...so what about the rest of us?

HB 1005 is the South Dakota income tax bill I've been waiting for. The two things I don't like about it:

1. Getting rid of the 150% rule is nuts: again, why should my taxes be affected by my neighbor's ability to get an exorbitant price for his land?
2. It only applies to ag land and not everybody's property, ag, commercial, and residential.
   

Otherwise, HB 1005 rocks. It follows the intent of my old argument in favor of replacing property tax (and any other tax we can offset) with income tax. Instead of making farmers pay taxes based on how much someone else might pay to buy the land to build a strip of McMansions or an ethanol plant or who knows what else, HB 1005 bases taxes on the productive value of the land -- in other words, on the income a farmer can make on that land.

Now the bill's authors, including primary sponsor Rep. Larry Rhoden(R-29/Union Center), go through all sorts of contortions to keep this from being a straight income tax. The productivity tax would employ a raft of experts from South Dakota State University and, if necessary, the South Dakota Agricultural Statistics Service to create a database of productivity values for all the ag land in the state. The SDSU economics department would then make recommendations each year what factors to use in calculating the productive value of the land. The productivity tax would replace the conventional assessment in 2010 (for taxes payable in 2011) and be based on the data from 2001 through 2008, with two years, the years of maximum and minimum income, thrown out. The database would then be updated each year and calculations based on the eight most recent years for which data is available.

Now this formula sounds like spreadsheet heaven to me. But with all due respect to the experts at SDSU and the legal wizzes writing this bill, wouldn't it be easier (and cheaper) to just say, "How much did you make? O.K., send us 7%."

But either way, as I've argued before, this productivity formula should be the basis for everyone's taxes. If we want to be all complicated about it, fine. Car dealers: let's have the SDSU economists add up the revenue-generating capacity of all the new and used car lots in the state, factor out the outlying data points, and tax them based on how much money they could be making selling and serving cars. Homes: figure out how much folks could make raising vegetables in their garden, telecommuting, babysitting, whatever prodcutive uses their homes could be put to, and tax them accordingly. Fancy second homes on the lake: calculate how much income could be generated from renting such places out to tourists (there's a revenue booster!)

Or, let's just keep it simple. Tax our actual income.

Property tax made sense in the old days -- the really old days, when property tax was really just the most convenient form of income tax. Almost everyone's wealth came directly from the amount of land they held and the crops or livestock they raised or other goods they produced on that land. But now most people don't create anything of tangible economic value on their own property; their land is just where they eat and sleep and have fun with their kids before heading to the plant or the office. And our taxpaying ability -- our wealth -- is much more clearly, objectively defined by a single number on a tax return or bank statement than it is by one county assessor's arbitrary guess as to how much our houses might sell for.

HB 1005 is a step toward recognizing this reality. HB 1005 is an income tax. It's not a direct income tax; it's still piled with statistical wizardry that will require several eggheads to compile and explain. But HB 1005 returns us to the principle that property tax was based on in the first place, that we should pay taxes based on what we produce.

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Robert Reich comments on the "silly" stimulus package and the failure of supply-side economics on Marketplace this morning (and hooray! American Public Media has the text online!). He notes that one part of the stimulus package, condensing corporate tax breaks for machinery purchases from the usual several-year scale to all happen this year ("accelerated depreciation") won't work (and didn't work last time it was tried in 2002) because "companies won't invest in more machines when demand is dropping for the stuff the machines make. And right now, demand is dropping for just about everything" [Robert Reich, "Don't Leave Demand out of the Equation," Marketplace Morning Report, 2008.01.30].

But wait a minute: if Americans are all getting richer, shouldn't there be more demand? Even if it's just the rich getting richer and the middle and lower class treading water, well, rich folks know how to "Buy, buy, buy!" just like anyone else, don't they?

Actually, no, says Reich:

Most of what's being earned in America is going to the richest 5 percent, but the rich devote a smaller percent of their earnings to buying things than the rest of us because, after all, they're rich -- which means they already have most of what they want. Instead, the rich invest their earnings wherever around the world they can get the highest return.

Now add all this together and there's just not enough consumer demand out there to keep the American economy going. We're finally feeling the whirlwind of widening inequality and ever more concentrated wealth [Reich, 2008.01.30].

