When it comes to economic forecasts, I tend to be a “glass-half-full” kind of guy. Yes, there is some probability that gas will rise to $20 per gallon and we’ll start riding horses again. I think it more likely that gas prices will fall back to $3 per gallon and there will again (sadly) be a market for the Hummer.
My natural optimism was dealt a blow by a new assessment of fast-growing firms from the Small Business Adminstration (SBA). The study is an adaptation of the work of David Birch of Cognetics from the 1980s and 1990s. Firms with rapid revenue growth were dubbed “gazelles” by Birch. He found that these firms were responsible for most of the nation’s employment growth.
CGR recently recruited a staff member from out of town. After he and his wife had found a house they liked (comparable to the home they were selling), they were confronted with what is a familiar problem—the property tax bill. The house they were about to buy was going to cost them nearly 50% more in property taxes each year. Familiar story, right? Darn those folks in North Carolina and Florida and Utah for their low property taxes! How can we compete?
But my colleague was moving from Orchard Park, a Buffalo suburb, not from Raleigh or Tampa or Salt Lake City! That’s right—Erie County property taxes are lower than Monroe County’s.
It is a good time to be a farmer. Farm product prices rose 18% from 2006 to 2007. From the first quarter of 2007 to the first quarter of 2008, farm product prices went up 15% with crop prices jumping 20%.
Joseph Glauber, Chief Economist with the U.S. Department of Agriculture, testified before Congress last week on rising food prices. He recited a litany of factors influencing world food prices, including a string of poor wheat harvests in Australia, Canada and parts of the U.S., and growing demand for high quality food from rapidly-developing economies like China and India.
I did it! I got my taxes filed on time AGAIN. This may not seem so miraculous to many of you, but I’m on a 12 step program for late filers. Early each year I seek out a group of my fellows for support in my struggle: “Hi, my name’s Kent. And I’m addicted to Form 4868.” If you don’t know what Form 4868 is, well, I’m begging you, PLEASE, don’t start. You’ll tell yourself it will just be just this once, but . . .
In honor of having stayed on the wagon for another year, I figured I’d write about taxes.
Some weeks ago I received an email containing a comparison of taxes paid under Clinton v. Bush II. Sent by a good friend, I was one of many names on the list. In the message, my friend challenged someone to confirm these figures, which claimed to show deep reductions in taxes paid under George Bush, deep reductions that became proportionately smaller as income rose.
The subtext of the message was something like, “I know that Bush cut taxes. But only for the fat cats, not for regular people.”
The nation’s economy is in trouble. How bad it is and how long it will last is open to speculation. Economists’ prognostications are treated with a good bit of skepticism—and for good reason. Our track record would shame a weather forecaster in a third-tier media market. In our defense, the economy rises and falls for a combination of real and perceived reasons. And perception is often more powerful than reality. At the moment we confront a real problem of global liquidity that has been revealed in an ongoing series of disclosures, each more surprising than the last, often in obscure markets that are unexpectedly significant. Each new revelation erodes the sense that we really know what’s going on in the markets or, more to the point, what it all means or when this steady stream of bad news will end. It is this uncertainty and ignorance that feeds negative perceptions about the future, perceptions that may be right or wrong but influence behavior nonetheless.
I hate red tape. Years of contracting with government has nurtured a hearty dislike for intricate rules imposed by tinpot dictators in legislatures and administrative offices. Here at CGR we recently executed a contract with New York City that was the size of Rochester’s White Pages (not Manhattan’s, thank goodness). The number of schedules, promises, clauses and conditions we had to complete was a project in itself. Not that I’m one to condone the harvesting of tropical hardwoods. And I’m as big a fan of peace in Northern Ireland as the next guy. We had to address both issues in the contract. But is all this really necessary?
That’s why it feels rather odd to be urging more red tape for local development corporations (LDCs). But that’s what is needed.
Governor Spitzer has a big task ahead of him: He’s campaigned on the idea that the state can do something for the Upstate economy. We elect governors whom we believe can fix things, right?
So it was with great interest that many of us read the study by consultancy A.T. Kearney aimed at developing an agenda for the state’s economic development arm, Empire State Development. No, this wasn’t presented as state policy, but we all assume that Kearney would be shrewd enough not to issue a report that was seriously at odds with administration thinking.
The Kearney study made a number of good points. But I was disappointed to see them fall into the familiar trap of focusing much of their attention on “sexy” sectors, groups of firms based on technologies that hardly existed a generation before, sectors that every state and nation is chasing like a Labrador after a ball: “New York’s best hope for the future is to focus both statewide and regional investments on emerging sectors—especially nanotechnology, bioscience and cleantech.”
An article published in the current issue of Health Affairs reports on pricing for self-pay patients, one of the only parts of the health care business that is largely “unregulated.” The author, Gerald Anderson, reports that people who pay their own hospital bills get charged more for care than those whose bills are paid by insurance companies or have Medicare or Medicaid coverage.
That’s not a surprise, of course. We’re accustomed to bulk discounts and buying clubs—the “membership has its privileges” sort of thing. Yet the magnitude of the difference should capture your attention: on average, patients without public or private insurance pay three times the Medicare-allowable cost. Anderson doesn’t report the average for New York but in New Jersey self-pay patients are charged a whopping 4.56 times the Medicare-allowable cost. Pennsylvania is right behind with a charge-to-cost ratio of 4.33. California, Alabama and Nevada round out the rest of the top five. At the other end of the scale Wyoming and Maryland hospitals charge self-pay patients 1.85 times and 1.23 times the Medicare-allowable cost. Note: Let me suggest that “cost” is in the eye of the beholder (or, at least, the beholder’s accountant). I don’t claim here that the Medicare number is the right way to define cost—hospitals don’t think so—but I do want to call attention to the discrepancy.
The article isn’t describing a new problem, but it is getting worse. In 1984 the average ratio was 1.35.
Last fall I wrote two columns on the mechanics of the state’s property tax system—how assessments are established, why we have this process of “equalization,” and how uneven is the administration of the system. Boring stuff, no? Worse, I can’t claim that fixing the problem would actually cut property taxes, just shift the burden around. Oh, a perfect reform would cut back the amount of money spent by the state on the equalization process, but better administration would probably cost more in the beginning (think “deferred maintenance”) and not save any in the long run.
Is there a constituency out there for fairness and transparency? Probably not, but Assemblywoman Sandy Galef (from Westchester, the epicenter of bad property tax administration) is trying. She chairs the NYS Assembly Committee on Real Property Taxation and has sponsored or co-sponsored a number of bills aimed at fixing the mess.
I’m not in the “tax as theft” school. How else can we come together to fund public schools, get our streets fixed and plowed, and finance support for the needy? Sure, some of that could happen without coercion, but I’m not one to campaign for a radical shrinkage of the public sector. Taxes are a necessary evil.
If you are still with me, then the question turns on how to tax and what to tax. Odd as it sounds, I write today in defense of the poor, embattled property tax. In recent forums sponsored by CGR’s New York Matters campaign on Long Island and in Rochester, several participants spoke in favor of shifting from the property tax to the income tax, particularly for the support of public education. The sales tax, too, is clearly preferred by voters to an increase in the hated property tax. Elected officials have certainly gotten this message—counties across the state choose an increase in the sales tax over a property tax hike when money is tight.
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When it comes to economic forecasts, I tend to be a “glass-half-full” kind of guy. Yes, there is some probability that gas will rise to $20 per gallon and we’ll start riding horses again. I think it more likely that gas prices will fall back to $3 per gallon and there will again (sadly) be a market for the Hummer.