Meanwhile, over in North Dakota... property tax wars

This caught our eye in the Bismarck Tribune recently: Measure 2, if passed, would eliminate all property taxes in North Dakota. It is an idea that has political legs primarily because of state coffers that are bursting from oil-related revenue. Unlike Montana, North Dakota has aggressively worked to develop oil exploration, and that makes everything that much easier.

The tack that supporters of the measure have taken is brilliantly simple. They maintain that as long as there are property taxes, it isn't really every possible to own property -- one only gets to keep it as long as one is able to "pay rent" to the government in the form of property taxes, making any government that taxes property the real owner of said property.

Sarpy Sam wrote something a few months ago to the same effect, and it really got me thinking when I read it. Most people don't notice property taxes on their homes because most are still paying a mortgage (often refinancing over and over again, extending the life of the loan,) with the taxes wrapped into their monthly payments.

For those who manage to pay off their homes or other property, however, the cold reality is that if one is unable to pay the taxes, the property will be confiscated faster than you can say "Department of Revenue." The burden is particularly heavy on those who bought a house a long time ago and paid it off, but who now find that the value of their property has gone up sharply, and with it the taxes. Since many of the homeowners who fit this profile are retirees on fixed incomes, they can be forced to sell their homes because they can't afford the taxes.

The idea is a seductive one -- what would it be like to have property that one actually owned? In other words, what if you could actually pay it off and owe nothing else on it? What if no one could take it away from you once you had burned the mortgage? An amazing thought, really!

The drawbacks are significant, though. This particular law wouldn't allow even local entities to levy property taxes, meaning that local governments would have to be funded by the state government. The net effect would be a loss of local autonomy, essentially turning city and county governments into administrative districts of the state government, rather than uniquely responsive local government entities.

The temptation to raise income taxes to make up the difference would be very high -- one of North Dakota's strong points when it comes to taxation has been that North Dakota has a very balanced schema: modest income, sales, and property taxes, none of which carries a disproportionate load. A related point is that property taxes, unlike income taxes, are very stable taxes that provide a steady flow of income not subject to the vicissitudes of economic cycles. Even sales taxes, while far more stable than income taxes, are somewhat cyclical. Cyclical taxes such as income taxes tempt governments into greatly increasing government spending during booms -- spending that a government then must struggle to pay for during inevitable economic downturns.

All in all, from an MH perspective, while all taxes are evil (even when necessary,) property taxes are less evil than are income taxes, since they do not directly punish productivity (although they do punish investment and saving.) We would favor very low property tax rates, with creative ways of addressing some of the worst aspects: perhaps having lower rates for those over the age of 65 with fixed incomes, or maybe even having property tax rates drop significantly once a mortgage is paid off, which would have the effect of encouraging families to reduce their debt burdens.

These creative proposals are things that can't be explored anywhere but in the legislative process. Bills to eliminate property taxes failed to pass the North Dakota legislature during the last session, a fact that should sound a warning bell for any "small-r" republican. In general, law made by referendum and ballot initiative tends to be poorly written law -- there is no formal debate and testimony, there can be no amendments to deal with problems that a bill's authors hadn't thought of, etc. While legislative wheels grind slowly, they tend to grind fine and to produce results that, because they usually involve compromise, reflect as close to a consensus view as can be reasonably hoped for.

We will watch with interest to see how North Dakotans vote on this matter, hoping that whatever they decide will be good for their state. Let us also hope that the Montana legislature looks across the border for inspiration and finds ways to lower our own taxes... of every kind. Of course, before that can happen, Montana will need elected officials at every level who creatively encourage a robust development of our oil and coal resources -- until that happens, any tax relief that we can hope for will be symbolic rather than substantial.

Sunday roundup and branding -- the Gazette, and beyond...

Image Courtesy of www.old-picture.com

Carbon County Moos on the brucellosis affair: Over the last couple of days, Montana Headlines has been expressing opinions on the recent brucellosis happenings. We've referred readers to blogging rancher Sarpy Sam, and now want to do the same for Karbon Kounty Moos, whose story is a more up-front and personal one -- and should be read.

The Democrats are coming, the Democrats are coming!: To take over the intermountain West politically, that is. As Montana Headlines has pointed out before, the Democratic resurgence in this region is real, and has many causes.

One, of course, is that the West has never been as solidly Republican as is commonly assumed. Another is big-spending Republicans on the national stage and an ill-conceived (and then botched) war.

Yet another is the combination of Republicans getting lazy and flat-out beat on the ground in this region -- not having the imagination and creativity to deal with shifting demographics and issues of concern while still holding onto core principles.

And there is, of course, the fact that the Democratic party has finally figured out that in order to win in the West, they have to abandon -- or at least soft-pedal -- some of their liberal shibboleths (think Senator Tester on gun rights or illegal immigration.)

Having the opposition co-opt one's positions, of course, means that Republicans have won certain battles. It also means that Republicans have to be bright enough to realize that if they try to keep using the same old play-book, they're going to keep getting beat.

A Republican resurgence in the West will come -- the fundamentals are still stacked in our favor -- but we will need some good leaders.

Deployment limits: This past week, attempts were made in the Senate to place limits on the length of deployments to Iraq and to mandate periods of time at home between tours in Iraq. Both attempts failed to get the required 60 votes to move forward. Both Montana Senators voted for the limitations, and both Wyoming Senators voted against the limitations.

Here in the Montana blogosphere, reaction from the left included an R-r@ted one from Left in the West, and from somewhere in the general vicinity of the right, The Western Word likewise expressed disappointment that the bill didn't pass.

Having limitations on the length and number of overseas combat tours and on length of time between tours is nothing new. Many of the old-timers from WWII recall that the mindset at that time was that no-one came home until the war was won. That wasn't exactly true, since very late in the war, a Advanced Service Rating Score was initiated to help decide who got to go home first.

But this system was developed by the military itself -- they had a mission to accomplish, and after winning in Europe, they had an excess of troops overseas. They wanted an equitable way of determining who came home when.

