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Thursday, February 20, 2020

Leftist Group Supports Case Against Higher Taxes

Isn't it nice to see that even the left is getting worried about what taxes can do to low-income families?

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It is not often you find leftists whose work supports mine in opposition of higher taxes, but that actually happened this week. Not only that: Representative Connolly (D-Laramie) even lends her support to this leftist group and their anti-tax analysis. 

Connolly's contribution comes in a half-page article on in the Wyoming Tribune Eagle (Print Edition p.A3) on Wednesday, where the paper declares:
Across Wyoming, parents raising children struggle to pay for basic necessities like housing, food and health care. Released Tuesday, the Self-Sufficiency Standard for Wyoming 2020 report aims to measure just how much an individual needs to earn to support the most basic costs of raising a family.
The Self-Sufficiency Standard (SSS) report is a project by the leftist Center for Women's Welfare. Their goal is to "further the goal of economic justice for women and their families". The term "economic justice" has a blunt, very simple meaning: redistribution of income, consumption and wealth, which of course is the essence of the welfare state.

Despite their socialist leanings, the CWW does a respectable job of the SSS report. It is data-driven, thorough in its details and transparent (if erroneous) in its methodology. They publish the data based on which they draw their conclusions, although they do not explain where they get the raw data they compile into their database. That shortcoming is common among the left, and in the choice between publishing your own data compilation and your raw data sources, the latter is always preferable. That way, a third party can test your methodology for replicability. That said, since the CWW actually publish their own database, they rise a notch above the rest of the crowd.

A thumbs up, in other words. This publication gives us a chance, namely, to examine the impact of higher taxes on Wyoming families. It will take far too much time to do it at the detailed level that the SSS report allows for, so a full examination will have to wait. For now, let us just look at one example: the SSS report's numbers on Laramie County. 

The report estimates what it calls a "self sufficiency" wage for a large number of family constellations, in every county in Wyoming. Again, this is an impressive piece of work, with a level of detail that we rarely see elsewhere. The report is not published every year, which is understandable given the significant amount of work that would have to go into it. Yet at the end of the day, the result is not very different from that which is also put out by other leftist groups under the "living wage" banner. In other words, the original contribution is more one of method than of analysis.

If we understand the SSS report as being another "living wage" proposition, its purpose becomes clearer. The Wyoming Tribune Eagle highlights this purpose with a quote from Representative Connolly (D-Laramie): "there is not one county where a family can survive on minimum wage".

Before we move on to the impact of taxes, let us just note that this minimum-wage point is moot. There are so few Wyoming workers making minimum wage that they are not identifiable in Bureau of Labor Statistics earnings data. However, if we move beyond this, the SSS report begins to provide some interesting factoids. 

The Tribune Eagles misrepresents those facts, of course. According to them, the report concludes that a family with two small kids needs an hourly wage of $24.02 to be self sufficient. This is also the number that Representative Connolly comments on. The paper then hints - not so subtly - that you actually need to make this much to feed your family in Laramie County. 

In reality, the number that the paper took from the SSS report (actually $24.01) is for a family with one adult. With two working adults in the family, each adult only has to make $13.77 (adjusting for the addition of another household member), dramatically lessening the policy drama that this report seems to want to stir up. In 2019 the average hourly wage in the private sector in Laramie County was $21.08.* 

What the Wyoming Tribune Eagle and Representative Connolly forget to report is that the SSS database gives us a good idea of how taxes affect cost of living for Wyoming families. Sticking to the four-member family in Laramie County, their estimated annual tax burden is about $8,328 per year. Of this, $3,239 is federal income tax - after standard deductions but before child tax credits - plus the "employee" half of the Social Security taxes. The rest are in-state sourced taxes.

Suppose, now, that the legislature would follow the lead of Representative Connolly and other friends of higher taxes. Suppose they started with passing HB169, sponsored by Connolly, proposing an increase in sales and use taxes from four to five percent. Since we don't know how the SSS report compiled the spending categories in its database, we can only go by their aggregates. In other words, we can only guess about the impact of this tax hike; excluding food and other categories that are obviously not hit by sales and use taxes, the legislature would raise the cost of living for this family by $179 per year. 

Another recent fad among tax hikers is a sales tax on food. This is not a tax that I believe Representative Connolly would support; as far as I remember, she opposed it in the Revenue Committee back in 2018. Nevertheless, other tax hikers on the Revenue Committee liked the sales tax on food because it would relieve Wyoming families of lots of money that those families have lying around the house anyway, not knowing what to do with. If we add a five-percent sales tax on groceries, the SSS data suggests that our sample family in Laramie County would be stripped of another $437 per year (assuming they can't cut their food costs by buying cheaper groceries). 

We have now taken $616 away from their annual budget, and we haven't even added the three-percent gasoline tax to it. Then, of course, we have the corporate income tax. Fortunately, it is dead for this legislative session, but don't forget that tax bills in Wyoming are like Democrat voters in Arkansas: when someone needs them, they rise from their graves. If this bill came back and were enacted, its impact would rapidly trickle down into the pockets of our sample family: they would lose hours at work, forfeit pay raises, and see their cost of living go up as businesses pass some of the cost on to their consumers. 

Suppose that this $21-or-so million in corporate tax revenue (depending on who made the latest estimate) trickles down to Wyoming families. Suppose we spread it out among the 169,000 households that the SSS report uses as its statistical base. This gives us an average cost for our sample family of $124 per year, combined from lost income and increased cost of living. 

In other words, we have now raised the cost of living for this family by $740 per year. 

We should thank the Center for Women's Welfare for providing us with this nice tool to estimate how taxes would impact the cost of living for Wyoming families. There are a number of shortcomings in their SSS report; as one example, the authors do not seem to understand how the Consumer Price Index is calculated. However, it is nice to know that people on the left are also concerned about the impact of the cost of government on low-income families. Going forward, let us hope they will be more active in helping us stop new efforts to make life even more unaffordable for working moms an dads here in Wyoming.  

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*) Based on the first two quarters of 2019, the only part of that year for which the BLS has produced wage data. The hourly wage is estimated based on BLS-reported weekly wages and the 40-hour work week assumption underlying the calculations in the SSS report.

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