Posts filed under 'Economic Opportunity'
While Pioneer has done quite a lot of work on water pricing and on wetlands regulatory reforms, given the fiscal crisis and President Obama’s call for school reform, we have set environmental issues a little to the side for the moment. Over the next few months, I’ll post a few questions on environmental issues, which any gubernatorial candidate will need to weigh.
So, basic question on smart growth. I understand the politics of targeting $50 million a year for open space protection. I also understand the shortcomings, such as goal-setting based on dollars out rather than environmental significance (i.e. agricultural value, habitat protection, or drinking water source protection). But in the term “smart growth”, there is, well, growth. Land protection is important, but if we are to block development through land purchases, what are we doing to “grow” smarter?
Answer is… not much.
Consider the lack of focus on contaminated site clean-ups and brownfields redevelopment? Mills and sites needing clean-up are often in older industrial cities, and the cost of clean-up and the liability issues make the sites unattractive to developers. The so-called “Wave 2″ regulations have come with greater controls over the use of licensed site professionals and stricter clean-up standards. And, currently, only the Mass Business Development Corporation, to my knowledge, invests in brownfield redevelopment, with a $30 million revolving trust account. (Developers can also take advantage of tax credits.) Clean-up support has averaged just over $ 4 million per year, less than 1/10th the open space protection budget.
Shouldn’t reuse (growth) be as important as protection? Think about it — reuse reduces the need for greenfield development. These properties are near commercial centers and transportation hubs — ahem, this is smart growth. They lie empty and off the local tax roles, and they reduce the value and attraction of abutting properties — bad fiscal policy.
Yep, I understand the politics of land protection for suburbanites (and, yes, more well-heeled urbanites). But there are also lots of folks living in these older, industrialized cities who would love a bit of focus on where they live.
October 7th, 2009
The piece Alan Wirzbicki did in today’s Globe has pushed comments up to a level you wouldn’t ordinarily expect given the topic. 234 at 2:15. Not bad for a story on congressional seats. Down from 16 Congressional seats in 1920 to 10 a century later.
Two Congressmen who provided quotes proved that they are clueless. Richy Neal is a nice guy but in his quote he raises navel-gazing to a new art form:
“Everybody in the delegation is particularly well positioned with their committee assignments,’’ said Representative Richard E. Neal, Democrat of Springfield, a member and subcommittee chairman on the Ways and Means Committee. “It obviously would present a challenge for the state.’’
The loss of a seat is a challenge for the state? The real challenge is what has led to the loss of seats. Just 20 years ago we had 3.2 million workers more or less. 20 years later we have at best that number and more likely less. That, even as the country’s employment base grew around 20-25 percent.
And the majority of the commenters get that. Few of them are opting for the nasty political jab at the hacks (though there are some of those, too). More of them are flabbergasted by Mike Capuano’s unbelievably cavalier and wilfully blind take on why we are losing population.
“I haven’t got any control over it, so why worry about it?’’ said Representative Michael E. Capuano, Democrat of Somerville. “I don’t think there’s anyone around who has figured out how to stop the population flow to the Southwest.’’
Try this list. For residents: cost of housing, property taxes, state taxes and fees, the cost of energy. For businesses, all of the above, plus outsized unemployment costs to employers, ever-changing fees, changing tax rules, regulatory requirements that are opaque and expensive to comply with.
What saves us is our much improved education system, great college networks, and the beauty of the place. It may not be enough to save Mr. Capuano’s seat. I’d hate to lose a seat in Congress. It just isn’t good for a state that during its history has inspired much of what has made the country great. But somehow losing Capuano after his comments seems like poetic justice.
August 14th, 2009
Kudos to the Globe editorial page and to the Boston Herald for picking up on an important lawsuit regarding Erroll Tyler’s attempt for seven years now (isn’t that long enough, folks?!) to open up a small business in the Boston area. You would think that we are rolling in dough and trying to push away the business tax revenue…
Erroll Tyler’s dream is to launch Nautical Tours, a cutting-edge amphibious vehicle tour service based in Cambridge. But, like countless cities across the country, Boston appears to be using its licensing power to protect existing businesses from honest competition by denying others their basic right to earn a living.