In Vietnam, the idea of a one year tour of duty was developed -- again by the military itself. Its wisdom has been debated, but it is how things were done at that time. (In most wars, flight crews have often had their tours determined by the number of missions or sorties they are required to fly, rather than measuring the tour according to a certain length of time.)

Anyone who has served in the military knows exactly how long they could potentially be sent on an overseas TDY, and whether and for how long that tour could be extended -- again, all under military regulations for the particular branch of service at that time. There is nothing quite like getting on a military aircraft in time of conflict, not being exactly sure where you are going or when (or whether) you will be coming back. That is, however, an intrinsic part of military service.

The military itself has two competing interests that have to be taken into consideration in deciding how long tours are, who does them, and who has to return for further tours: First -- accomplishment of their assigned mission, and second, recruitment and retention. From the military's perspective, this is a balancing act, and it varies from service to service and from job to job within each branch of service.

Even when a draft is on, the balancing act continues with regard to "recruitment" and retention, since drafts are politically unpopular, and also because some draftees elected to extend their time in service voluntarily.

Ultimately, these decisions need to be made within the military itself. Congress has no role in making such decisions, and Sens. Tester and Baucus were wrong to vote for the Webb amendment.

Some felt that since Webb was a combat veteran, that he should have been heeded. In fact, as a combat veteran and former Secretary of the Navy, Webb knew better than to introduce this amendment. It was a politicized act meant to tie the President's hands in Iraq. In some cases it may have helped troops and the mission, and in other cases it would have hurt both. Regardless, it is not the job of Congress to decide.

As Montana Headlines has repeatedly stated, what Congress can do is to deauthorize a military action. To "undeclare war," so to speak. The proposed Byrd amendment sounds like an approach that is constitutional. Sen Tester has, incidentally, expressed his support for this amendment.

Granted, the Byrd amendment hasn't materialized yet, so we don't know exactly how it will be worded.

In general, Sen. Byrd has been a strong proponent of holding firmly to separation of powers -- which in recent years has meant holding firm against executive over-reach. He has also in the past spoken about "the pitfalls of usurping the Executive Branch’s role in an ongoing war," so one supposes the legislation will be carefully written to reflect that as well.

Lonely older women will hate Fred Thompson: According to Susan Estrich, that is. Keep in mind that Estrich is famous for her brilliant management of the Dukakis presidential campaign. But she is an entertaining political commentator.

The upshot of her recent commentary is that older single women are tired of seeing single guys their age date and marry younger women (a shocking recent trend,) and they will take it out on Fred Thompson by voting for the other guy (or gal,) since Thompson married a "trophy wife."

Sounds like Estrich is miffed that Thompson didn't chase her during nearly his two decades of being single.

Another liberated modern woman had the same first impression, but on looking at the situation again, realized that she was following the kinds of prejudices that she would condemn in others.

How will it all end up? Who knows? But early indications are interesting -- liberals have sniped at Thompson for being married to a 40 year old blonde who has the audacity to be sexy, smart, successful, and Republican (those danged liberated women -- gotta do something about 'em,) and they've even floated the rumor that Thompson is gay (and you can just hear them add, "not that there's anything wrong with that...")

Now where have we seen the homosexual-friendly Democratic Party indulge in gay-baiting before? Oh, yeah. Right here in Montana.

Anyway, it is interesting that Democrats seem to have directed more fire at the undeclared Thompson than they have on all of the other GOP candidates combined.

The Loonies are coming, the Loonies are coming!: The strong Canadian dollar has cash registers ka-chinging in northern Montana.

The taxability of the $400 election-year "check in every pot": We have already discussed the needlessly complicated means of getting that golden $400 check from the Montana government.

Now, we learn from the Missoula Independent that those who itemized deductions on their income-tax return in 2006 will have to declare the $400, while those who took the standard deduction in 2006 won't have to declare it as income.

According to H & R Block District Tax Specialist Nancy Eik, that’s because itemized returns allow for larger deductions, so “you already got a deduction for the $400 last year.”

Huh?

Let's try that another way: the purpose of a standard deduction is to eliminate the hassle and paperwork of itemized deductions, both for the majority of taxpayers and for the government.

The number is set at a level determined by the government to exceed the amount of deductions that most taxpayers would be able to take. Therefore, by definition, those who don't itemize are almost always getting a bigger deduction than they would otherwise be entitled to.

So this "tax specialist" has it exactly backwards, it would seem.

This little part of the bill would seem to be yet another bit of election-year pandering (should we be surprised, given that the entire schemata is designed around election-year pandering?)

Most Montanans presumably take a standard deduction rather than itemizing, so most Montanans won't have to declare the $400 check as income. And most of those who do have to declare it as income probably weren't going to vote Democrat in the first place.

You've gotta hand it to the Democratic strategists in Montana -- they're no amateurs.

Sunday roundup and branding -- the Gazette, and beyond...

Image Courtesy of www.old-picture.com

How the surplus was/will be spent: The Gazette asks -- "...Two years from now, will Montana have another huge surplus pile of cash? Or might the spending approved this year eat up any potential surplus, creating a deficit?" We'll give you three guesses and the first two don't count.

It was clear this session that when it came to tax cuts or rebates, Democrats put on their fiscal responsibility hat and fretted over whether such cuts would break the bank.

But when it came to spending proposals, there never seemed to be any worry about those potentially breaking the bank. At such moments, they put on their "essential services to the people of Montana" hats -- and for some reason there were always more (and more expensive) essential state services when the Democrats were sitting down to figure out how to spend the DOR's take.

"Glee": That one word from the article about how the head of the Dept. of Health and Human Services feels about the increased spending in this year's state budget says it all. It probably reflects how all the department heads must feel (except maybe for the agriculture and livestock folks -- did their budgets ever get put back up to what the Republican House proposed?)

With 400 new full-time employees added to the state payroll, those who want our state's taxation and government bureaucracy to resemble California more closely have a lot to be gleeful about.

But we heartless Republicans should rest easy (except when sending our checks to the DOR) -- if it turns out that we're still rolling in money two years from now, we'll get big tax cuts rather than even more state employees and higher spending, right?

