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August 25, 2022 In In The News

The Accountability Myth: Remarks on the Report

In mid-2021, a national education organization, EdChoice, published a report about the lack of accountability for traditional public schools. EdChoice National Research Director Michael McShane, Ph.D., argues that traditional public schools are unaccountable in three major ways: financially, democratically, and academically. Alaskans will find McShane’s observations familiar and should take them into account when managing and reforming education in the Last Frontier:

“Traditional public schools are not financially accountable to taxpayers… When it comes to ‘financial accountability,’ public schools have been disastrously opaque, failing to disclose how dollars are actually spent and whether they are used to educate students. Opacity is a great tool for schools and districts: If no one can see where the money goes, it’s easy to convince the community that there just isn’t enough money.”
“Traditional public schools are not democratically accountable to citizens… ‘Democratic accountability’ relies on school board elections, which are problematic. School board elections are held off-cycle to drive down turnout. Bond elections use unclear language to muddy what they are actually asking of taxpayers. And the wishes of organized interests routinely supersede those of the body politic.”
“Traditional public schools are not academically accountable to students, parents, or anyone else for that matter… In practice, ‘academic accountability’ in K–12 education means schools are required to jump through the hoops set up by state and federal bureaucrats that are loosely related to demonstrating that students have actually learned anything. They are required to fill out paperwork and track down metrics and send them to the appropriate person at the appropriate office by the appropriate date, but ultimately not much happens after that.”

Traditional public schools are not financially accountable to taxpayers.

Answering the central financial question of education is quite complicated: How much money does your local public school spend educating the children in its charge? Firstly, Alaska’s funding formula is not a straightforward equation. Secondly, what counts as per student spending is not consistent. As McShane writes:

Are we just talking about “current” spending, the operating expenses that a school pays every year? Do we include capital costs and debt service? How do we think about long-term obligations like contributions to teacher pensions? How do we depreciate assets like school buses? Do we do it over five years like some states do or 20 years like others? Different sources include different combinations of expenses when identifying how much a school spends.

According to the U.S. Census Bureau, Alaska spent an average of $18,394 per student as of 2019. That number includes salaries and benefits for teachers, school administration costs, transportation, child food services, capital costs, debt payments, and pupil support costs. Another resource, however, Georgetown University and McCourt School of Public Policy’s Edunomics Lab, compiles data reported by each district directly to the state of Alaska and shows the average cost per pupil in 2019 as $20,907. Both sources use expenditure data from the districts, but they have quite different numbers.

Moving on from these discrepancies, how much of the money spent is directly benefitting the students? Alaskans can find further breakdowns of per-student expenditures at the school level on the Department of Education and Early Development’s (DEED) Report Card to the Public or on Project Nickel. The problem, as EdChoice explains, is that:

…schools, districts, and states [including Alaska] are incentivized to classify their funding in ways that avoid public scrutiny. By shunting expenses into spending categories that don’t “count” towards per pupil expenditure calculations, they are able to artificially diminish the spending figures that are reported to the public. When that happens, school board members and, more importantly, voters do not get the full picture when evaluating how the school is performing. If you think a school is spending 75 or 80 percent of what it is actually spending, you might be more impressed with its performance than if you had the full picture.

Lastly, districts across the state have received millions of dollars in federal funding from the three coronavirus relief bills. As reports from APF have pointed out, thousands of dollars per student have been and are being used to purchase things and hire people, and currently districts are not showing whether any return has been realized on this investment. Some expenditures have not even been related to the pandemic. Worse, McShane worries that these monies may “become part of the baseline of school spending, showing massive ‘cuts’ when the money runs out.”

“We cannot hold schools accountable for their spending,” he writes, “if we don’t know what they spend. And we don’t know what they spend.”

Traditional public schools are not democratically accountable to citizens.

The EdChoice report explains this point clearly:

If trying to answer the question “how much does my local school spend” was too tough, how about a couple of easier ones. Can you name the President of the United States? How about your governor? The mayor of your town? OK, now for the hard one, can you name anyone on your local school board?