Look at the stimulus package in terms of what Reich just said:

Suppose we are willing to borrow $146 billion from our kids just to keep today's economy humming. If we handed every penny of it in big chunks to the million richest Americans, they'd blow, say, 50% of it on buying things. (That stat is a wild guess; hard data is welcome!) The rest of the money would go into investments, much of it into foreign economies. If we handed every penny of it in little chunks to the hundred million poorest Americans, they'd spend almost all of it on stuff, just like they do with their regular incomes.

But forget the stimulus package: Reich is pointing out that if the economy is slowing down, it's happening in part due to the increasing concentration of wealth. If you're going to base your economy on consumer spending, well, you need consumers to have wealth to spend. Concentrate that wealth in the hands of a few, sandbag the many with increasing debt, and you get a situation like, oh, now.

Stimulate your political economy: comment at The Madville Times!

Yesterday's Senate State Affairs Committee vote to send SB 190, the pipeline tax, to the floor wasn't quite the small victory of South Dakota interests over Big Oil that it appeared to be. Sure, it passed 6-3 (the three opposing votes were Kundson, Dempster, and Gray, all urban Republicans). But Senators Nesselhuf and Heidepriem, my fellow Democrats, put forward an amendment to water down the bill. Now, instead of the first $30M in revenue going into a crude oil pipeline compensation fund and any revenues about that going toward a water and environment fund, the tax has been capped at $30M. Once the fund reaches $30M, the state stops collecting the tax, and TransCanada and other pipeline operators get to ship their crude oil through the state for free. The tax doesn't kick in again until something bad happens (spill, explosion, etc.) and the pipeline compensation fund is spent down below $5M.

Now $30M may still sound like a lot of money. But let's put that amount in perspective (the back of the envelope, please):

1. Oil spilled by the Exxon Valdez in 1989: 250,000 barrels.
2. Amount Exxon spent to clean up that oil: $2.5 billion
3. Cleanup cost per barrel in 1989: $10,000
4. Average increase in Consumer Price Index since 1989: 4.6%
5. Cleanup cost per barrel in today's dollars: $23,500
6. Maximum size of oil spill a $30M cleanup fund could cover ("max spill"): 1280 barrels
7. Amount of oil to flow through Keystone pipeline each day by 2010: 590,000 barrels
8. Number of Exxon Valdez oil spills Keystone pipeline will carry through SD each year: 860
   
9. Max spill as percentage of daily volume: 0.22%
10. Time it would take max spill to flow past a given point: 3.12 minutes
    
11. Possible volume spillage characterized by TransCanada consultants as "pinhole leaks" that might not be detected for up to 90 days: 1.5%
12. Oil that could spill if TransCanada responded to, excavated, and clamped off a major leak within 45 minutes: 25,000 barrels

Environmental experts and TransCanada engineers reading this blog (and SiteMeter knows you're out there) are invited to submit corrections and clarifications to these estimates. After all, cleaning up an oil spill from a tanker in the ocean is surely a very different operation from cleaning up a spill from an underground pipeline.

But as it stands, it appears our cowardly legislators are capping the one guaranteed source of funding for dealing with environmental damage from a crude oil pipeline at $30M, enough to clean up a 1280-barrel spill. That doesn't come anywhere near covering the size of spills that could take place. $30M also doesn't cover further damages -- compensation for lost agricultural production value, legal costs, and whatever other expenses folks might seek reimbursement for following a pipeline accident.

As a commenter noted here last night, the pipeline tax is a great revenue opportunity for South Dakota. Not one penny comes out of South Dakotans' pockets, and the oil companies paying it will hardly notice two cents out of each $90 per barrel. We hit our own citizens much harder with utility hook-up fees, business licenses, and local taxes when they start up businesses in state; why are we giving a foreign oil corporation an almost free pass to ship black gold through our state without making them pay for the privilege?

Let's remove the cap from the pipeline tax. TransCanada is using and endangering South Dakota's resources to make its oil profits: South Dakota has every right to claim a piece of the action.

Comment at The Madville Times!

Some bad legislation is just hard to kill. The Senate Health and Human Services Committee killed the sonogram bill last Wednesday, only to have it dragged back to life by Senator Duenwald and friends. In sillier news, the State Senate Transportation Committee killed SB 20, which would have eliminated vanity license plates just to make DMV director Deb Hillmer's job easier. But now Senator Napoli is leading another vanity license plate bill into the fray -- and, perhaps for lack of anything better to do, District 8's own Senator Dan Sutton is backing him.

