off debt with more debt.

Unfortunately, Illinois has the lowest credit rating of any state in the country. Their rating is only one notch above being considered junk. The state’s low credit rating would force them to offer bonds to buyers at a higher interest rate, plummeting the state further into debt.

Illinois lawmakers have let down those they were elected to represent. They have failed to protect their constituents from massive tax increases or to provide much-needed property tax relief. With the measure now heading to the ballot, it is up to the voters to protect themselves.

Photo Credit: Travis Stansel


Iowa Governor Signs Property Tax Transparency Bill into Law

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Posted by Derek Peterson on Friday, May 31st, 2019, 11:22 AM PERMALINK

Iowa Governor Kim Reynolds (R) signed a bill into law last week that adds transparency and taxpayer safeguards to local property tax increases.

Thanks to this new law, local city councils and county boards are now required to hold public hearings when discussing property tax issues. These hearings must be made known on the county’s website as well as social media, and hearing notices must include a “statement of the major reason for the increase.” This transparency will allow for greater input from those who will be affected most by changes.

Chris Ingstad, President of Iowans for Tax Relief—who has played a key role in advocating for property tax relief—says that this reform is a huge win for Iowans and empowers taxpayers.

“When the first public hearing of property tax reform was held in March, Iowans for Tax Relief advocated that an open conversation between local government and their constituents is needed. This bill accomplishes that goal. Transparency, citizen input, and local government accountability will all be increased,” said Ingstad.

In addition, this new law also requires any property tax hike that would generate a revenue increase of 2 percent or more to receive a two-thirds majority vote in order to pass. The higher threshold for passage acts as a safeguard for taxpayers, as it makes it difficult for local lawmakers to pass large property tax hikes without broad support. Unfortunately, a property tax increase of 2 percent or less would be able to pass with just a simple majority vote.

This property tax transparency law comes one year after Gov. Reynolds enacted the largest tax cut in state history. Once fully implemented, the 2018 tax reform package will both simplify the tax code and reduce tax rates. The individual income tax will change from a nine-bracket tax system with a top marginal rate of 8.98 percent to a four-bracket system with a top rate of 6.5 percent. In addition, the corporate tax rate will be lowered from 12 percent to 9.8 percent. The pro-growth reforms included in the 2018 tax reform package will save Iowa taxpayers $2.86 billion over the next six years.

Rising property taxes have long been an issue in the Hawkeye State. A Des Moines Register/Mediacom poll conducted in February found that 55 percent of Iowans view their property tax as being too high. While this law itself does not provide tax relief, it will make unwanted tax hikes more difficult to impose.

Photo Credit: Gage Skidmore


PA Governor Wolf Has a New Excuse for Double Tax on Natural Gas

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Posted by Derek Peterson on Tuesday, May 21st, 2019, 5:03 PM PERMALINK

If at first you don’t succeed, try, try again.

Pennsylvania Gov. Tom Wolf has once again proposed a severance tax on natural gas drilling, this time to pay for “Restore Pennsylvania”, a $4.5 billion infrastructure plan.

The thing is, Pennsylvania already taxes natural gas extraction. The state imposes what is called in impact fee on gas installations which is already used for state expenditures. A severance tax is a double tax, and any claims that the natural gas industry is avoiding taxes is a lie.

This is not the first time he has called for such a tax. In 2014, Gov. Wolf called for a severance tax designed to help balance budgets, or pay for the growth of benefit programs when the state was in a bad place financially. He has called for severance taxes every year he has been in office, however these proposals have not been considered by the Republican-controlled Legislature.

Gov. Wolf is now using “infrastructure” as an excuse to implement this long-desired severance tax. His proposal, which should be appearing in the form of a bill soon, calls for borrowing the $4.5 billion needed for the projects immediately, and paying off the debt over a 20-year time period using revenue from the severance tax.

David Spigelmyer, president of the Marcellus Shale Coalition, said the following about Gov. Wolf’s proposal:

“Pennsylvania’s tax on natural gas – the impact fee – generates hundreds of millions of dollars annually for critical infrastructure programs across the entire Commonwealth. This existing annual tax revenue, when combined with other business taxes paid by the industry as well as lease bonuses and royalties tied to natural gas development on state land, has provided nearly $5 billion in revenue since unconventional shale gas development began.”

