Doug Kellogg

NE: Trading Guaranteed Tax Hikes for Promised Local Property Tax Relief is High Risk

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Posted by Doug Kellogg on Tuesday, April 30th, 2019, 4:58 PM PERMALINK

Property tax reform has been a big focus in Nebraska this session. This makes sense given the state’s high property tax burden.

The Tax Foundation ranks Nebraska 12th-highest for property tax collections per capita, and 8th-highest as a percentage of home value. Their taxes are way too high, especially for a lower cost of living state.

The state also faces an issue as the cost of agricultural land, and thus the tax burden for that land, has been driven up as people purchase the land for purposes other than farming. This is putting pressure on farmers as their baked-in costs rise.

So you could say the pressure for action in Lincoln is significant.

Governor Ricketts has championed a couple great reforms: a constitutional property tax cap, and a measure (LB 103) that requires that any additional revenue taken in as local property values rise is returned to taxpayers or there is a vote held before local government can keep it.

These are solid policies to protect taxpayers. Massachusetts, New York, and most recently, Iowa, have passed effective property tax caps.

Yet, in the Cornhusker State, while the control on rising revenue from values has been enacted, the cap legislation has stalled.

Both bills were introduced by Senator Lou Ann Linehan. The cap’s difficulties would be bad enough, but a third bill from Senator Linehan (LB 289) is really complicating the situation.

The idea of the bill is to provide immediate property tax relief. However, it attempts to do so by imposing a $200 million-plus tax hike, then sends the money largely to school districts in exchange for them lowering property taxes.

The tax hikes include increasing the sales tax overall, eliminating various sales tax exemptions (including for bottled water, soda, various moving-related services), and a hike in the cigarette tax rate over 30%. Monday, the legislature worked on expanding the expansion, but trimmed the rate of the sales tax hike. The bill will head to a full vote in the Senate, which will need 33 votes to override a Governor Ricketts veto.

There are good measures to limit property taxes in the legislation – chaining future growth to inflation and reducing the percentage of a property’s value that can be assessed for tax purposes.

The problem is that even with those limitations, the complex bill is likely to amount to trading a massive guaranteed tax hike for fleeting property tax relief.

Tax Foundation’s Joe Henchman testified to the committees that at best their reform would move Nebraska up two places in the state property tax burden rankings. Meanwhile the proposed 1% increase in the state sales tax would give Nebraska the 17th-highest sales tax rate in the country. Worse, it would become higher than neighboring Iowa’s, incentivizing people to shop across the border.

The sales tax hike and expansion is regressive, driving up the cost of living for everyone in the state. The cigarette tax hike is regressive as well, and compounding the damage is the strong likelihood that revenue falls short.

Less than 10 percent of state cigarette tax hikes from 2009 to 2016 met revenue projections. So relying on a cigarette tax hike in creating a new state aid program is likely to drive demand for other tax hikes in the future.

Those pushing this approach may well realize this, but they say they are getting desperately needed property tax relief in exchange.

However, Nebraska itself has imposed tax hikes to increase state aid and limit property taxes in the past and it has not worked out, as Governor Ricketts explains:

“In 1990, the Legislature passed LB 1059 which created the school aid formula known as the Tax Equity and Educational Opportunities Support Act (TEEOSA).  With this bill, the Legislature raised the sales and income tax over the veto of Governor Kay Orr. This did not reduce property taxes, which continued to increase in the following years.

“Subsequent attempts to achieve property tax relief have continued to involve the TEEOSA formula.  For example in 1998, the Legislature increased state aid through TEEOSA by about $125 million, or a 27 percent increase. In 1999, property taxes still went up about $48 million. In 2005, the Legislature boosted state aid another $70 million, or 10 percent in one year. In 2006, property taxes went up $161 million statewide.”

It is not only Nebraska that has seen this spend-to-save approach fail.

New York attempted to deal with its sky-high property taxes under Governor Pataki by implementing a property tax relief program, STAR. STAR created tax exemptions up to a certain amount of home value – with the state paying out to compensate school districts for lost revenue.

The result?

“From 2001 to 2005, however, property taxes per pupil shot up by 28 percent even after deducting STAR savings,” (Empire Center, NY Torch blog).

This session, New York State enacted a permanent 2% cap on property tax increases, at the behest of Governor Cuomo. This straight up property tax cap has proven to be an effective protection for taxpayers, having helped New Yorkers avoid over $20 billion in new taxes since its original implementation.