Local school boards are, according to the mythology that has grown up around them, small-d democratic institutions that answer to the community and ensure that schools reflect the values and protect the interests of the local body politic. Whereas some reformers have wanted to hold schools “accountable” based on things like test scores or other metrics, school boards are supposed to hold schools accountable the good old-fashioned way, through elections. If schools are not doing what citizens want, they elect a new school board. That school board then oversees the schools, stewarding local tax dollars, hiring and firing key staff, drafting policies, adopting curricula, and approving schedules and calendars.

If you cannot name anyone on your local school board, you are not alone. And that fact — that most people don’t know who is on the school board, what the school board does, or even when to vote for school board members — is the best evidence that traditional public schools are not accountable to citizens.

School boards are opaque institutions because people do not show up to vote in school board elections. They are often held “off-cycle,” that is, on a different date than elections traditionally take place. While almost everyone knows that Election Day is a Tuesday in early November, school board elections are… held… at random times throughout the year. While the President, congresspeople, city councilors, and all the other elected officials in a state or city are elected on the same day, school board members frequently are not.

For example, the school board in Anchorage runs the largest school district in the state and controls a budget of over $570 million. The board is made up of seven members, who each serve rotating three-year terms and represent the entire Anchorage voter base. Municipal representatives, on the other hand, represent districts within the city. At least two of the seven seats are up for election every year. In 2022, two seats were up for general election on April 5. In 2021, four seats were up for general election on April 6. Noticeably, the elections were not held on Election Day in November, when the most people vote.

By moving elections off-cycle, civic leaders have given power over to special interest groups such as local teachers’ unions because, rest assured, those groups ensure their members know when the off-cycle elections are happening. Writes McShane:

When turnout in elections is low, organized interest groups have a huge leg up. By simply getting their members out to vote, they have already secured a large bloc in the electorate. They only need to organize a few more people and they have enough to win the election. Once they have won, they have functionally elected their own bosses. The school board will be the ones who negotiate the teachers’ contract and set their salaries. They will hire the superintendent who is supposed to be the teachers’ manager. They will sit on both sides of the negotiating table.

…Organized interest groups have outsized power in the decision-making processes of school districts. Teacher and administrator unions are able to call the shots to a degree that average citizens simply are not. As a result, simple, commonsense reforms that very few people outside of those interest groups disagree with do not happen, and schools are not democratically accountable to the citizenry.”

Traditional public schools are not academically accountable to students, parents, or anyone else for that matter.

The last hope for accountability, when taxpayers and voters have no ability to impose it, falls to the direct consumers of school services: students and parents. Yet, here McShane’s observations once again present a discouraging picture:

What happens to a public school that receives consistently low standardized test scores? Does it lose funding? Does it get shut down? …While states have created elaborate ‘accountability’ systems for schools, and at times even for teachers, very few schools in practice ever actually receive any substantive penalties for low performance. School funding is not tied to test scores. Schools can underperform for decades and suffer functionally zero consequences….

Let’s walk through what a typical state accountability system looks like. The best source for how a state’s accountability system works is the documentation it sends to the federal government to comply with Every Student Succeeds Act (ESSA). That piece of federal legislation requires states to administer school and district accountability systems but gives substantial flexibility in how states do so. States do, however, have to submit their accountability plan to the federal Department of Education for approval and must, at least in theory, create school performance report cards.

Alaska’s plan includes the establishment of long-term goals for students and details how Alaska identifies low-performing schools and intervenes when necessary. The Alaska DEED identifies low-performing schools using five indicators, and schools receive points from zero to 100 for each:

The Academic Achievement. This score is equal to the percentage of students scoring at the proficient or advanced achievement levels on the statewide assessments in English language arts (ELA) and mathematics.
Academic Growth. For grades 4 through 9, progress toward proficiency in ELA and mathematics is considered, although DEED has administered three different statewide assessments between 2016 and 2022, which makes it difficult to compare growth over years.
Graduation Rate. For high schools, the graduation rate is included.
English Learner Progress. For all schools, the percentage of English language learners who either are deemed proficient in English or meet growth targets toward proficiency is calculated using complicated DEED formulas.
General School Quality or Student Success. This indicator is calculated using schools’ chronic absenteeism and grade 3 ELA proficiency.