Compared to SB 20, this new measure, SB 185, is at least funny. It lists specific messages to be banned from South Dakota license plates, including...

1. the number 69, "unless used in combination with the vehicle make" (sorry, Bryan Adams fans -- and you know who you are -- "SUMR 69" is right out);
2. any reference to illegal drugs or paraphrenalia (alas, no "BIGBONG" for bell makers);
3. any reference to folks who use illegal drugs (if we're counting past use, looks like "MPEACHW" might be outlawed after all, not to mention "CLINTON");
4. any reference to race, color ("BLACK"?!), ethnic heritage, sexual orientation (forget about "STR8"), disability status, or political statement, with exceptions for "generally accepted" racial or ethnic terms, like "IRISH" or "VIKINGS" (though I'm betting other sections mean "PACKERS" is out);
   
5. any reference to a government agency (perhaps my conservative friends would agree that government agencies are inherently obscene).
   

One glaring oversight: this bill takes no steps to eliminate the inevitable serendipitous occurrences of "69" in standard license plates. "43A D69" -- yikes! The state itself is issuing hundreds of such filthy license plates. Deb Hillmer and the county treasurers should be rounded up and sternly chastised, perhaps even subjected to a week-long sensitivity seminar.

This is the silliest legislation I've read yet this session. What does it take to kill a bad idea once and for all in Pierre?

Send comments, license plate ideas, and wooden stakes to The Madville Times!

The Red Tide Returns! After a month of feverish voting (actually, just 1142 votes, fewer people than bother to read the Madville Times in a week), "Pettigrew Heights" has emerged victorious as the new name for the Irving neighborhood, The Loop, Hell's Kitchen, or whatever you like to call the historic central residential district of Sioux Falls.

However, the neighborhood's new namesake, Richard F. Pettigrew, one of South Dakota's first senators and one of Vladimir Lenin's favorite authors, might not approve. "Pettigrew Heights" was not the public's first choice. Actually, the name placed third, 93 votes behind "Old Town" and "Historic Heights." The Mayor's Neighborhood Conservation Area committee overruled public sentiment and decided to recommend the third-place finisher to the City Council. (Take heart, Douglas: maybe John Edwards can get a break like that at the convention!)

Senator Pettigrew might see more subversion of the popular will by the elites here. If there is some plutocratic plotting afoot, we can all revel in the splendid irony of their undemocratic choice on behalf of the author of Triumphant Plutocracy, Pettigrew's blistering 1921 critique of government corruption, corporations, and especially lawyers (read at your own peril, Todd!) that gained him Lenin's favor.

And in this case, the elites on the committee may actually have shown more sense of style than the proletariat. According to Walker, the committee felt "Historic Heights" didn't distinguish the neighborhood from other historic parts of town, while Old Town had no unique connection to Sioux Falls. Pettigrew Heights at least memorializes a unique and significant figure in South Dakota and Sioux Falls history, something town marketers all too often fail to do in their "community branding" efforts.

Still, democracy means trusting the people and getting the government we deserve. If folks vote for a rotten governor or a rotten neighborhood brand, well, they should have to live with it. But even if "Pettigrew Heights" is yet one more sign of elites imposing their will on the masses, we can find some solace in seeing that the powers that be in Sioux Falls are willing to forgive Senator Pettigrew his political apostasy and honor his name on the map.

Now, when will the Sioux Falls Roosevelt Socialists Club start having house parties there?

Leave your comments and calls for revolution at The Madville Times!

Stop Treating TransCanada with Kid Gloves

South Dakota Republicans appear to be approaching the whole TransCanada Keystone pipeline with the wrong mindset. They're operating from their typical and flawed "elephant hunt" or "Toyota lottery" (see #2) mindset: we're just poor little South Dakota, so that big company probably don't really want to come here, so we'd better not impose any taxes or regulations or demands or even send any signals that might scare them away.

