Monday, March 30, 2015

Proposal 1: A Line In The Sand

On May 16, 1972, voters approved a constitutional amendment by a 2-to-1 margin, enabling the establishment of a state lottery. Smart people knew that instituting a lottery would NOT result in better funding for education.

Here is how the con game works, if the lottery adds one dollar of new money to the School Aid Fund, then the legislature can reduce contributions from the general fund by one dollar. The result is not more money for education, but the same amount of money for education.

Why would anyone want to do that?

Instituting a state lottery shifted the tax burden from those in the best position to pay taxes to those in the worst position to do so. Lower income Michiganders are far more likely to buy lottery tickets than higher income Michiganders. The purchase of lottery tickets by low income Michiganders makes up a larger portion of their disposable income than the purchase of lottery tickets by high income Michiganders does.

Funding education from a state lottery is a regressive tax scheme! Democrats have historically opposed regressive tax schemes but they enthusiastically rushed to the polls and voted yes on this one because it was for education.

But it didn’t help education. In fact, education funding has lost ground over the years even as lottery sales have grown.

On May 5, 2016, voters will decide whether or not to approve a constitutional amendment that will increase the sales tax by 1%. Democrats know that this is another regressive tax scheme. They know that sales tax makes up a much larger percentage of disposable in income for low income Michiganders than for high income Michiganders.

Proposal 1 is tie-barred to another regressive tax increase at the pump resulting from the replacement of retail fuel tax and sales tax with a larger wholesale fuel tax. Low and middle income Michiganders pay more for gasoline was a percentage of disposable income than high income Michiganders.

Voters should also know that the added revenue from these taxes will NOT result in better funding for roads, education or local government.

Proposal 1, the ballot initiative to increase sales tax by 1% was made necessary by reductions in corporate income tax rates and corporate property tax. Some of that money was used to fund roads, education and/or local government. Now it has to come from somewhere else.

Some legislatures are already talking about reducing the state income tax rate if this scheme to increase the sales tax succeeds. Reducing income tax rates will save low income Michiganders tens of dollars and high income Michiganders thousands of dollars.

Many Democrats are calling on us to hold our nose and vote “yes” on Proposal 1. They have capitulated. The Republicans have won. Democrats just want funding for roads, education or local government and they are willing to pay more for it even if it is socially unjust.

Republicans created the problem of underfunded roads, education or local government by giving their corporations a great big tax break. Now the same Republicans are telling us that if we want roads, education or local government to be properly funded, low and middle income Michiganders will just have to pay more taxes.

If only it were true? But it isn’t!

As soon as they have the fresh money from increasing the sales tax, they will give themselves another tax break and we will be right back to at the negotiating table looking for another solution that shifts the tax burden farther from the top and closer to the bottom.

I never thought I would write this, but maybe it will be the Tea Party Republicans that will rescue the day by voting “no” on Proposal 1 just because it is a tax and they oppose all taxes on principle without any thought for how fiscally necessary it is to collect taxes and pay for good governance.

Some Democrats have abandoned the principle of opposing regressive tax schemes and have turned on the other Democrats for sticking to their principled and socially just position.

I wonder if there is a line in the sand that Democrats will not back away from. One thing is for certain, if we back away from this one and draw a new line, the Republicans will not wait one minute before they cross it. We might as well start drawing the next line now.

I don’t support regressive tax schemes that shift the tax burden from those who benefit the most from government, the wealthy, to those who benefit the least, the poor. I will be voting “no” on Proposal 1 even if whole Democratic Party rises up in one accord and sings sweat Hosannas crying out in support of a “yes” vote.

The line is drawn! What does a line in the sand mean if you are not willing to take a beating rather than back away? Perhaps the roads will crumble and school doors will close?  I don’t know, but I am very certain that backing off and drawing a fresh line in the sand will not fix the problem.