Pennsylvania’s existing impact fee achieves the same goal severance taxes set out to do in other states. Adding a severance tax on top of the impact fee would create a massive burden on the natural gas industry in Pennsylvania, making it a very unattractive state for future development.

Natural gas has been a boon to Pennsylvania, not just economically, but it has lowered carbon emissions. The state produces 20 percent of the natural gas in the United States, and Pennsylvania’s carbon emissions have gone down by 30 percent as natural gas use has grown in recent years.

It makes no sense to risk this progress with a double tax.

When asked if he would consider any other methods of funding for his proposal, Gov. Wolf stated he was open to other proposals, but was skeptical they would be able to raise the revenue needed for his project. “If you have another way of raising $4.5 billion, that are going to be dollars directed toward doing things that the people of Pennsylvania really need to make their lives better, I'm all ears”, he said.

Gov. Wolf’s severance tax has been defeated before, and it must be defeated again.

Photo Credit: Nicholas Tonelli


NJ Gov. Murphy Wants $447 Million Tax Hike

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Posted by Derek Peterson on Tuesday, May 21st, 2019, 10:46 AM PERMALINK

Taxes. Whatever the question, Governor Phil Murphy’s answer is taxes.

New Jersey’s second-year governor is back with his second budget proposal and it’s all about the benjamins, AGAIN.

Murphy has proposed a radical budget to fund the state through the 2020 fiscal year that will hurt the hardworking men and women of the state with a whopping $447 million in tax hikes. New Jersey lawmakers are currently negotiating a budget to fund the state beginning on July 1.

Gov. Murphy presented a budget of $38.6 billion, a 3 percent increase in spending from the previous year. This disparity would allegedly be funded through the “Millionaire’s Tax”. This tax would hike New Jersey’s top marginal income tax rate to 10.75 percent, up from 8.97 percent for income over $1 million. This tax would cost taxpayers an estimated $447 million.

Remember, just last year Murphy pushed through a $1 billion-plus tax hike. Which included taxes on businesses, ride-sharing, rental homes, and “high-earners”, which sounds like the same thing he wants to do this year. If you want new ideas, you’ve come to the wrong place. That, despite the fact current policies are ruining New Jersey.

The Garden State has been seeing residents fleeing in record numbers, in part due to the radical tax structure in the state. People “vote with their feet”, and 2018 saw New Jersey become the No. 1 state to move away from in 2018.   

While calling for large tax increases, the budget also aimed to remove $33 million from the New Jersey Fireman’s Association fund. This fund provides financial assistance to firefighters, including volunteers, to fund burial services, retirement homes, and in-home medical care. The proposal called for moving the $33 million from the firefighter fund to the state’s general fund as revenue. It was only amid public backlash that Gov. Murphy announced he would not carry out the transfer of money from the fund.

In an attempt to tax away your Second Amendment rights, Gov. Murphy has also proposed aggressive fee hikes on firearms. Under current New Jersey law, a firearm permit is $2, a firearm identification card is $2, and a permit to carry a gun is $20. Under Gov. Murphy’s budget proposal, a firearm permit would cost $50, a firearm identification would cost $100, and a permit to carry would cost $400.

You can take action to stop these unconstitutional fees on firearms by signing our petition.

Lastly, Gov. Murphy’s budget calls for “increasing fees on opioid drug distributors and manufacturers to help support our fight against the opioid epidemic”. Make no mistake about it; this is a tax increase that will lead to higher healthcare costs for patients, pharmacies, caregivers, and businesses. This increased fee does not take in account those with a legitimate need for opioids. Opioids allow patients dealing with cancer, chronic pain to live pain-free lives. Imposing punitive fees will not deter the demand of opioids. These fees don’t address the over-prescription of opioids and the lack of education that contribute to the epidemic.

Murphy’s Law states: “Whatever can go wrong, will go wrong”, and the New Jersey FY2020 budget proposal is further proof of that.

Photo Credit: Edwin J. Torres/ NJ's Governor Office


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