How to get $400 in just 27 easy steps: Leave it to our friends on the left side of the aisle to turn a tax rebate into a Kafkaesque nightmare.

The whole thing could have been accomplished by a simple check-box on a Montana income tax form: "Did you own, pay taxes on, and live for at least 6 months in a primary residence in the State of Montana in 2007?" If yes, add $400 to your income and subtract $400 from your total tax. If you get audited and are found to have misrepresented this, you get a hefty fine. Done.

For those who live in Montana and pay property taxes on their home but for some reason don't file a state income tax form, the Kafka routine could still be available.

Crying wolf: Surprise, surprise -- wolves will bypass elk and deer and go for easier prey like domestic livestock. By the way, have we somehow missed the investigative reports in the Montana media that detail:

1. The numbers of livestock killed by wolves
2. The numbers that ranchers have actually been compensated for by Defenders of Wildlife or other environmentalist groups
3. How long it takes to get reimbursed by said groups
4. Whether the reimbursement takes into consideration other factors such as lost income on investment between the time the kill happened and when the reimbursement was received
5. How complicated the procedures are for getting reimbursed

Credit to the Gazette when credit is due: In its "Ups and Downs" segment, the Billings Gazette editors treated Gov. Schweitzer's "ride a kangaroo" comment as though it had been made by a Republican. The comment was directed to the Australian firm BBI, after its bid to buy Northwestern Energy was rejected by the state Public Service Commission.

They wrote: "Schweitzer's comment was flippant and inappropriate to the complex and serious matter of selling Montana's largest utility distribution business to the Australian firm."

The regrouping of the Montana GOP: Gwen Florio's article in the Great Falls Tribune talks about the divisions in the Montana GOP -- but other than talking about the ouster of Mike Lange as Majority leader at the end of the legislative session and of a primary race ousting a Republican legislator who broke ranks in 2005, there wasn't a lot of evidence in her article for a division about core principles within the GOP.

There was a lot of evidence for there being a division between Republicans and Democrats.

Montana Headlines has little inside information to back this up, but a more realistic assessment is that there is very little disagreement on core issues and tendencies between "moderates" and "conservatives." We're all pretty conservative in these parts.

The key issue is really more one of style. There are also these questions, which Montana Headlines in its own way has been addressing in one way or another since the beginning of this site: is it possible to be a firm, principled traditional conservative without being shrill and bellicose? And is it possible to arrive at real-world compromises while remaining uncompromising about our core beliefs?

The sweep of historical conservatism in the Anglo-American governmental, cultural, and legal tradition answers that question with a resounding "yes." Some of the reputation for shrillness on the part of Montana conservatives is deserved, and that needs to change. But a lot of it is the product of unfair caricatures by the opponents of the GOP.

We know we will be caricatured, so Republicans have to adjust tone and strategies accordingly -- replacing bellicosity where it exists with calm, thoughtful, and quiet determination. Initial impressions are that Erik Iverson, as the probably state GOP chairman, will more reflect the latter, but it is the duty of all Republicans to make sure it is so -- not just the leadership.

Not only does it make practical sense to approach things in that manner, it also keeps us fully in the traditions of conservatism -- moderation in all things, caution when it comes to change, Christian behavior, respectable comportment, generosity and magnanimity in one's personal life, acting with respect toward established offices and institutions... and so forth.

We need, in other words, to be in public what we are at home and work. And if we aren't that way at home and work -- well, then we may be many things, but we aren't particularly conservative.

The proposed legislative compromise: big losses and (small) victories

The governor's public announcement stated clearly what had been floating around last week -- he believes the special session will take 3 days. As Jeff Mangan notes, the man "certainly knows how to count votes. The only questions that remain, who and how many?"

Rep. Mike Lange was at the meeting with the governor, but Speaker Sales and the Chairman of the House Appropriations committee, Rep. John Sinrud, wasn't, so that is interesting.

A couple of months ago, we wrote a piece talking about the fact that while we admired the creativity of the Republican House strategy of splitting HB2 in an attempt to have an impact on the final legislative product, what matters in the end is whether that strategy is successful or not. The extent to which the final budget and tax proposals differ from the executive branch's initial proposal are going to be one measurement of successes, if any.

The proposed compromise does contain a tax credit for homeowners tied to the amount of property tax they pay, in addition to the $400 election year "check in every pot" to all homeowners and renters, so that is a notable change -- although the amount of this credit isn't given, and we don't know whether it will be ongoing.

The $65,000 exemption for business equipment is a change, since it will mean that all businesses can claim that exemption -- not just ones with equipment value of under $65,000 (that's if we're understanding it right.)

Notably absent is any property tax cut for businesses, farmers and ranchers, or other non-homeowners.

And while $50 million would be trimmed from the Senate spending plans, it must be remembered that the total size of that budget was $7.9 billion at last count, making this a 0.6% cut. Wow.

The Senate also busted the governor's own budget, so this spending may not be terribly different from what the executive branch proposed in the first place -- hardly a real compromise with Republicans on spending.

The rest of the proposals are pretty much what Democrats wanted in the first place -- some of which Republicans agreed with, some of which they didn't.

So if this is roughly what gets passed and signed, Republicans will have lost on most things, but have some minor victories, which is all that could be expected with as little leverage as they had.

Would they have won those compromises (or even better ones) had they stayed with HB2 and behaved like good little boys and girls? Maybe, but we doubt it. Was it worth it? Probably, but only time will tell.

We will just quote from the above linked Montana Headlines post for thoughts that haven't changed over the past months:

As we have noted before, Democrats in the end hold all the power in this legislative session if they choose to strong-arm their budget through one way or another.

...Republicans will lose that particular arm-wrestling match. How they comport themselves during that struggle and loss will determine the longer-term victory – which is always the one that matters.

Special session called -- tea-leaf reading begins (plus more on permanent taxing and permanent spending)

Somehow Montana Headlines had missed the news that a meeting was scheduled for today in Billings between legislative leaders. Spotting Stapleton, Sinrud, and Sales deep in conversation on Broadway early in the afternoon indicated what was up, and the report came out soon.

