The Three Musketeers: Taxes, Health Care, and the Economy

The latest Badger Poll found the following three issues to be the top concern among Wisconsin residents:

1. Taxes (23 percent)
2. Health care (12 percent)
3. Economy (11 percent)

I understand the general purpose of getting public responses on "the most important issue," but as I look at those top three, I can't help but wonder how you can possibly separate any one from the others.

Health care costs are the biggest strain on public revenue, and unpaid medical bills are one of the biggest factors behind personal debt and bankruptcy. And as costs continue to rise and put pressure on employers, wages will continue to stagnate and gradually the level of insurance will decrease for employees, which in turn leads to an increase in unpaid medical bills and -- in addition to more personal debt and bankruptcy -- results in more costs shifting onto the payers who remain in the system, such as public employees and private employees who are still receiving affordable coverage.

To simply aim public policy at the monolithic goal of "cutting taxes" has the potential for handling a portion of the cycle by shifting more health care costs onto public employees -- if the tax cuts are realized in that way -- which I'm sure would please a number of conservative commentators, but it wouldn't deal with the fundamental problem of rising health care costs or the economic troubles that come as a result.

The "just cut taxes" line is great for a stump speech, TV commercial, or press release, but it's fundamentally short-sighted at best, and at worst it misses an opportunity to address one of the fundamental causes of high taxes and economic distress, which is our inefficient and inequitable health care system.

Wisconsin Makes the Honor Roll!

Take that, WMC!

Countering the right-wing claims about how bad Wisconsin is for business, the (truly) nonpartisan Corporation for Enterprise Development (CFED) recently ranked Wisconsin as one of the top states in the country for performance, business vitality, and development capacity.

The differences between the business rankings by the CFED and the business rankings by the Tax Foundation, a favorite of conservatives, couldn't be starker.

While Wisconsin is ranked 38th in the country in the Tax Foundation rankings, it's ranked 7th for performance, 18th for business vitality, and 16th for development capacity in the CFED rankings. While Wyoming is ranked 1st in the Tax Foundation rankings, it's ranked 15th/45th/25th in the CFED rankings. While Alaska is ranked 3rd in the Tax Foundation rankings, it's ranked 42nd/48th/43rd in the CFED rankings.

You get the idea.

So why the big differences?

The easy answer, of course, is methodology. The Tax Foundation, predictably, focuses solely on taxes. The CFED rankings, on the other hand, take into account a number of factors such as average annual pay growth and greenhouse gas emmisions on the performance side, manufacturing investment and start-up business job creation on the business vitality side, and energy costs and patents issued on the development capacity side.

In other words, while the Tax Foundation looks at one factor and makes assumptions (or, more accurately, others make assumptions) about how that impacts business performance, the CFED rankings rate how businesses are actually performing in the states and how they are poised to perform in the future.

To be sure, if the Tax Foundation rankings were simply used for what they are -- a tax ranking -- that would be fine. Who can fault them for doing what they set out to do?

But that's not the only way the Tax Foundation rankings -- and others like it that focus solely on taxes -- are used. Instead, these rankings are used as rhetorical ammunition to help craft public policy.

"High taxes are driving businesses out of the state!" went the common charge during the (second) TABOR drive last spring. While TABOR failed miserably (twice, I might add), it's bound to be back at some point. And, in the meantime, corporate lobby groups like WMC will continue to use business tax rankings to push special interest policies under the threat that businesses won't be able to survive in the state without them.

What's most unfortunate is that these tactics derail public policy from focusing on initiatives that would really help business in the state such as comprehensive health care reform and putting state resources into creating more university spinoff companies.

The latter, it just so happens, is one of the areas that the CFED study found Wisconsin could use significant improvement. And it's not that the opportunities for improvement aren't ripe for the picking in Wisconsin -- they are.

For Madison, improvement means opening the gates on stem cell research. For Milwaukee, improvement means committing funds to Chancellor Santiago's research initiative. For Stevens Point, improvement means putting resources into promising research on developing and manufacturing alternative energies from renewable resources like wood chips.

Indeed, when the Journal Sentinel covered a study that exposed the growing economic disparities between Madison and Milwaukee, just about everyone agreed -- including a researcher from the Wisconsin Taxpayer Alliance, which published the study -- that what helps Madison get a big leg up economically is the UW.

The same could be true throughout the state. After all, Wisconsin has one of the most highly rated public university systems in the country. There's absolutely no reason the state should rank so low in university spinoffs; but, the fact remains, the UW hasn't received a lot of fiscal love from the state legislature in recent years (I even heard GOP legislator Alberta Darling say that very thing recently).

Now, if this post turns out like others like it, at least one anonymous commenter will read this section and claim that I'm advocating a tax increase. That's not true. What I'm talking about here is prioritization.

Heading into the '07-'09 budget process, for instance, the state will be dealing with accounting for millions of dollars in new tax breaks that were promised in the last legislative session. And most of these tax breaks are not the kind that will help you and me, but rather the kind that the Recess Supervisor astutely called "boutique tax credits and exemptions" in a recent post. In other words, they're special interest handouts.

Perhaps this upcoming budget cycle is shot because of these promises that already have been made. But when it's all said and done, and the regular business of the legislature kicks into gear, the special interests will again come with their hands out for more.

And, when that happens, let's hope our elected officials are looking at the most appropriate studies in terms of our state's business needs.

UPDATE: The WMC line, from WisBusiness: " 'But this sounds like it is weighted more toward quality of life factors rather than hard economics,' [a WMC spokesperson] said, noting that the WMC will continue to push for lower taxes as well as regulatory and liability reform."

Sorry, WMC. These measures include quality of life factors and hard economics; and, if anything, it's weighted toward the latter, regardless of how good news "sounds" to your organization.

LATE UPDATE: Sen. Mary Lazich (R-New Berlin) peddles the latest Tax Foundation rankings for 2007.