Nebraska can do better than Democrat-dominated New York, and must keep pace with Iowa. Governor Ricketts has put the right reforms on the table. It’s up to the legislature to pass them and avoid the high-risk attempt to trade tax hikes for relief.

House of Pain? Delaware House Must Stop Tax on Pain Medication

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Posted by Doug Kellogg on Friday, April 19th, 2019, 2:36 PM PERMALINK

The Delaware State Senate recently passed a direct tax on opioid-derived pain medication in the name of solving the opioid crisis. It's now up to the House to stop this dangerous policy.

The problem is, this policy won’t solve the opioid crisis. But it will tax patients who are legitimately using medicine they need.

The costs of a tax get passed on to consumers.

A report by economist Alex Brill, and Women In Government, shows the damage a tax would cause: “the tax would do little to discourage inappropriate use, could have the unintended consequence of promoting illicit opioids for some, and would raise the cost of health care generally.”

Insurance costs will be driven up for everyone, as the Women In Government study shows, as does an analysis by two Union College economists that focused on New York’s first opioid tax proposal.

People without health insurance feel these costs as well, since they have no way to deflect higher costs if they need to buy medication.

You pay more, but the crisis doesn’t get better, and may even get worse.

A tax on legitimate opioid medicine ironically makes illegal synthetic drugs more attractive to people suffering from addiction.

New CDC data show that illicit fentanyl is what is killing people today.

Government cannot tax away this crisis. However, community-based solutions have been shown to help those suffering from addiction.

One example is Little Falls, Minnesota, which focused on addiction treatment for users, instead of just jail time. According to PBS, the Minnesota Health Commissioner reported the local hospital “has seen patient pill use decrease by 724,000 pills per year and have tapered about 670 patients off of controlled substance prescriptions.”

Delaware Representatives should stop the Senate’s misguided, dangerous tax before it punishes patients, and makes health care more expensive. There are proven ways to address the opioid crisis.

Photo Credit: Wikimedia

Read Between the Lines: Low Taxes Pay Off for Sports Betting

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Posted by Doug Kellogg on Friday, April 5th, 2019, 1:45 PM PERMALINK

Another Associated Press article on sports betting in the states, another headline that does not do justice to the reality on the ground.

The latest, “Most states’ sports betting revenue misses estimates”, is correct on the surface, but fails to explain how the states that are coming up short have failed to widely authorize sports betting, and also suffer from high tax rates.

Rhode Island and Pennsylvania are two of four states cited for having lower than expected revenues. But these states suffer from absurdly high tax rates on betting, which the article mentions but somehow fails to connect the dots.

Rhode Island’s tax rate is an unbelievable 51 percent.

Pennsylvania has a massive 36 percent effective tax rate, on top of a $10 million initial licensing fee. The state experienced a significant delay in sports betting getting started because it took months for an operator to even apply for a license and pay the massive fee. The state is also right next door to New Jersey, which enacted sports betting in a more efficient, and taxpayer friendly manner. Consumers can head across the border to place bets in New Jersey (in-person or via an app) instead of paying massive tax rates in Pennsylvania.

These huge tax rates completely ignore the success that Nevada has had for decades with a lower 6.75 percent tax rate. Cuts in the federal excise tax rate on bets decades ago were also necessary to open up Nevada’s sports books for significant growth.

It’s no wonder New Jersey has done just fine on revenues, with an 8.5 percent rate on in-person bets and 13 -14.25 percent online. The Garden State has also allowed mobile bets from the start.

Pennsylvania is awaiting legal mobile betting, as is Rhode Island, both states have passed measures legalizing it.

The AP article quotes a West Virginia lawmaker who complains taxes on betting aren’t high enough to bring in revenue. This misses the point, and would only hurt West Virginia. The state has a competitive 10 percent tax rate on bets, but implementation of sports betting has suffered from delays not necessarily related to public policy, and few operators which has limited availability.

Mississippi is also cited by the AP for missing revenue projections. It is another state without mobile wagering, and unlike Rhode Island and Pennsylvania, Mississippi bills to open up mobile betting have failed this session. Mobile betting only works if you’re at an authorized location.

It is 2019, you can’t expect to reach the broadest market possible if you’re limiting betting to in-person, physical locations.

Despite the headline, the evidence shows low taxes, and free markets work in sports betting just like they work everywhere else.  

A Chance to End the Income Tax in North Dakota

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Posted by Doug Kellogg on Tuesday, March 12th, 2019, 3:37 PM PERMALINK

There could soon be a tenth state with no income tax.