With the governor's call for a special session coming less than an hour afterwards, speculation can't help but run a bit wild. Did the session get called so quickly after the meeting because the legislators had discussed the possibility of calling themselves back into session without waiting for the governor? Charles Johnson, who has to be as good at reading faces as anyone, says that Democratic legislative leaders showed no signs that they knew the governor was about to announce the special session -- but who knows?

On the other hand, there are those who speculate that there must be two defections from Republican ranks -- otherwise the governor wouldn't have called the special session yet. Maybe.

But one thing is certain -- based on our unscientific polling of not particularly partisan Montanans (which is probably half the population,) public opinion isn't running nearly as much against Republicans as one would expect from reading liberal sources. The entire bunch up in Helena is viewed as ineffectual. And if public opinion isn't running against Republicans, then there isn't much point for Democrats to drag it out any longer.

Having the Democratic party get socked with a $15,000 fine by the FEC and then compounding that by flubbing an attempt to draw fire in the direction of Denny Rehberg's office can't have helped.

Rumor has it that the governor has been saying that he thinks a special session can be done in three days -- this means that he either has his two Republican defectors or he has decided to compromise.

________________________________

If compromise is really in the works, then barring something really creative, it would have to mean an agreement on property tax cuts/credits. But there doesn't seem to have been evidence at the legislative meeting in Billings today that such an agreement has been reached. Which means that Democrats either have either pocketed their two Republican votes or there is diversionary smoke being blown.

Mike Dennison's article (linked above) on property tax cuts correctly reports that the Democrats' talking points have been that there is no such thing as "permanent" anything -- subsequent legislatures can undo anything a previous legislature has done.

But the questions have to be boiled down to these: what do we want it to be easier for a legislature to do -- to raise taxes or to cut them? to increase state spending or to cut it?

If we want it to be easy to raise taxes and easy to keep spending levels rising -- the Democratic plan is the way to go, since their tax credits will be one-time and the amount of ongoing spending they want to add is far greater. All Democrats have to do to have Montanans pay more property taxes next year than this year is nothing. And increases in ongoing spending won't register next session as an increase, but rather as the status quo.

On the other hand, with the Republican proposal, the legislature would specifically have to raise property taxes in the next session in order for Montanans to pay more taxes. Are their property tax cuts "permanent?" No, but it will take work to undo them, and the legislature will have to explain to Montanans why they need that extra money.

Same for spending. Republicans want to shift much of the ongoing spending increases proposed by Democrats into one-time spending. A subsequent legislature, if they want to spend that much money again (and if they have it,) will need to vote specifically to increase that spending again.

In short, regardless of whose plan is followed, a subsequent legislature can tax and spend as much (or as little) as they want. But how easy it is to do each depends in large part on what prior legislatures have done.

All one has to do is recall the squealing from Democrats about the Republican "six-pack" that was substituted for HB2.

No prior legislature could bind a future Montana House to use a single omnibus spending bill like HB2. But when the Republican controlled House did something different from what previous legislatures had set as the standard, they proved that changing legislative course isn't as easy as Democrats glibly say it is when they are poo-pooing Republican proposals for what Democrats like to call "so-called permanent" property tax cuts.

Needless to say, the Montana Headlines view is that it is a good thing for legislatures to be in the position of having to explain why they want to take more of our money from us. We think it is a good thing for them to have to explain why they need to spend more money when there is a surplus -- rather than realizing that maybe a surplus means that it wasn't necessary for Montanans to have had quite so much money taken from them that year.

Democrats express concern about whether there will be money to "pay for" property tax cuts in the future. Leaving aside the fact that this is thinking about it backwards, one wonders why they aren't equally concerned about whether there will be money to pay for their proposed ongoing spending increases in the future.

We will find out soon enough what they think, and what has been decided for us.

Divide and conquer

While the Billings Gazette has its own report, the Great Falls Tribune gives a somewhat more detailed account of the proposed summit meeting in Billings between Democratic and Republican legislative leadership.

A few things jump out of the report:

1. While Rep. Mike Lange has taken a beating due to Epletive-gate, including baseless rumors (started by whom?) that he might be edged out of leadership, he is exactly right in insisting that the governor be involved in any talks and negotiations.

It is good that Speaker Sales is taking a more prominent role at this point -- listening to him on the final day of the session, one is reminded that the caricature of him painted by Democrats in the blogosphere is just that.

Based on the timing of the collapse of negotiations between Sen. Stapleton and Sen. Cooney on the last day of the session while there were still many hours to work things out, one suspects that Sen. Cooney is not able to make the final deal in the Senate, so why pretend that he is? There is a third person along on this date, so he might as well sit up front with the other two.

2. The expected mind games are going full steam, attempting to plant ideas into Republicans' head that certain of their number are in secret negotiation with the governor. In fact, the governor's comments can only be interpreted as a thinly veiled implication that he is talking to nearly everyone except the leadership:

"I've been speaking to a lot of other folks. ... They're frustrated with their own (Republican) leadership."

Well, maybe, but not because we want them to sign off on everything Senate Democrats propose.

A less confident leadership would feel undermined by their own people if they believed it. After all of the party-line votes that Republicans have held together on, though, it is hard to be terribly worried about this kind of smoke and mirrors.

This is especially true since no Republican is going to gain anything politically by undermining his own party at this point. Above all, none of this is personal or nefarious -- Democrats are just playing politics, and we'd be surprised if they didn't. So no need to over-react.

3. Democrats cannot assume that they are going to get to start negotiations where they ended in Helena on the last day of the session. Republicans had essentially, as we have written before, given in on all of the spending increases that the Senate wanted -- at least on a one-time basis, and they had long ago agreed to go along with the $400 election-year "check in every pot" nonsense.

The details that should have been worked out (and by all accounts were being worked out) was the extent of the permanent across-the-board property tax relief that Democrats would agree to in return. Since this was the only Republican request, not to come up with it in some form would have been an admission that the Democrats were not interested in compromise. Senator Cooney is too astute and experienced as a legislator not to see this.

