Comedian Richard Pryor once famously observed that “cocaine is God’s way of telling you you’re making to much money.” Similarly, large deficits are government’s way of telling that they have too much money. Yet Wisconsin, despite running deficit after deficit during economic downturns, refuses to recognize it has a tax problem.
Even the simplest budget observer can understand why Wisconsin is always caught with its pants down when the economy goes bad. Most importantly, it doesn’t put away any money in reserve to help mediate budget downturns. Secondly, it fixes these budget downturns with budget tricks – money transfers, one-time funding, delayed payments, and the accumulation of more public debt.
Perhaps most confusingly, Wisconsin government has a history of trying to ameliorate downturns by raising taxes. Let’s think about why a deficit occurs – tax revenue to the state slows down because individuals are making less money. As a result, they pay less in income taxes, and buy fewer goods, which shrinks sales tax revenue. It would seem clear that raising taxes on these people would do nothing to correct their lowly situations – it only serves to maintain the bloated spending that the deficit is practically begging lawmakers to correct.
Predictably, Governor Jim Doyle’s budget deficit “fix” proposal introduced Monday combines all the worst of the above budget strategies. The centerpiece of the plan is Doyle’s proposal to implement a .7 percent taxes on hospitals, which would then presumably be matched with federal dollars. Doyle is so married to this proposal, he actually said “There is no good argument against taking this step.”
Naturally, this new tax would be passed on to health care consumers (sometimes known as “sick people.”) Ironically, Doyle recognized this phenomenon when he proposed his tax on oil company profits and included a “no-pass through” provision which prevented companies from passing the tax on to drivers. If Doyle didn’t think the tax would be passed on to consumers, there wouldn’t have been any need for the provision. The hospital tax is no different, and will serve to make health care more expensive – at a time when citizens list health care costs as their #1 concern.
Another problem with the hospital tax is its reliance on federal matching funds to plug the budget hole. The feds are often fickle when approving more federal funding to bail states out. This was in evidence in the 2003-05 budget, when Doyle wrote in hundreds of millions of dollars in Intragovernmental Transfer Program (IGT) funds to plug a Medicaid hole. As it turns out, Doyle’s number was pure fiction, as the money never materialized. Naturally, the state refinanced some debt (opting to pay more long-term in exchange for a few immediate bucks) rather than making any substantive budget changes.
Doyle’s plan also transfers $243 million out of the transportation fund and backfills that hole with – no surprise here – more debt. This is the same go-to maneuver Doyle and the Legislature utilized between 2003 and 2007, where they borrowed nearly $900 million to backfill the $1.1 billion transferred out of the transportation fund. When all the debt service on those bonds are paid off, taxpayers will have paid over $1 billion in interest – money they wouldn’t have had to pay had the deficits been dealt with in a more fiscally prudent manner.
Doyle hysterically claims that his budget “repair” bill doesn’t raise taxes. Yet consumers will be paying more for medical care, and drivers will be paying more in the future to pay off new debt incurred in the transportation fund. And government will continue to call plays from the same playbook that got us into this mess in the first place. The state’s unwillingness to deal with its overspending problem in the past is a primary reason it is looking at a deficit now. And Governor Doyle’s new budget “fix” bill will guarantee that the state will be staring at an even more severe problem the next time the economy dips.