Last week, the Institute for Justice filed a major federal lawsuit against the City of Boston on behalf of Erroll. Check out IJ’s 3 1/2-minute video on Erroll’s fight.
We expect to help as much as we can in IJ’s campaign for “economic liberty.” Since when should urban entrepreneurs have to beg for years just to get a chance at moving up the ladder of American society?
February 23rd, 2009
Bill Shipman — chairman of CarriageOaks Partners LLC in Manchester-by-the-Sea and co-chairman of the Cato Institute Project on Social Security Choice — advanced an intriguing idea on how to “support housing prices and facilitate the market for toxic securities that ultimately are tied to housing” in a recent Investor’s Business Daily: Suspend the capital gains tax on toxic assets.
No tax on short- or long-term capital gains or other income realized upon sale of the asset through 2013 for any individual or institution that purchases either the distressed real estate or securities collateralized by the real estate. This idea will produce winners and no or few losers.
When the seller would keep all of the proceeds from the sale of a house, because none are taxed, the future value of the house is greater than if it were taxed. The present value, therefore, is also greater.
Stated differently, housing prices rise when taxes are reduced. An individual who has been thinking of investing in distressed real estate may now find the timing right. If he assumes that housing in his market would rebound within five years, he now has an incentive, at the margin, to buy.
Institutions may provide a limited-purpose collective pool, such as a mutual fund, to buy distressed real estate, and then distribute the sales proceeds tax-free within five years. This structure would allow individuals who are not real estate professionals, but who nonetheless find the present housing market now more attractive because of the tax treatment, to easily participate and profit in its rebound. Private capital would enter the market, buy distressed property, and aid in re-establishing the market for housing.
Homeowners who are able to service their mortgage, but who are considering dropping the keys off at the bank, will rethink because their negative equity will shrink. Homeowners who are unable to meet their mortgage responsibilities would also benefit in those cases where the equity flips from negative to positive.
The securities collateralized by the real estate will increase in value as well, for two reasons. The first is that the collateral is now greater, therefore the risk is less. The second is that the gain on the sale of the securities is not subject to tax, therefore increasing the after-tax return to capital. Purchasing these securities from banks, an objective of the legislation just passed, would improve their balance sheets.
Shipman notes two objections he has heard:
The first is that investors would reap a windfall due to the tax treatment. This objection is a confirmation that the idea has merit because no windfall can accrue unless private capital invests.
The second objection is that it would cost the government money in the form of the lost income and capital gains tax. This is a red herring because the private sector isn’t investing, and without investing there can be no gain to tax. From the government’s point of view, not investing, or investing with no tax, yields the same zero revenue.
Elegant solution. Thoughts?
October 20th, 2008
In Japan, Bud is hardly known. It was a flash in the pan in the late nineties but never really caught on. Stella Artois and other InBev beverages have a stronger toehold, but really only a toehold. That is especially true outside of Tokyo and Osaka. For the most part, the market is locked up by Suntory and other Japanese manufacturers. (Full disclosure: I have a special dislike for how locked up it is, as the liquor importation laws, now amended, prevented me in 1992 from expanding a small exporting business to Japan. The laws are amended, but this is still Japan.)
I am sure back home the news of the InBev buyout of Bud has lessened sales, as bar hounds realize, as Drudge put it, “This Bud is … for EU.” What I found interesting was the willingness in a down market for InBev to take on so much debt to fund the $52 billion buyout of Anheuser-Busch. Perhaps this nugget from the Wall Street Journal helped convince InBev that it was a good idea:
InBev’s willingness to take on so much debt may be partly explained by Anheuser’s corporate tax rate, which at 40% was more than twice InBev’s last year. The new company may be able to offset some of Anheuser’s taxes with interest payments on the new debt.