An abrupt end to the session makes sense only from the standpoint of a plan to play for all the Democratic marbles. Republicans had nothing to gain by not cutting a deal on the last day of the session.

But regardless of who pulled the plug on those final negotiations from the Democratic side, a step is rightly being taken back by the House Republicans on spending proposals, with Lange now going back to talking about significant spending restraints on the proposed corrections and revenue department budget increases, and even in the "present law adjustments" that involve increases for existing programs.

This is exactly right. Republicans had given in on the spending increases, but had done so with the proposal of getting some sort of long-term property tax relief in return. With Senate Democrats refusing to come to an agreement on that, Republicans are now right to go back to their original position of pushing for much-needed spending restraint.

Montanans know a little about horse-trading, and it doesn't mean settling on the price that the seller initially asks for. Once they see that the Democratic idea of compromise was to give nothing on spending and to give nothing on long-term tax relief, Montanans should start to get the picture.

Property tax cuts -- now we're getting somewhere

If Sales and Cooney were to subcontract the negotiations on property tax cuts to Montana Headlines and 4&20Blackbirds, it appears that we'd make more progress in a few hours than they made in 90 days.

Responding to our suggestion that Montana Republicans would have embraced North Dakota's recently-passed property tax credit legislation, 4&20 suggests that the Montana GOP wouldn't have done so because of their purported inability to compromise. 4&20 goes on to say that North Dakota's legislation "closely resembles Governor Schweitzer’s one-time tax rebate for Montana households."

Now, one of the frustrating things about following this entire fracas up in Helena is that details are skimpy, to say the least, about what each side actually offered or rejected.

The legislators have been sent home to do some explaining to their constituents -- but in order to ask our legislators to explain, we first have to know the facts.

Montana Headlines, for all its cautious habits, however, is going to go out on a limb and suggest that had a deal like the North Dakota legislation actually been on the table, Republicans would indeed have some explaining to do if they rejected it. We're pretty confident that Democrats didn't even come close to considering legislation like this.

We posted our comments about the North Dakota legislation not because we believe that the ND legislation is perfect or that North Dakota isn't deserving of all the jokes we Montanans tell on them. It was sheer serendipity that we ran across the item in the first place, and what initially drew our attention was that they were in the process of setting a record for length of session, precisely because they, too, were hammering out property tax relief.

We point out the details because this legislation is not theoretical, but is legislation that was actually passed by a legislature in the region in a state with a similar economy (oil and gas, agriculture, no big cities) and similar politics (strong Democratic party, 2 Democratic U.S. Senators.) And ND Republicans, for the record, are hardly "mouth-breathers" -- they are a pretty moderate bunch, to say the least. Some might call them positively liberal by comparison to Republicans in the intermountain west.

Consider the following facts about the North Dakota legislation:

1. It is long-term and as permanent as these things can get. It is ongoing, and not a one-time tax credit. It would need to be revoked by a later legislature.

They did wisely add a provision that the percentage of the credit can be lowered in 2009 if more than $44 million in credits are claimed next year -- in other words, a sort of automatic down-regulation provision, but without requiring each legislature to decide on a tax credit every single session.

"One-time," however, it is most definitely not.

2. Everyone gets the tax credit -- individuals rich and poor, small businesses and large corporations -- as long as they pay state income taxes. In other words, out-of-state businesses who do business in ND get the credit, while someone who owns property but doesn't generate income in ND doesn't get any credit at all -- a pro-business provision.

By contrast, the best offer that Democrats in Montana made excluded businesses, corporations, and families who made more than $45,000 (pity the two-income family where each spouse makes a whopping adjusted gross of $23,000.) The ND House held the line on this point, insisting that the plan initially passed by the ND Senate would have excluded all businesses and 70,000 North Dakota taxpayers -- and that such a plan had to be rejected for that very reason.

Sound familiar? The Montana Democratic proposal would have excluded 20% of Montana taxpayers from ongoing tax relief, as well as businesses and corporations. That's one reason why the Montana House rejected it.

3. People who don't pay taxes don't get credits -- none of this ridiculous idea of "credits" for taxes that aren't actually paid. If there is an excess, a voucher is given for credit against future taxes. No election-year hand-outs. Granted, both Republicans and Democrats went in for this foolishness in Montana this year, but that's not our fault at Montana Headlines.

4. It is a meaningful but prudent percentage reduction -- 10% for homeowners and 6% for businesses and farms.

5. There is a reasonable cap on the total amount of refund -- $1000 for businesses and married couples. By putting a cap on the credit rather than capping the income at which someone can get any credit at all (as in the Montana Democratic plan,) extremes for large corporations are avoided, but still everyone gets some relief.

In order to max out on the North Dakota credit, someone would need to owe $10,000 in property taxes as a couple owning a home or nearly $17,000 as a business. This means that only the very biggest get capped, while nearly all homeowners, farmers, ranchers, and small businessmen get the full effect of the credit.

----------------------

In summary, the North Dakota property tax credit is meaningful long-term tax relief that goes to every property taxpayer who lives full-time or does business in the state, with a reasonable cap to limit what the very biggest property owners get back.

Sounds a whole lot more like the last offer made by the Republicans than the last offer made by the Democrats here in Montana.

Until we see concrete evidence that Montana Democrats were willing to agree to legislation designed along similar lines, we will stand by our statement that Montana Democrats never came to the table on this -- the single fiscal issue on which Republicans asked for meaningful compromise, after dropping all of their requests on spending restraint.

Oh, and North Dakota also added $200 million to their state's rainy-day fund and left a $150 million ending balance in the books for a cushion. And all state employees get a raise, school funding was revamped, etc. Not bad for a day's work (or rather 78 days work) over in NoDak.

Looking ahead -- neither discouragement nor stubbornness, please

There really is little further to say about what happened up in Helena with Rep. Lange. GeeGuy over at Electric City nailed it by combining a no-nonsense "this was stupid of Lange" with a cold-eyed appraisal of some of the "cluck cluck clucking" going on by Democrats and by the press.