Why else would our governor have done absolutely nothing to help landowners threatened with eminent domain (and claimed he hadn't been aware he was supposed to do anything)? Why else would the Republicans on the State Senate Agriculture and Natural Resources kill SB 138, which would have required TransCanada and other pipeline companies to put up some guarantee of financial responsibility for any damage caused by a pipeline accident? (Note: Democratic Senator Tim Johnson and Representative Stephanie Herseth-Sandlin think such a requirement is perfectly reasonable.)

A quick glance north will demonstrate that we don't have to bend over backwards to accommodate TransCanada. North Dakota has been asking for some concessions from TransCanada and getting them. ND's Public Service Commission has gotten TransCanada to agree to lay thicker pipe near the Fordville aquifer and Lake Ashtabula. The City of Fargo played hardball with TransCanada and got them to add some safety features to protect the city's water sources. The ND Forest Service got TransCanada to agree to use horizontal drilling, a method that costs five times as much as regular trenching, and adjust the pipeline route to minimize its span across the Pembina Gorge area.

A few environmental regulations and resistance to eminent domain aren't going to stop TransCanada. They've got oil that's worth $90 a barrel now, twice its value five years ago, and will only increase in value as demand increases and supplies dwindle. Like any business, they want to maximize their profit, and their accountants could probably show us that it's worth the gamble for TransCanada to pay lawyers to try getting the land for cheap through eminent domain and to pay lobbyists to tell our legislators that bond requirements are an excessive financial burden. We all do that when we negotiate: we argue for the best deal we can imagine, then settle for a deal that works.

Almost nothing South Dakota can do regulatorily will make TransCanada say, "Ah, forget it, we don't really want to build this pipeline. We'll just leave this oil in the tar sands." We could bring back SB 138 and double the requirements. We can pass SB 190, which would put a two-cent-per-barrel tax on the pipeline to create an oil-spill cleanup fund, and even amend it to slap on another quarter per barrel to replace the food tax. The attorney general could step in to help the landowners fighting eminent domain. We could impose the South Dakota Resource Council's three-part proposal for regulations on TransCanada -- proper bonding, adequate annual compensation for landowners, and significant taxes on pipeline profits (as communicated to me in an e-mail from SDRC board member Charlie Johnson).

We could do all that and probably even require TransCanada VP Robert Edward Jones to walk the length of the pipeline route wearing a chicken suit, and you know what TransCanada would say? "Cluck cluck -- so can we dig now?"

We're not trying to convince a factory to bring a couple hundred jobs here instead of South Carolina or someplace warmer. We're talking about a pipeline that's going to make big money for Big Oil. They're going to make billions. TransCanada's dealings with North Dakota prove they're not on a shoestring budget, and their project isn't just one regulation or one tax away from collapse.

Quit being chicken, Republicans. Let's hold TransCanada's feet to the fire and protect South Dakota's interests.

Submit your comments -- and leads on where we can get a good chicken suit -- at The Madville Times!

Gee, pipelines can explode? Probably not what TransCanada wants us to think about as they try to convince us to make way for a South Dakota oil boom.

Hmm, that makes two explosions in a two-month span. I thought TransCanada's paid expert Heidi Tillquist said that accidents happen only once every 41 years -- oh, wait, that was one spill every 41 years....

Pipelines explode. Wind turbines don't. Neither do cornfields or wetlands.

Senate Bill 138 comes before the Senate Ag and Natural Resources Committee again tomorrow. Perhaps the senators will hear the lingering echo of that little explosion in Rapid City.

Comments, questions, but only metaphorically explosive material welcome at The Madville Times!

I continue to wait for the conservative chorus to rise in protest against President Bush's proposed "stimulus package" -- a.k.a. the government handing people checks and telling them to spend that free money as fast as they can. Surely these "stimulus package" handouts will destroy any sense of personal responsibility, not to mention"reduce incentives to work, save and invest."

These stimulus package handouts also may not actually have any effect on the recession we may or may not be in. Harvard economics professor Greg Mankiw blogs about all things economic. Yesterday, asking "What ends recessions?" he cited a study by David and Cristina Romer on economic recovery efforts. They looked at postwar recessions and what governments have done to help their economies fire up again.

Remember that governments have two main tools for tinkering with the economy: monetary policy and fiscal policy. Monetary policy is what the Federal Reserve does, adjusting interest rates to encourage (or discourage) borrowing. Lower interest rates make it easier for people to borrow more money, which means there will be more money flowing in the economy and thus (we hope) increased economic activity.