So, tonight, raise a pint of InBev products to your federal government.
Sounds so familiar, doesn’t it?
July 14th, 2008
I have referenced the Stephen Moore-Arthur Laffer report on Rich States, Poor States, and its overall message that tax policy does matter for people and business locational decisions. I know the question of business creation and population growth is more nuanced than that, but as I was reading Stephanie Ebbert’s piece in the Sunday Globe about the hundreds of thousands of dollars we are spending to boost our Census numbers, I wondered if we aren’t as usual on trying to manage the message rather than addressing the underlying problem.
So, a friend from Mississippi emails the Moore-Laffer report and notes that we are soon to have the political oomph of the Mockingbird and magnolia state. Check out table 1 on page 15 of the RS/PS report, which suggests that Massachusetts is among the bottom 10 in the nation in terms of cumulative domestic migration. Huh? It means that we lost 330K people over 10 years (1997-2006). Connecticut lost 110K, and at the very bottom of the list is California at -1.3 million and New York at -1.96 million.
At the top (winners) is Florida at +1.6 million, Arizona at 770K, and even colder states like Washington (+218K). Folks, can we, uh, start acting like adults and figure this out?
July 11th, 2008
Ross Kerber in today’s Globe has a playful profile of Boston University Economics professor and Pioneer Academic Advisor Larry Kotlikoff. LK is indeed “one of the country’s toughest critics of mutual fund companies and other financial firms.” Is it possible that all the gnashing of the teeth and self-flagellation about Americans’ consuming too much and saving too little is, uh, hype?
When my financial advisor friends call me (two times annually to “check in” and make sure I don’t forget that I am going to have trouble walking, to embarrass my children by spilling food all over myself and ultimately die), I have to agree with the message of “Spend ’til the End.” (Buy here!)
Kerber summarizes the argument well, noting that Kotlikoff agrees that many (around two-fifths of Americans may not save enough), but that the problem lies in his observation that:
Many people end up setting aside too much money for retirement, at the expense of enjoying their youth more.
A better strategy, he argues, would be for individuals to study their own situations – including mortgage debt, private pensions, and future Social Security payouts – so they can understand how such things will affect their standard of living, before and after retirement.
And how can you disagree with the closing line of the article where Kotlikoff urges us to “price [our] passions.”
Related question regarding savings rates… Often we hear that the US saves the least among industrialized nations. Does anyone know how borrowing for home purchases figures into those calculations? The reason I ask is that it seems to me that if we are comparing the US savings rate to that of, say, Japan or Italy, where the percentage of homebuying households is far lower, we will necessarily suffer in the comparison. S/he who knows how international comparisons of debt and savings are calculated, please speak up!
July 7th, 2008
Carddata.com notes that U.S. consumers racked up an estimated $51 billion worth of fast food on their personal credit and debit cards in 2006, compared to $33.2 billion one year earlier. That tells you how far in debt we are, right? An Amex card for a burger and fries.
But Creditcards.com notes that
- The median U.S. household income is currently $43,200 and the typical family’s credit card balance is now almost 5 percent of their annual income (Source: Federal Reserve).
– Of the households that owe money on credit cards, the median balance was $2,200 — meaning half owe more, half less (Source: MSN Money).
Doesn’t sound as bad, if you put it that way. I know that there are other forms of personal debt. But it still is not nearly as bad as the state’s debt level. If you do an all-in analysis of the debt and liabilities for state government and quasi-public agencies including pensions, benefits and the backlog of infrastructure improvements we have, it totals to above $90 billion just for the state of Massachusetts. That’s above $15,000 per person (man, woman and child). And that’s not including local commitments made to unionized employees, which has already bankrupted a number of cities across the country, and, ahem, here in the Commonwealth.
