Archive for the ‘tax’ Category

The Attack on Colorado’s TABOR and the Threat to Other States

Posted on: January 9th, 2013 by admin No Comments

IP-1-2013 (January 2013)
Author: Robert G. Natelson and Zakary Kessler

PDF of full Issue Paper

Introduction:
A lawsuit challenging the constitutionality of Colorado’s Taxpayer’s Bill of Rights (TABOR) has dire implications that extend far beyond the boundaries of Colorado. The theory of the lawsuit can be used to void well-founded safeguards in the constitutions of almost all other states.

In Independence Issue Paper 12-2012, Professor Rob Natelson, II’s Senior Fellow in Constitutional Jurisprudence, debunked the lawsuit’s claim that TABOR violates the requirement that each state have a “republican form of government.” In this Issue Paper, Professor Natelson and Institute intern Zak Kessler demonstrate the practical implications of the lawsuit.

If the plaintiffs win, the result will be legal and practical chaos, not just in Colorado but across the country. This is because the theory of the lawsuit is that any fiscal restraints on a state legislature render that legislature less than “fully effective” and therefore “unrepublican.” Special interests can employ this theory to destroy well-founded and long-standing safeguards against legislative fiscal abuse. Furthermore, they can use the same theory to attack the voter initiative and referendum process, and other constitutional limits on the power of state politicians.

Jared Polis on U.S. Postal Service: end its “monopolistic protections and special treatment”

Posted on: December 15th, 2011 by Brian T. Schwartz No Comments

This originally appeared in the Boulder Daily Camera on December 3, 2011 in response to this question: The United States Postal Service is facing major financial constraints, and it is forecasting a record $14.1 billion loss for fiscal 2012. … What do you think the USPS should do?

Break free, USPS! Leave your over-protective and controlling parent: the U.S. government. Yes, the perks are nice. The Feds grant you monopolies on mail delivery and mailbox access. They exempt you from costs such as vehicle licensing, parking tickets, threats of antitrust suits, and taxes on sales, income, and property. The fifteen billion dollar U.S Treasury credit line is nice, too.

But Federal controls cripple you. The Feds make you deliver mail almost everywhere, six days a week, while restricting your ability to increase prices. Freedom to adjust prices and deliver on fewer days would save billions annually. Three of four Post Offices lose money. But U.S. Code prohibits closing them “solely for operating at a deficit,” and Congress must approve any layoffs.

Further, you must pre-fund your retirees’ health benefits, which your Postmaster General says is “effectively bankrupting” you. Yes, USPS retirees get health benefits! As your website says, “federal statutes hamper [your] ability to craft a market-based benefits package.” Indeed. DownsizingGovernment.org describes how your employees enjoy a “postal pay premium” between 20% and 35% compared to comparable private-sector employees.

USPS, listen to what Rep. Jared Polis, D-Boulder, wrote ten years ago. Ending “monopolistic protections and special treatment enjoyed by USPS” would “benefit … postal customers, postal employees, and businesses in the delivery sector. … Unless we unshackle USPS and allow it to leverage its infrastructure effectively as a normal privately owned company, then USPS will sadly fade away as it becomes increasingly irrelevant in the marketplace.”

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Thanks to Ari Armstrong for the Jared Polis reference.

Maintaining Boulder open space trails: user fees & sponsorships should replace taxes

Posted on: June 22nd, 2011 by admin No Comments

Opinion Editorial
June 18, 2011

by Brian Schwartz

How Boulder County finances its trail maintenance is unjust. The county sales tax forces people to finance hiking trail maintenance, whether or not they use them. Meanwhile, people who don’t shop in Boulder County can use trails without paying. The County should strive to replace tax-funded trails with user fees and sponsorships.

As a type of user fee, parking fees and annual parking passes for cars registered in other counties are a step in the right direction. The assumption is that a typical hiker coming from outside Boulder County pays less county sales tax than a trail user who resides in the county. The parking fee is an attempt to resolve this difference.