Fiscal policy is what Congress and the president do, usually either cutting taxes to leave more money in the economy or increasing spending to pump more money into the economy. For instance, Congress could vote to buy the Army more boots, which would create a lot more business and jobs for folks making leather, laces, and boots (if only most of those jobs weren't in China). Or, as the President is currently proposing, the government could just cut everyone a check for $800 and say, "Have fun at Wal-mart!"

So what works better at fighting recessions, monetary or fiscal policy? You can sift through the academic language of the Romer study if you like, but the short version: the Romers find that interest rate cuts account for "nearly all of the above average growth that occurs early in recoveries."

Mankiw cites another paper from Princeton's Alan Blinder that similarly concludes that monetary policy is a much better tool than fiscal policy for fighting recession. Blinder doesn't rule out using fiscal policy, but he would reserve that tool for "occasional abnormal circumstances... such as when recessions are extremely long and/or extremely deep, when nominal interest rates approach zero, or when significant weakness in aggregate demand arises abruptly." Mankiw questions whether the current economy, with historically mild 5% unemployment and "a consensus near-term growth forecast of about 1 percent" meets Blinder's criteria for resorting to fiscal stimulus.

Perhaps we should question these handouts as well. Is it coincidence that Republicans and Democrats alike can so quickly agree on an unbudgeted $145 billion dollar expenditure in an election year?

And you know, maybe a little recession every now and then isn't such a bad thing. After all, the mere fear of recession has oil prices dropping (below $89 this morning, an 11% drop from the start of the month). Maybe Bush should hold off on that stimulus package until gas gets back down to $2 a gallon. Tough it out until then, and people might be able to save enough money on their own to spend in other sectors without any government intervention.

But don't get me wrong: you'll find me waiting by my mailbox as eagerly as the next guy for my check from President Bush. But then I'm a raving tax-and-spend liberal who believes in government handouts. I have my excuse. Fiscal conservatives, I await your hue and cry.

Comment and offer your recipes for economic growth and fiscal responsibility at The Madville Times!

Hooray for Senator Tim Johnson, the only member of South Dakota's Congressional delegation to say flat-out that he does not support the use of eminent domain by TransCanada to obtain easements for its Keystone pipeline.

The Aberdeen American News sent six questions to Senator Johnson, Senator Thune, and Representative Herseth-Sandlin pertaining to TransCanada's proposed pipeline. Question 6: "Do you support the use of eminent domain to acquire needed easements from landowners who oppose the pipeline crossing their property?" In today's AAN ["S.D. Congressional Delegation Responses to Questions About TransCanada's Keystone Pipeline," Aberdeen American News, 2008.01.20], Senator Johnson provides this very succinct, unqualified answer:

No. I do not support the use of eminent domain to acquire easements for this project.

Landowners take note: you have at least one friend in Washington.

Unfortunately, you appear to have only that one clear friend in Washington. Here's Representative Herseth-Sandlin's rather typical gentle fence-riding:

The power of eminent domain for any project must be used sparingly. We have had experience across South Dakota with construction of regional water systems. This process has demonstrated easements can be obtained through mutual agreement rather than through condemnation and courts. I have been concerned by reports that TransCanada was overly quick to threaten legal action and force landowners to incur legal fees and have raised this issue with company officials, urging them to deal fairly with landowners.

That said, pipelines are the most efficient, safe way to transport volatile liquid fuel around the country. Our highway and rail system alone would not have the capacity to transport the amount of fuel needed to power this country, nor could it do so as safely as a pipeline. Denial of eminent domain authority on a project like this could doom all such projects to failure and impair the development of vital infrastructure.

She's concerned, but pipelines are great. No help for South Dakotans there.

Senator Thune's response was worse. His folks couldn't even take the time to respond directly to AAN's questionnaire (which surprises me: Thune's man Lauck should have been able to crank out some old-fashioned policy-debate line-by-line in no time). His statement doesn't say a word about eminent domain. He just says the project is great, since it will help free our country from Middle East oil:

At almost $100 per barrel, our dependence on oil from the Middle East is harming our national and economic security. It is important that our nation take reasonable steps to displace this oil with homegrown renewable fuel, domestically produced petroleum, and petroleum imports from our friends and neighbors in North America. From the Keystone pipeline to ethanol and biodiesel plants, South Dakota has an important role to play in freeing our country from Middle East oil.