The episode does provide an all-too-vivid illustration of why Montana Headlines has, throughout the session, been talking (at the risk of sounding like a nag) about the need for the Montana Republican party to rediscover the apparently lost art of rhetorical discipline. Leaving aside things that should be highly valued -- like good manners and intelligent discourse -- it demonstrates that Republicans are always going to come up on the short end of things when we don't pay attention to little details like not letting someone get you to lose your temper in public.

We would add, parenthetically, that there are elements of Hellenic tragedy in this, one of the final scenes in the last act of the play. Specifically, we observe a lesson in the concept of hubris, since some Republicans have made a point of criticizing the governor for his reported temper. We had heard a couple of predictions that the governor would lose it at some point during the session. While he has certainly had his little moments, barring something completely unexpected, the final and most memorable outburst will unfortunately be chalked up in the "R" column.

Because of the bad press coming at a most politically inopportune time, a temptation for Republicans is going to be discouragement, but that would only compound any problems caused by Majority Leader Mike Lange's now-famous hortatory oration. Lange did the right thing by apologizing to the governor, and now it's time for Republicans to get back to negotiating the best deal possible. Attempts will be made to capitalize on this by making it seem like a larger-than-life occurrence -- with the goal of cowing Republicans into compromises they otherwise would never make.

Another misstep would hurt even more, so whoever does the negotiating needs to be under extremely good self-control. Republicans can expect that there will be subtle attempts to draw them out into more intemperate language. It's just part of politics -- there's nothing personal about it. Anticipate it and mentally prepare for it.

On the other end of the spectrum of possible Republican responses is stubbornness. Negotiation involves give and take, bargaining chips, and shifting positions. Again, there's nothing evil or personal about any of this. It's just how things are done.

If a line in the sand is going to be drawn, whoever is drawing it had better be very certain that it is a line that the entire Republican caucus is going to back up no matter what disaster comes down the pike. Otherwise, don't draw that line -- it is very demoralizing to watch the other guy step across once your ability to hold that line disappears.

When mistakes are made, there are costs. We suspect that the costs don't need to be terribly high for this mistake if the GOP handles things well from this point on. We expect that getting schooled like this will result in lessons learned and that things will now be handled with a little more attention to detail.

Republicans should continue to be grateful to Lange for all of the hard work he has put into this session. His position hasn't been an easy or eviable one, given that it was a pre-determined fact of life that Republicans would lose a lot more battles than they would win. We hope that he dusts himself off and goes back to the work of finishing out the session -- and he has our support as he does that.

Finally, thanks to our friend Jay over at 4&20 Blackbirds for his concern -- both head and keyboard are on the road to recovery.

The Billings Gazette: Cubin, wolves, and income taxes

Montana Headlines was about to return to its roots by criticizing the Billings Gazette for an unfair slant. In the on-line edition as it originally appeared, this article was advertised on the home page with the rather unpleasant picture of Rep. Barbara Cubin (R-WY) and the subtitle of "Howl now or forever hold your peace."

The impression was that these were Rep. Cubin's words, when they were actually the Gazette writer's words. Given that Rep. Cubin already is laboring to counter an image of using impolitic language from time to time, it seemed like unfair piling on. Apparently, someone else thought the same thing, since that caption soon disappeared -- even though the unpleasant picture remains.

And now, there is the task of agreeing with a Gazette editorial from this morning. It opens with a thought that has to have been niggling in the backs of many Republican heads here in Montana:

Montanans who just finished filing income tax returns wonder about their Legislature's obsession with "property tax relief."

Well-stated. Not having access to the inner circles of Republican strategy in the state, we would imagine that having just reformed the income tax bracket system to remove the negative perception (although not the reality) of being a high income tax state, Republicans would not feel they could return to income taxes this soon.

Yet it seems that the Gazette editorial is hinting that income tax cuts (along with a healthy rainy day fund) are exactly what should be pursued, rather than property tax cuts. If so, then we doubly agree with the Gazette editorial writer.

We certainly support just about any tax cuts, and since property tax cuts are the chosen focus of this legislative session, we do support them. We think that they should be real and across-the-board (with possible exceptions for large out-of-state corporations, luxury vacation homes, etc.)

It is hard, however, to look at the overall tax breakdown illustrated in the Gazette editorial and wonder why, in the face of a surplus, Republicans and Democrats alike aren't working toward further income tax cuts rather than property tax cuts. This is especially true since income taxes are the most volatile taxes in the arsenal of a revenue department. Property taxes, by contrast, are a consistent source of income year in and year out.

A reason to favor property tax cuts is that Democrats are perhaps more open to them than they would be to income tax cuts, given the greater demagogic payoff of income tax issues for Democrats. But these cuts or credits are boiling down to something that doesn't represent a meaningful tax-relief policy: one-time $400 checks being mailed out to every Montana home-dweller in a re-election cycle, and no permanent tax relief at all for 20% of Montanans.

Furthermore, we are facing the amazing fact that the legislature is at this point in divvying up a $1 billion surplus -- and there has still been no rainy-day fund money being set aside. This is particularly amazing in a state almost completely dependent on the highly volatile cycles of income tax revenue. One would think that the first thing GOP and Democrat leaders would have sat down and agreed upon would have been the amount to set aside for future revenue shortfalls.

Montana Headlines would speculate that Republicans might have been better off doubling or tripling the governor's proposed rainy day fund, and axing all property tax relief (including the governor's) once it became clear that Democrats were not going to allow real, permanent, across-the-board cuts in property tax rates.

Yet, given a choice between a last-ditch stand on the hill of getting some sort of property tax relief and letting the legislature just fritter the entire surplus away on spending (which is what they seem to be bent on doing) -- setting expectations for further massive spending in the future -- yes, Montana Headlines is going to continue to stand with the Republican leadership for tax cuts of almost any kind.

So, property tax cuts it is. Let's roll.

Sunday roundup and branding -- the Gazette, and beyond...

Image Courtesy of www.old-picture.com

Oh, what a relief it is(n't): There is supposedly tax relief coming -- both temporary and permanent. "Key Senator" Jim Elliott, D-Trout Creek, has proposed a bill for property tax relief, but it needs a lot of work.