The North Dakota Senate has the opportunity to pass a bill this session that would eliminate the income tax. The legislation, HB 1530, which sailed through the House, is sponsored by Rep. Craig Headland, finance committee chair and Taxpayer Protection Pledge signer.

North Dakota’s “Legacy Fund” consists of oil tax revenue that has been saved over time, and now amounts to north of $6 billion. Headland’s bill would use this fund to cover the estimated $900 million in income tax the state takes in during a two-year cycle, and end the state income tax.   

The state is also seeing revenues come in higher than expected, so dropping the income tax is more than affordable: “A revised revenue forecast released today by the North Dakota Office of Management and Budget (OMB) estimates general fund revenues of $4.3 billion for the 2019-2021 biennium, an increase of $51 million from the November forecast.”

Ending the income tax would be a great move for North Dakota taxpayers and the economy. Recent tax cuts in North Carolina have led to the state outpacing the region in GDP and population growth. No income tax Florida saw record job creation from late 2017 to late 2018, and Texas led the nation in the rate of GDP growth in 2018.

This move is also necessary, as the Legacy Fund is a ripe target for special interests, and politicians looking to spend on various projects. If the fund is not used to eliminate the income tax, it will end up being used for something that either does less for taxpayers, or is downright wasteful.

North Dakotans should be able to keep their hard-earned money. The Senate and Governor Burgum should seize this opportunity to deliver what would be an earth-shaking win for voters, taxpayers, and the state - building on the great success they have already had.

Photo Credit: Flickr - Drew Tarvin

Nevada Should Avoid Bill That Would Drive Up Costs for Car Repairs & Hit the Brakes on Small Businesses

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Posted by Doug Kellogg on Thursday, March 7th, 2019, 11:59 AM PERMALINK

Choice and competition are what drive better options at lower prices for consumers. But a bill in the Nevada legislature would add regulations that would limit competition in the auto parts market, driving up costs for consumers, and crushing small businesses.

The legislation in question, Assembly Bill 173, is up for a vote in committee Thursday. It would stop Nevada residents from benefiting from the savings they can achieve when using non-Original Equipment Manufacturer automotive parts.

The government would get in the way of perfectly happy consumers and businesses who are doing just fine right now by adding hurdles, like permission slips, endless forms, and even outright banning the use of non-OEM parts in various cases.  Lower costs for consumers, healthy market competition, and lower insurance premiums would be placed at risk under AB 173.

Small businesses in the industry already face heavy regulation, and pay a hefty tax burden. Attacking them with even more restrictive regulation threatens their existence, and hurts the Nevada economy.

Nevadans who need to replace a car part should have the same choices and competitive market they enjoy today. Misguided, heavy-handed government regulation would only make their lives more expensive.

Photo Credit: Wikimedia Commons

Fight for $15 Knocks Out Jobs, Hours, Hurting Workers

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Posted by Doug Kellogg, Griffin Namin on Tuesday, March 5th, 2019, 10:53 AM PERMALINK

As many states hike their minimum wages in response to the far-left "Fight for 15" campaign, the evidence is rolling in that this policy hurts the very workers it's supposed to help.


New York City is one of the most high profile areas on the road to $15, and a high cost of living area. One might think it could absorb a radical wage mandate, but even in New York, that is not proving to be the case.


Investors Business Daily reports: “Over the past four years, the minimum wage for New York City restaurants that employ more than 10 workers went from $10.50 an hour to $15. That's a whopping 43% increase. Next year, every restaurant, big and small, will have to pay their workers at least $15 an hour."


These massive increases to wages are backfiring on all levels across the city, "4,000 workers lost jobs at full-service restaurants, Bureau of Labor Statistics data show. By the end of last year, there were fewer restaurant workers in the city than in November 2016. Even though overall employment climbed by more than 163,000."


According to a survey conducted by the New York City Hospitality Alliance, when asking full service restaurants, “74.50% respondents report that they will reduce employee hours; and 47.10% will eliminate jobs in 2019 as a result of mandated wage increases that took effect on December 31, 2018."


In addition, the survey also found that “76.50% of respondents report reducing employee hours, and 36.30% eliminated jobs in 2018 in response to mandated wage.”


The $15 wage is an attack on workers most of all. But it is also hurting restaurants - especially moderately priced restaurants in the city. Rosa Mexicana operates four restaurants in Manhattan and estimates the $15 mandated wage will increase their labor costs by $600,000 this year.


Liberal leaders in states across the nation seem to be rushing to get wage hikes, as if they want to outpace the disastrous reality that these policies will bring. That way they can get headlines and pretend they did something to help workers, before it is obvious that they aren't helping at all.


