Tuesday, March 14, 2006

Front-Page Blunder

I was taken aback this morning when I read an article appearing on the front-page of the biggest newspaper in Wisconsin, the Milwaukee Journal-Sentinel.

Here’s the first line of the article in question: “An analysis by the non-partisan Legislative Fiscal Bureau released Monday says taxpayers could have saved up to $1.9 billion in state taxes over 20 years if revenue limits had been in place” (emphasis mine).

Interesting opener, I thought, considering the LFB report does not deal specifically with taxes and neither does the constitutional amendment it analyzes. The issue at hand for both is revenue.

The proposed constitutional amendment states very clearly that revenue refers to the combination of taxes, fees, licenses, permits, assessments, fines, forfeitures, lottery proceeds, tribal gaming proceeds, and all money received from most bonds.

According to the LFB report, if the amendment was put into place twenty years ago, there would have been a decrease of about $1.9 billion in state revenue in 2003-2004. This says nothing directly about taxes because that figure is just a portion of revenue. In fact, the report does not even mention taxes in its analysis of how the amendment would impact state government.

And this $1.9 billion figure is even a conservative estimate of the amount of state revenue that would be lost under the proposed amendment. This is true for a couple reasons.

One, the figure excludes all revenue generated through bonds, which governments use to finance large expenditures like new construction and major maintenance on existing infrastructure. Under the proposed amendment, these state bonds would need to go before voters in statewide referendums. If even 25% of these referendums failed, it could decrease the amount of revenue collected by the state over the twenty year period by another $3.7 billion based upon the state bonding numbers provided in the LFB report.

Two, the decrease in revenue estimated by the LFB report doesn’t include revenue potentially lost from the federal government due to the amendment. A number of state programs work on a matching system in which the federal government contributes dollar amounts based upon what the state contributes. By far the biggest generator of federal dollars for Wisconsin is the Medicaid program. In the 2003-2005 biennium alone, federal dollars for Medicaid brought in a grand total of over $5 billion in funding for people in the state. If state revenue is restricted and fewer state dollars are able to go into programs like Medicaid, revenue collected from the federal government will decrease, as well.

Revenue collections, as noted before, are very different than tax collections. In any given year, according to figures provided by the LFB (see pages 62-64), taxes only amount to about 55-60% of total state and local revenue collections and roughly 70-75% of revenue collections from Wisconsin sources.

And there is no guarantee that taxes would decrease under the amendment on a level equal to the decrease in revenue. In fact, theoretically, taxes could actually increase or at least stay the same under the amendment as long as total revenue only increases annually at a level equal to inflation plus growth.

But I can’t say I’m surprised that the Journal-Sentinel confused revenue and taxes in terms of the amendment. The conservative Republican proponents of this amendment and their special interest contributors like Wisconsin Manufacturers & Commerce and Americans for Prosperity have put on quite the PR show to make this a campaign of style over substance.

Even the official title of the amendment—the “Taxpayer Protection Amendment”—is a misnomer intended to confuse the public about the amendment's impact on the state.

The sad part is thousands of Wisconsinites are going to pick up their paper or visit the JS website today and get fed a bogus line. It’s bad enough when the line is coming from the amendment’s coauthors or the special interest groups—it’s downright detrimental when it comes on the front-page of the state’s biggest newspaper.

I’m not holding my breath for a correction. But if we do get one, think it’ll come on the front-page?


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