A drawback is that the fee makes some out-of-county hikers “pay twice.” Meanwhile, the sales tax still forces county residents who do not use trails to fund other people’s recreation. To resolve this, the County should both decrease taxes and extend trailhead parking fees and passes to cars registered in the county.

In addition to user fees, corporate sponsorship of trails is another way to raise revenue through voluntary means. The Continental Divide Trail Alliance does this. Since 2009, REI has contributed more than $15,000, while Home Depot, Salomon, Coleman, and Smartwool have each contributed more than $1,000. Trailhead maps and direction signs along the trail could identify sponsors: “This trail is maintained by a generous donation by …” and include the sponsor’s logo — tastefully sized of course.

A version of this article was printed in the Boulder Daily Camera on Saturday, June 18, 2011.

Why Colorado Should Shift to a Defined Contribution Retiree Health Plan

Posted on: September 28th, 2010 by admin

By Barry W. Poulson, Ph.D.

Colorado taxpayers are on the hook for more than $1 billion in unfunded liabilities incurred in the defined benefit retiree health plan administered by the Public Employee Retirement Association (PERA). An additional $79 million in unfunded liabilities was incurred in 2008, reflecting both a rapid growth in retiree benefits and losses in the assets held in the Health Care Trust Fund. Prospects are for continued volatility and deterioration in the funding status of PERA’s retiree health plan.

It’s time for the state to move from a defined benefit retiree health plan to a defined contribution plan. Here’s why.

The $1 billion in unfunded liabilities in the Health Care Trust Fund would not be such a looming fiscal crisis if there was some prospect that the liabilities could be paid off within 30 years to meet Government Accounting Standards Board (GASB) standards. But due to flawed actuarial assumptions used by PERA, the funding status in the Health Care Trust fund is actually worse than reported.

A four year smoothing technique is used to estimate the actuarial value of assets in the plan. This means that some, but not all of the decrease in the market value of assets in 2008 is reflected in the actuarial value of assets for that year. The loss in the market values of assets in more recent years is, of course, not reflected in the actuarial value of assets in 2008. These losses in the market values of assets in the plan will be reflected in the actuarial value of assets over the next four years. Thus, even with recovery in the stock market we are likely to see an increase in unfunded liabilities in the plan over the next four years.

Another flaw is to assume an 8.5 percent rate of return on assets in these plans. Because PERA assumes such an unrealistically high rate of return, they engage in a risky investment strategy, with 70 percent or more of assets in equities. The actual rate of return on assets in these plans has been zero or negative over the past decade. The best economic analysis of public sector pension and health plans, such as PERA, suggests that a more realistic rate of return on assets that is about half or less than that actually assumed by PERA.

The fatal flaw in defined benefit retiree health plans such as PERA’s is moral hazard. The reality is that politicians have promised retiree health benefits they can’t pay for. They offer public sector retirees generous health benefits as an alternative to better compensation because the cost of retiree health benefits is deferred to future generations. Public sector employee unions encourage this because it is less likely to generate taxpayer resistance than higher compensation which must be funded from current revenue.

Most private sector employers have either eliminated defined benefit retiree health plans, or replaced them with defined contribution plans. While most state and local governments have not eliminated health plans for their retirees, they have enacted a number of reforms to reduce the cost of those plans, including replacing defined benefit plans with defined contribution plans.

The Colorado Legislature should replace PERA’s retiree health plan with a defined contribution plan. In the recent Independence Institute study, “How to Save a Billion Dollars in Other Post-Employment Benefit Costs,” we estimate that in the short run this reform would reduce the employer annual required contribution to the plan from $72.6 million to $29.0 million. The annual required contribution from the state would be reduced from $24.6 million to $14.5 million, a savings of $10.1 million.

More importantly, this reform would reduce the accrued actuarial liabilities in the plan, and enable the state to pay off the $1 billion in unfunded liabilities over a 30 year period.

Dr. Barry W. Poulson is a Senior Fellow at the Independence Institute. The study referenced in this article may be found at How to Save a Billion Dollars in Other Post-Employment Benefit Costs.