Well, time is up, and any politicians pushing a radical wage hike are doing so knowing the consequences.


Photo Credit: Flickr - Ronald Ehrl

Everything CT Governor Ned Lamont Wants to Increase Taxes On in Budget

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Posted by Doug Kellogg, Griffin Namin on Thursday, February 28th, 2019, 1:18 PM PERMALINK

New Connecticut Governor Ned Lamont has floated various tax hikes leading up to his formal biennial budget proposal, but now we have the full plan, and it’s not a cheap one for the state’s already-overburdened taxpayers.

His “A Path Forward” plan is filled with tax increases, broken promises, and high fees. The unambitious name is fitting, it’s a path alright, one terrible path to choose among other options – like finally containing Connecticut’s rising spending, and pension liabilities.

The total bill for Lamont’s revenue proposals exceeds $1.06 billion in 2020 and $1.486 billion in 2021.

The massive amount of tax hikes the Governor has proposed is led by sweeping new applications of the state’s 6.35 percent sales tax, and taking away sales tax exemptions that sensibly have been used to ease costs on necessities, like doing your taxes, or buying textbooks. The Governor’s assault on exemptions will also hurt Connecticut residents who belong to non-profit credit unions. Credit unions by their nature return benefits to members who live in the community, and often offer free educational services. And interestingly newspapers will be hit as well, maybe Lamont isn't happy with his media coverage. 

It is incredible how damaging and tone deaf these new sales tax are… Need to take your dog to the vet? That will cost more. Does your child need a bike helmet? That will cost more. Ready to drive your new baby to Mom and Dad’s house? Safety seats will cost more.

If Lamont wants more uniformity in the state sales tax, he should lower the rates for everyone, not discourage people from purchasing necessary products and services, and make it even more unaffordable to live in Connecticut.

Here’s the rundown of notable Lamont’s tax hikes (full list here):

  • 10-cent plastic shopping bag fee
  • Soda tax
  • Text book tax
  • Newspaper & magazine tax
  • Renew corporate tax surcharge
  • Boat sales tax hike
  • Bike helmet tax
  • Child car seat tax
  • Veterinary services tax
  • Credit union tax
  • Hair cut tax
  • Parking tax
  • Garbage tax
  • Camping tax
  • Nonprescription medicine tax
  • Vaping wholesale tax
  • Movie tax

This could get worse if the Democrats’ Senate Bill 475, which would increase the statewide sales tax to 6.85 percent also gains traction.

Senate Republican leaders have put forward a plan that offers no tax increases, no tolls, and lowers costs statewide.

Photo Credit: Flickr

Kentucky Sports Betting Bill with No “Integrity” Fees, Moderate Tax Rates, Heads to House

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Posted by Doug Kellogg on Monday, February 25th, 2019, 12:40 PM PERMALINK

Late last week a House bill to legalize sports betting in Kentucky was voted out of committee unanimously.

The legislation is already the center of attention, and will certainly earn more as debate heats up. It is estimated to bring in $48 million in revenue if Kentucky can beat out neighboring states in legalizing sports wagering - promising to devote that money to the state's struggling pension fund (though the only real fix for the pension fund is significant reform).

How will it get that money? That is the big question for taxpayers and consumers.

Kentucky’s legislation includes a tax rate on in-person bets of 9.75 percent, and a 14.25 percent tax rate on digital bets. These are relatively modest rates. They are higher than Nevada (6.25 percent), and New Jersey (8.5 percent in-person, 13 percent online). However, they are far lower than Pennsylvania’s absurd 36 percent effective rate.

The state’s proposed licensing fees are nothing to scoff at though, with a $500,000 initial fee and $50,000 to renew every year. Still, committee members halved an initial $1 million fee, and Kentucky is avoiding Pennsylvania’s disastrous $10 million price tag that caused a months long wait for an operator to even apply.  

There is room for improvement in their tax rates, but at least Kentucky does not have Dr. Evil throwing out demands like Pennsylvania apparently does.

Kentucky deserves credit for avoiding so-called integrity fees as well. These fees sometimes have different names, and rates, but amount to giveaways to sports leagues that serve no purpose. Government should not be using its taxing power to directly siphon off money for leagues. The leagues will already benefit if and when sports betting drives added interest in their sports. Nevada has done fine for decades without these fees, Kentucky is right to avoid them.