Try these numbers on for size. First we have $50 billion in total public sector debt, due to:
– Total Direct Debt of the Commonwealth $20.8 billion
– Total Quasi Public Agency Debt $29.2 billion
Add to that the $13 billion for the public pension liability, another $13 billion for the unfunded retiree healthcare liability, and a minimum of $17 billion in deferred maintenance backlog. Folks, that comes to $93 billion, and we could easily have estimated more (the deferred maintenance backlog is certain to be much more!).
July 2nd, 2008
The budget’s not done but we are officially in a new fiscal year. Happy fiscal year 2009! We have all kinds of games and rides available: rollercoaster budget negotiations for the select few on the conference committee (long ride, might last a few weeks into the new fiscal year), the house of mirrors used to keep you the citizen from understanding where the money is going, and the house of horrors where the state’s financial analysts finally force themselves to stare at the coming collapse in capital gains revenues. And, yes, there is cotton candy served on paper cones made from bond prospectuses.
Are we ready?
Across the country, we have seen unsustainable increases in general fund spending. In the Commonwealth, budgeted expenditures were almost 7% higher in 2006 than in 2005, and 2007’s were almost 10 percent higher than in 2006. So what are we to do when the economy slows?
Jennifer Steinhauer of the NY Times summarizes the challenge:
State tax revenues, adjusted for inflation and tax cuts, fell 5.3 percent in the first quarter of 2008 compared with the same time a year ago, according to a report to be released Tuesday; it was the third quarter in a row that total adjusted revenue declined. The first quarter revenues were the weakest among states since early 2003.
Sales tax revenues, the beating heart of many budgets, were essentially flat for the first time in six years. Corporate income taxes declined 5.1 percent from January to March compared with the same period the previous year — the third straight quarterly decline. And 12 states showed a falling off in personal income taxes, though revenue from those taxes rose 4.4 percent nationwide.
Steinhauer further reports that
In Nevada, where the Legislature is not officially in session, Gov. Jim Gibbons, a Republican, called last week for state agencies to cut their budgets by 4 percent on top of $914 million in previous cuts in the current two-year budget cycle — all toward closing a $275 million deficit. Layoffs are also expected.
In Rhode Island, WJAR-News10 reports that Governor Donald Carcieri used the coming fiscal crisis as a way to extract benefits reforms and to trim the state workforce.
In October [2007], the governor announced plans to eliminate about 1,200 state jobs through layoffs and attrition. In the end, Carcieri fired about 220 workers, but he used the layoff threat as a bargaining chip to force other changes.
Earlier this year, Democratic lawmakers voted to reduce retirement benefits for state workers, which created a flood of retirees. Hundreds of those positions may remain vacant since Carcieri said he must eliminate 300 to 400 more jobs to balance the budget.
In return for halting the layoffs, union leaders agreed last week to a tentative deal that would force their members to pay more for health insurance and forgo a pay raise next year. As part of the terms, unions leaders supported a bill scaling back restrictions that make it extremely difficult for Carcieri to replace state workers with nonunion private contractors. It passed last week.
Back home, one wonders if we will have enough in the Rainy Day Fund to weather the storm…
July 1st, 2008
The Milken Institute does a quadrennial review of “technology and science assets, and their ability to leverage those resources to achieve economic growth.” The 2008 report (entitled 2008 State Technology and Science Index), released in tandem with the 2008 San Diego BIO International Convention, brings good tidings for Massachusetts. We lead the nation, with Maryland, Colorado and California taking up the following three state slots.
All good news. But the press release notes a shocking finding:
Regional competition has intensified since the last release of the index in 2004. Not only are states competing against each other for human capital and resources, but countries like China and India are raising the stakes to a global level.
Uhm, joking. For data junkies, take a view of the interactive link, which provides all the measures and stats.
June 20th, 2008
Previous Posts
|
Categories
Recent Comments
Education
Healthcare
Middle Cities
Noise across the Bay State
Noise across the Nation
Stats on Government
RSS Feed
|