Montana Headlines still believes that the idea pushed by members of both parties to give tax credits to renters doesn't make much sense, since by definition, tax relief should go to those paying taxes. This amounts to a handout -- which is OK, just call it a handout and not tax relief. But then, we're not the ones having to get elected, so maybe we just don't have the proper perspective.

Likewise, the permanent tax relief provisions only apply to those with adjusted family incomes of less than $45,000.

The Great Falls Tribune reports that the median income for two-earner Montana families is $57,000. If this is true, then well over half of such two-earner families will get no property tax relief.

According to 2005 income tax data from the Montana DOR using adjusted gross incomes (which doesn't break things down by single or double incomes), 20% of Montana families will get no property tax relief. That same 20% of families, according to those DOR statistics, paid 75% of all income taxes in the state in 2005.

The idea that a family earning $46,000 -- or $446,000 for that matter, doesn't deserve property tax relief reflects an ignorance of who the truly wealthy really are. We'll give you a hint -- it's the people who don't have to get up every morning to go to work, and those people make more than that. A lot more. And they don't comprise 2% of the Montana population, let alone 20%.

And why should income determine who gets property tax relief, anyway? It would seem that what can justly be avoided are giving big tax breaks to expensive luxury homes. Why not cap the value of private homes that get tax relief at, say, the 80th percentile of home values in the region of the state, and exclude 2nd homes from receiving tax relief? Provisions can be made for the elderly on fixed incomes or for family farmers and ranches to make sure that they don't get taxed out of their homes as property values rise around them.

A lot of work needs to be done on this. One thing is certain, the property tax relief plan as Sen. Elliot proposes it is not at all worth making spending compromises over. Better to cut spending and put the excess in a rainy day fund than to engage in a tax-relief plan that is just for show.

The trouble is that there just isn't a lot of money to be taken from the truly wealthy because there aren't enough of them. You have to sock it to the mid-middle and upper-middle class in order to rack up the big tax bucks. As Clive Crook pointed out in a recent Atlantic Monthly article (sorry, dead-tree stuff again), the vast majority of Americans consider themselves to be middle-class -- which is why politicians seem eager to be perceived as catering to them (even while figuring out ways to sneak enough money out of the back pocket of the middle class in order to bribe 51% of likely voters into voting for them.)

Ask most people where the middle class stops and where being rich starts, and they'll usually pick a family income not terribly higher than what they themselves make. And as family income rises, that family's definition of where being rich starts rises as well. Simple human nature -- and more to the point, simple common sense, once one realizes that the level of wealth at which one doesn't have to get up and go to work every morning is very, very high.

Crook summarizes his article, subtitled "What War on the Middle Class?" by pointing out that the real war, both present and coming, is a war within the middle class over who gets to be the payee and who has to be the payer.

By excluding from property tax relief the 20% of Montanan families who already pay 75% of the income taxes (nearly all of whom are middle or upper-middle-class), a war within the middle class is being promoted. And does anyone other than selected politicians really want or need that in Montana?

Speaking about something actually worth spending part of a surplus on: At Montana Headlines, we're not at all fans of mandating what should be in health insurance policies, so some of the bills aimed at such measures are dying well-deserved deaths. But if we as Montanans can afford to provide basic health care to kids who can't help it if they are born into families who can't afford health insurance, we should fund CHIP and Medicaid.

Republicans shouldn't be afraid to fund these things, and Democrats should understand that funding today cannot mean funding forever, regardless of the health of the economy.

Another predictable failure on immigration reform: From the beginning of the session, Montana Headlines has maintained that we need a comprehensive package of immigration reform measures based on the hard experiences of other states.

These measures should address depressed wages for legal workers, concerns about having to provide welfare benefits for individuals here illegally, concerns about already overburdened schools having to absorb children of illegals, concerns about enforcing the rule of law, concerns about safety on our roads and highways, and concerns about the integrity of the voting process in Montana.

Attempts to pick something here or there to address are inevitably going to seem unfair to one group or another. The House overwhelmingly rejected a measure aimed at state contracts with contractors who employ illegal workers. The idea is a good one, but it placed too much burden on law-abiding contractors, in the opinion of both parties.

The burden needs to be shared between the state and private businesses when it comes to making Montana a friendly place for legal workers and an unfriendly one for illegal workers and those who would employ them. This means carefully written bills covering a broad range of measures -- this should not be a partisan issue.

We've got 'em right where we want 'em

Conservatism never is more admirable than when it accepts changes that it disapproves, with good grace, for the sake of a general conciliation; and the impetuous Burke, of all men, did most to establish that principle.

-- Russell Kirk


The portrait is, of course, of Edmund Burke, and we will return to the Kirk quotation later. The title of this post is what the legendary quarterback John Elway said to his teammates when they were pinned down on their own 2-yard line, trailing in the 1987 AFC championship with time running out.

Elway had an advantage, because it was 1st down. The Montana House GOP leadership is 4th and long on the Human Services bill (the last of their 8 bills), but it looks like they may finally have found a way to construct it that might actually get the needed 51 votes from the GOP caucus+Jore.

And, we might add, to do so by creating something that actually resembles a serious appropriations bill (i.e. no mock $300 tabula rasa on which the Senate must write the bill themselves.)

The Senate is starting to work over the first 4 appropriations bills sent to them from the House, and so we will now for the first time get some substantive Democratic input -- a must if we want our good governor to sign off on the specific compromises and solutions that need to be reached in the bills.

If budget director David Ewer was furious at having to testify as an opponent of the GOP bills in the House, what he must be feeling at having to come before a Senate committee to talk about bills that have actually been formally endorsed by the House Appropriations committee and formally passed by the Montana House of Representatives, we can hardly imagine. He may actually have to treat them like real bills.

Fortunately for Ewer, in dealing with the Senate Finance and Claims Committee he now has the assistance of Sen. Dave Lewis, R-Helena, a former state budget director under Democratic and Republican administrations, to help explain things to him:

"The kinds of increase that we're talking about in this budget are so extraordinary that I can't even imagine you wouldn't be more accepting of the adjustments that were made," Lewis said. "We've never seen anything like this."

