Sunday, June 14, 2009

Wisconsin Budget: Fun Facts

MJS gives us a couple key issues on the new budget attempting to be rammed through by Senate and Assembly Dems:
Oil company tax: To generate $224 million for highways and other transportation programs, Doyle and Democratic legislators want to tax oil companies. But Assembly Democrats dropped a provision saying that oil companies couldn't raise gas-pump prices to cover the tax.
Let me guess, to "create jobs?" No doubt, some of that money will be funneled towards the proposed KRM rail that will prove to be another economic suckhole finding its way towards the red on the Government's account balance. At least they dropped the provision on pump prices. Taxing gasoline, an inelastic good, will undoubtedly pass on most of the cost of that tax to consumers as opposed to producers. But if producers had to bear most of the burden, we would likely see at least some suppliers moving out or going out of business. Theoretically, this could lead to a shortage of supply, and people lining up at the pumps for hours.

Thankfully, the provision was removed, although I would object to the tax increase in the first place.

As for other provisions that have proven less controversial:

• Making residents with taxable incomes of $225,000 for a single person and $300,000 for married couples pay $287 million more in income taxes the next two years. That would be done by creating a 7.75% tax rate.

• Raising income taxes on capital gains, costing some investors an estimated $170.4 million.

• Raising the $1.77 state tax on a pack of cigarettes to $2.52, costing smokers an estimated $310.4 million.

• A 75-cent monthly fee on all phone lines, which would cost customers $102 million. The money would go to protect local police, fire and other emergency services.

• Requiring vehicle owners to buy more liability insurance coverage, which the state insurance commissioner has said will raise premiums.

Hmm. My personal favorite is the one taxing investments. That my friend is a sure-fire way to jumpstart an economy: penalize entreprenuership, which, as Econ 101 tells us, is one of our four factors of production other than land, labor, and capital.

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