Um, note to Thune and everyone else: Alberta's tar sands will not lower our imports from the Middle East one drop:

To many, Canada is America’s greatest hope to continue happy motoring for a while longer. They look longingly at those billions of barrels of “oil” trapped in the Alberta tar sands and assume that it will soon be flowing south in whatever amounts we desire. This is unlikely to happen for extracting “oil” from Alberta is turning the place into one of the greatest environmental disasters on earth. While production from the Alberta sands will likely continue for centuries, it will never reach the level to replace even a fraction of the 13 million barrels of imports the U.S. requires each day. It will not be long before the Canadian people start thinking about their grandchildren and exports will slow [Tom Whipple, "The Peak Oil Crisis: Issues," Falls Church (VA) News-Press, 2007.12.20].

The TransCanada pipeline won't replace Arab oil; it will only fuel our ever-increasing consumption. The Canadians will violate our property rights, tear up our farm fields, leak into our aquifers, and Osama's buddies and financiers will still be making money off America. We will still have ships in the Persian Gulf and troops on the ground in Qatar, Kuwait, and Iraq.

Perhaps Senator Johnson recognizes exactly this fallacy in the "TransCanada means no more Arab oil" thinking. The pipeline feeds greed. If we pursued energy conservation and real alternatives, we wouldn't need to sacrifice our land rights and environmental security.

Senator Johnson is the only South Dakota politician I've heard yet say anything about protecting South Dakota landowners' rights against TransCanada and any other foreign corporation that pretends just to be doing what's "Good for America, Good for South South Dakota." Kudos, Senator Johnson. Now tell your colleagues to get with the program.

Thirsty for more foreign oil, or for freedom from foreign tyrants? Either way, leave your comment at The Madville Times!

Forget Islamo-fascists or secular humanists: the biggest threat to America is cheapskates, regular Americans who don't buy enough stuff. Or so one might think from all the talk from the President and Congress about needing a stimulus package -- that's the modern translation of "bread and circuses" -- to stave off a recession. The U.S. economy grew 3.8% in the second quarter of 2007 and 4.9% in the third quarter, people bought more computers and cars and who knows what else, but apparently that's not enough. President Bush, who wasn't willing to let funding for children's health care increase any more than $5 billion, wants to pour $150 billion out of government coffers to encourage shopping.

Now Mrs. Madville Times and I certainly won't burn our $1600 rebate check from Uncle Sam in protest. But when we think about what we would do with the money, we find our priorities leaning toward some distinctly unpatriotic uses. I'd love to use the rebate to pay down our medical debt. Otherwise, it would be nice to just sock the money away and add a little cushion to our pretty lean budget.

We're not the only folks with such unpatriotic thoughts: some of the economists in the street -- actually, folks at the mall -- KELO interviews say they'd put a rebate check in the bank as well for future expenses, like a wedding or kids' college tuition.

Such anti-American thinking! If Congress and the President enact a tax rebate, they'll be expecting us to let those handouts burn holes in our pockets. Pay down your credit card debt? Knock a couple payments off your mortgage? Save the money? Blasphemy! If we don't buy more iPods and TVs and plastic junk from China, we're not helping the economy!

It seems the whole economy is based on our indulging in a constant orgy of ever increasing spending. Responsible, conservative financial behavior -- the frugality that got Grandma and Grandpa through the Depression and paid for World War II -- would ruin the nation... or at least the wealthy corporations that depend on our mindless overconsumption.

Is that why no one talks about energy conservation? Is that why Bob Ellis speaks so insultingly of the poor? If everyone tightened their belts and started putting money in the bank, the U.S. economy would collapse. Responsible -- dare I say moral -- behavior would lead to serious economic harms. That suggests something profoundly wrong in the values underpinning our economic system.

The dependence of our economy on overconsumption is a moral failing more destructive than any of the faux family values that Bill Napoli or Jim Dobson preach. This is why I'm so much more concerned about economic issues than abortion, gay marriage, or any of those popular social issues. We need to figure out how to get everyone off the treadmill of "buy, buy, buy!" and put our economy on a practically sustainable and morally defensible foundation.

Comment on the economy and everything else at The Madville Times!