With Anti-Free Speech Push, NJ Pols Try to Tell New Jerseyans to Shut Up

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Posted by Doug Kellogg on Friday, January 25th, 2019, 6:20 PM PERMALINK

A politician gets heat in the media over a non-profit entity that helps promote his agenda. This politician could take responsibility, defend the situation, or disown it and urge it to be shut down.

Or… they could blame “the system”, point the finger, and push sweeping new laws to destroy free speech in the state for citizen groups and advocacy organizations.

Of course, New Jersey Governor Phil Murphy chose the latter option.

After facing critical stories about a non-profit run by Murphy allies, the governor’s efforts to make this about state law, rather than his personal situation, have led to legislation that would drastically limit free speech of New Jerseyans and citizen-groups.

The current front-running legislation is Assembly Bill 1524 (Senate Bill 1500), which sailed through committee unanimously (why the heck are any Republicans supporting this?). However, it is no sure thing that this is the legislation that leaders back for a vote.

The bill would demand donor disclosure by political action groups (even though 527 groups already have to report donors to the IRS), and non-profit advocacy organizations - of course, unions are exempt.

This would create a chilling effect on free speech, as contributors to organizations lose their right to privacy and become subject to political retribution, harassment, and more. In today’s climate of mobs showing up to people’s houses, the risk here should be more clear than ever. Further, these new restrictions would make it next-to-impossible for the average person to start an advocacy organization.

A-1524 would likely be unconstitutional as well since it goes after more than just speech intended to influence a vote within an election timeframe. Fighting a protracted court battle to silence speech would be a waste of state resources.

Further, Murphy’s non-profit may be new and tied to his agenda, but passing laws to stop or limit these non-profits would negatively impact elected officials who work for legitimate non-profit organizations with preexisting agendas.

The landmark Supreme Court case that upheld the right to privacy for donors to non-profits was Alabama v. NAACP, a case that shows how high the takes can be when states attack privacy rights.

It’s for good reason that there is a broad coalition from across the political spectrum, and covering a variety of issues that opposes the push for these anti-free speech policies.

New Jersey needs more debate and advocacy, not less. Trenton has been steering the state in the wrong direction of late, that may make it tempting to politicians to shut down people who speak out on their failures, but that doesn’t make it right.

Don’t Tell the Associated Press, But Sports Betting is Going Well In NJ

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Posted by Doug Kellogg on Thursday, January 3rd, 2019, 6:28 PM PERMALINK

A recent, widely circulated Associated Press (AP) article, entitled “Sports betting will be no home run for state budgets”, takes a negative tone in reviewing the results (so far) of sports betting in states that have recently legalized it, largely focusing on New Jersey.

It’s surprising because there is nothing negative about the results out of New Jersey since legal sports betting began there in June. Here’s a reality check…

1) The AP piece itself included numbers showing that New Jersey is on track to match or exceed the state’s revenue estimate of $25 million over one year. The state took in around $8 million through November from sports betting. Actually meeting a government revenue projection? That is a small miracle in itself.

2) To gloss over this reality, the article highlights that sports betting revenues make up a small percentage of total state budgets. Meanwhile, nobody in their right mind argued sports betting revenue would patch state budgets - especially not for big-spending states like New Jersey.

3) New Jersey sports betting is doing more than meeting projected revenue, but that perspective is missing from the AP piece. Moody’s projected that sports betting would account for 4 percent of gaming revenue, but so far it has already accounted for 8.5 percent.

4) Sports betting seems to be boosting New Jersey gaming industry revenues, which saw a 19.5 percent increase in September this year, compared to September 2017. Government took in $23 million on gaming in September alone.

5) Pennsylvania is referenced as potentially eating into New Jersey’s industry. But Pennsylvania’s tax rate on bets is a whopping 34 percent, plus the state imposes a big licensing fee. This has delayed the rollout of sports betting in Pennsylvania. Jersey’s tax rate could be better, but their Western neighbor is going to have trouble competing.

6) While legalizing sports betting the right way (with low tax rates and no fees) is good for a state economy, consumers, and yes, government coffers, these aren’t the only reasons to do it. Bringing the existing black market into the light, creating transparency for betting, and regulating a currently illegal market are also good reasons for legal sports betting.

7) New Jersey also legalized sports betting to help localities, specifically downtrodden Atlantic City - though the state has a long way to go to reduce the tax burdens, waste, and overregulation that also contribute to their economic woes.

With the right legal framework, no fees for giveaways to sports leagues, and low tax rates, the ceiling for sports betting in the digital age is sky-high. Don’t let straw man arguments distract from the reality.

Photo Credit: Flickr - Tom Lianzi