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Archive of posts published in the category: Taxes

I Thought UTOPIA was bad, but I was wrong.

I was just reading the latest newsletter from the Utah Taxpayers Association. I thought UTOPIA was bad. Now I’m sure it’s horrible.

I was under the impression that Orem City’s UTOPIA debt was $50 million, which is more than $50 per person. The newsletter points out the debt is $77 million, or closer to $800 for every woman, man and child in the city.

I also assumed that this debt would be paid off with the mandatory fees of $20 per household and $40 per business (adjusted for inflation). Not true. According to the June 2014 Utah Taxpayer Association newsletter, these fees would only go to pay for the costs going forward. Only if there is a substantial upsell in premium services would there be a chance that money would be available to pay off the existing debt.

It’s hard to believe anyone could continue to support something so poorly planned and mismanaged.

A Public-Private Partnership in Orem

A utopia is a community or society with near perfect qualities. In Utah, UTOPIA, which stands for Utah Telecommunication Open Infrastructure Agency, is a clearly imperfect Internet connection agency. The original idea was for UTOPIA to run fiber to every home and business and then let Internet providers compete for customers attached to the fiber. The cities which partnered with UTOPIA would put up the money and then make the money back through fees from the Internet providers.

In my city of Orem, Utah, we went $50 million in debt (that’s more than $500 for every man, woman, and child in the city) to build the fiber network. Unfortunately for us, the money is spent and the fiber reaches only one-third of the residents. The fees from those lucky enough to use the Internet service are not enough to cover the interest on the debt and continue the build out. We are in a very fine mess, a deep, deep debt hole.

You might think the city is ready to give up and get out of the Internet business, but, no. The city is proposing a Public-Private Partnership. Our city government would partner with a private company to provide every residence and every business a fiber-based 3 Mbps Internet connection. 3 Mbps is a rather slow connection, a DSL-like speed. Faster speeds would be available for an additional charge.

What is the catch? How will we finish the build out? Our city government will force every residence owner to pay $18-20 dollars per month (adjusted annually for inflation) for up to 30 years. Businesses will also pay $36-40 per month (adjusted for inflation) for up to 30 years. Even if someone doesn’t want the service, and even if someone never uses the service, he or she will still be obligated to pay the monthly fee for up to 30 years. It’s not like electricity or gas, where you can stop paying and lose the service. It’s like the water, sewer, and garbage services you must pay every month your house is occupied.

Utah is one of the most conservative states. Orem is probably one of the most conservative cities in Utah. I have to wonder how our city government could have decided to get into the Internet networking business. As much as we all like to think we believe in a government with limits, we still manage to venture into areas better served by private, competing companies. We manage to prove over and over again that governments do not run businesses well.

It is hard to be nice.

I try to be nice, but being nice is getting to be harder and harder.

If I disagree with liberal or progressing thinking, I am branded as disagreeable. If I disagree with President Obama, I am a racist for not giving him a chance. If I watch Fox News, I am a bigot. If I listen to Glenn Beck, I must be endorsing all hate speech. If I do not support same-sex marriage, I must hate all gay people. If I am against raising taxes, I am a tea-bagging, hate-filled, non-charitable excuse for a human being. If I am against killing babies about to be born, I hate all women. If I am against the new health care laws, then I support every conservative crack-pot who says or does the wrong thing. If I believe President Obama is a Socialist, I must be too angry, too partisan, too vocal, and too disrespectful of the Office of the President. If I do not support cap and tax legislation, I must want to ruin the earth and all the animals and people who live upon it. If I don’t support generous pensions to teachers, then I hate all children. If I want lower taxes and a balanced budget, then I must be a heartless, unfeeling, hateful rich guy who wants the rich to get richer and the poor to get poorer.

Only if I say what is politically correct and support social justice for all can I be redeemed from my un-nice, unenlightened state. Only if I make my money with a green job, drive a GM hybrid car, shower in a trickle of water, give all my money to the government, rid myself of all fur and leather, stop using plastic bags, and never wash my driveway with water from a hose, may I call myself a good-hearted, kind, non-hateful person. Only if I rid myself of every non-liberal opinion may I call myself nice.

Am I ever allowed to disagree in a nice, non-disagreeable way? I guess I better keep that answer to myself. Pete

This Doesn’t End Well

I was helping one of my kids with a tax return and noticed an amazing refund. The husband and wife had approximately $1,500 withheld from their paychecks for federal income tax. Back when I was their age, getting back half of that amount would have been great. Getting the full amount back would have been incredible. So, how big was their “refund” this year? Would you believe $4,500?

As you might guess, they are not complaining, but I was shocked. Days later I am still in shock. The additional money came from tax credits (credits, not deductions) for having a child, for having jobs (making work pay), and for paying college tuition.

While I agree these are worthy, deserving, well-intentioned credits, I couldn’t help but think about where the government gets the money to be so generous. A quick calculation would suggest that $1,500 came from my kids’ withholding, $2,000 from the 50% of us who pay income tax, and $1,000 from China and others who have enough bad financial sense to loan money to the USA.

How can our government afford to be so generous when it has to borrow $2 for every $5 it spends? The standard answer to our debt is to say we will raise taxes on the rich. Unfortunately, raising taxes does not increase revenues.

An article entitled “Maryland’s Mobile Millionaires” appeared in the March 12, 2010 issue of the Wall Street Journal. The article explained how a tax increase on millionaires designed to increase tax collections had actually lowered the monies collected. For 2008, the year the tax increase was enacted, the number of millionaires in Maryland fell sharply to 5,529 from 7,898. So even though the tax rate went from 4.75% to 6.25%, revenues from millionaires fell by $257 million. Part of the decrease likely came because of the recession, but part of the decrease was due to rich people moving to states with lower tax burdens. Of the millionaires who filed Maryland tax returns in 2007, one in eight did not file a return in 2008.

This is just one example of how raising taxes on the very rich does not increase revenues. As taxes go up, a few rich people will move to another country, but most will make changes to their investment strategies. They just lower their income by moving more of their money to tax-free or tax-deferred investments. Then they wait for the government to learn again that higher tax rates produce lower revenues.

This doesn’t end well. The government will borrow more money in the short term and print more money in the long term. Taxes will go up for everyone. Eventually our lenders will quit lending. Our currency will be significantly devalued. Government services and entitlements will be cut. The pain will be enormous. We will learn again that good intentions may pave a road we do not want to travel. Pete