Jeff Mangan, who knows a lot more about how things work in Helena than most, has proposed that the most workable compromise might be to bring back HB 2 in exchange for permanent property tax relief. He postulates that the GOP might have to choose between their split appropriations bills and getting the property tax relief they promised when campaigning.

This may still very well need to happen, but if the most recent version of the Human Services bill passes, the political landscape will shift, and the GOP will be in a position to expect both the split bills and the necessary substantive compromises on spending, tax relief, and other legislation.

The feeling at Montana Headlines is that it would be a bad idea to bring back HB 2, simply because it rewards bad behavior on the part of House Democrats, who refused to participate in the process of amending the House bills.

Democrats, of course, hold precisely the opposite view -- that they don't want to reward what they see as bad behavior on the part of House Republicans in splitting the appropriations bills. If this last appropriations bill passes, however, the GOP will have done what they are responsible for doing -- they will have passed comprehensive appropriations legislation using the procedural rules of the House.

The Senate, in turn, can now use its own rules and procedures to amend those bills in a way that can come to a substantive consensus between the House Republican leadership, the Senate Democratic leadership, and the governor. It has been predicted that cooler heads will prevail once the bills hit the Senate -- may it be so.

We started this post with the quotation from Russell Kirk about Edmund Burke for a reason. The compromises that we will get from this process will, in the end, leave us with a state government that most conservatives will think is taxing, regulating, and spending too much.

It will be a state government that is not doing as much as it should to address critical things like the coming crisis of illegal immigration and the ongoing crisis of the depopulation of our rural areas.

It will be a state government that is still using misdirected programs to address real problems. As an example, think full-day kindergarten -- which will not address the real problem of having some Montana high-school graduates who are intelligent and motivated enough to go to college but who can't read and write properly.

Progressives (and as an aside to 4&20 BB -- don't even think of ruining our reputation by calling us one) will of course portray the end product as a once beautiful work of art that was marred by unappreciative Republicans -- but Republicans should take that in stride, speaking and behaving in such a way that we can say that we have accepted some changes of which we disapproved, with good grace, for the sake of a general conciliation.

Economic patriotism for Montana -- part II

Ed Kemmick put simultaneous responses on Mark Tokarski's website as well as on Montana Headlines, pointing out that our two sites had addressed the same Billings Gazette article on Gov. Schweitzer's and Corey Stapleton's comments about our tax and business climate.

Kemmick correctly pointed out that our views of these remarks were "180 degrees" apart, and expressed an interest in hearing our comments on the other's posts.

One can read Tokarski's post by clicking on the above link, and the Montana Headlines post with Tokarski's response in the comments section is just below, or here.

We were not capable of being as concise as was Tokarski, so are replying as a separate post here.

First, Mr. Tokarski mixes up two things that are intertwined but separate: indicators of economic prosperity (such as incomes and unemployment rates) and state government revenues.

What is at issue in this current legislative session is state government revenues, so that is what should be concentrated on.

There is no question, for instance, that energy prices and demand account for some of our current high tax revenues. But this is a separate issue from our economy. Are we to assume that a booming energy production industry is the reason that unemployment rates are low in Whitefish as well as in Sidney? Or that incomes have risen in places west of the Bighorn River?

Second, Tokarski, using a common Democratic argument, implies that the only reasons for Montana’s cyclical revenue collections are things like energy or commodity prices. It is true that commodity prices have a cyclical impact on our economy, but it cannot be avoided that what grossly magnifies the effects of these economic cycles on Montana’s tax revenues is our dependence on an income tax – something over which we do have control.

States without income taxes do not go through the kinds of cyclical crises that Montana does. The bottom line is that incomes (and hence income tax revenues) vary with broader economic cycles, but citizens own property and spend money at far more constant rates.

There are good reasons to avoid a sales tax (for instance, Billings draws a lot of income out of Wyoming because Montana doesn't have one) -- but if we insist on avoiding one, we'd better stay used to wide fluctuations in tax revenues.

As has been stated on Montana Headlines before, more is accomplished (including scoring political points) when there aren’t arguments over who gets credit for what. The main point to our previous post was not to claim sole Republican credit for favorable economic conditions or high tax revenues. It was rather to question whether the governor was attempting to use appeals to “helpfulness” as a way to silence Republicans who believe that lowering tax burdens yet more will help the state’s economy even more.

And as has also been stated on Montana Headlines before, Republican policies at the very least did not hurt the economy or hurt tax revenues. Republicans certainly can’t prove that it was only their policies, and not factors like energy prices and demand, that were responsible for Montana’s current favorable economic and revenue situation. But then, we’ve never heard them claim that they were.

Neither, though, can Democrats prove that Republican policies did absolutely nothing to help our economy or revenues, but yet we certainly hear Democrats making that assertion.

There is one point on which we would agree – namely that a good use of excess tax revenue is to plan ahead for days when revenues will be lean.

Democrats could propose that ongoing state spending rise only with inflation, and that no new employees or programs would be added. They could furthermore propose saving most excess revenues for a rainy day. With such a combination, a future Montana on the cyclical economic downswing wouldn't have to struggle to fund them.

While Republicans wouldn't share their economic pessimism, we would still probably find consensus on that plan. As long as Democrats continue to propose massive increases in government spending, however, we will assume that they aren't as worried about a future bust as they say they are.

The Missoulian gets it right on rebates for renters

In today's Missoulian, the editors give a common-sense opinion on the the proposals of some lawmakers to give property tax rebates to renters.

They correctly note: "If it's property tax relief, then rebates logically belong to the owners of property." Still left out is the fact that the Democrat plan would restrict tax rebates to homeowners, leaving the owners of rental housing and other commercial property without tax relief, even though they have been paying the same rates. Montana Headlines has discussed this before.

The editors suggest an honest way for proponents to get a piece of the pie: "if they want it, they really ought to campaign for the money to be distributed in some form - say, as some kind of per-capita payment."