Each of the subgroup scores is calculated based on formulae enumerated in the document and then rolled up into a single score for each school and district. For elementary schools, academic achievement in ELA and mathematics are both worth 15% of the total score; academic growth for both subjects is worth 20%; English-learner progress is worth 15%; the absenteeism score is worth 10%; and the grade 3 ELA proficiency sub-score is worth 5%.

The calculation is even more complicated for schools that serve seventh grade and up. For schools that do not have a 12^th grade: academic achievement in ELA and mathematics are both worth 15% of the total score; academic growth for both subjects is 20%; the four-year graduation rate is 15%; the five-year graduation rate is 5%; English-learner progress is 10%; and the absenteeism score is worth 10%. For schools that do serve 12^th graders: academic achievement in ELA and mathematics are both worth 30% of the total score; academic growth is not calculated; the four-year graduation rate is 15%; the five-year graduation rate is 5%; English-learner progress is 10%; and the absenteeism score is worth 10%.

Those scores are then weighted further and combined if a school serves K–12.

Even Alaskans’ whose heads don’t hurt by the strange and complicated rules probably have little idea what the final scores truly mean. The accountability seems just as meaningless: The state pledges to intervene in the schools with the lowest scores for at least three years and with high schools that have four-year adjusted graduation rates below 66.66%. According to DEED’s plan, such schools “are held accountable to a rigorous improvement process, supported by district and State resources and support, with reporting of results to stakeholders.” What does any of this mean in terms of action and outcome?

If after three years — really six years, including the three that pass before qualifying for intervention — schools do not improve their performance, the state can step in more forcefully, providing evaluations and performing resource allocation audits, as well as helping to write new strategic plans, assigning School Improvement Coaches, providing training or technical assistance, replacing teachers and principals, or taking over governance of the schools or entire districts. Why the state government that developed the system would be any more competent to implement the practice is another question.

EdChoice gives reason to fear that the state’s solution may simply be to change the rules, because the metrics provided by DEED are arbitrary. In fact, “those designing and implementing the system will always be able to change the weights or metrics to shape the outcome if they don’t like what they see. If too many schools are identified as low-performing, they can give more weight to the easier categories.”

Such cheating may actually be preferable to alternatives, which McShane calls “jiggery pokery.” He writes, “[W]eighting high school graduation rates, which might be the single easiest metric to game in all of education, so high for high school scores pushes schools to hand out caps and gowns and push kids across the stage. Allowing the use of measurements like ‘growth to proficiency’ allows schools to look like they are demonstrating student growth” without truly demonstrating schools’ impact. “In all of these cases, schools and districts are gaming the metrics… preventing them from actually being held accountable.”

In practice, “academic accountability” in K–12 education means schools are required to jump through the hoops set up by state and federal bureaucrats that are loosely related to demonstrating that students have actually learned anything. They are required to fill out paperwork and track down metrics and send them to the appropriate person at the appropriate office by the appropriate date, but ultimately not much happens after that.

Solution

After articulating his three arguments, McShane writes:

So organized interest groups elect their bosses who water down any measurement of their work and pocket the money that people don’t realize they are spending… This all matters to the broader conversation about what families and communities get out of the K–12 system in which they are investing. A purported lack of accountability is a common reason cited to oppose school choice programs. While the typical (and… correct) response is to argue that schools of choice are held accountable by parents, it is also important to challenge the premise that public schools are actually accountable. …

Perhaps a different regime is in order. By empowering families to choose where their children attend school, we could deputize millions of parents as school accountability officers.

By allowing more families to choose the schools that their children attend, Alaska could ensure democratic accountability, academic accountability, and financial accountability in its education system. Schools would be more democratically accountable because institutions that serve families would grow and those that don’t would not. Schools would be more academically accountable because parents could see what and how their children are learning and select schools that, in McShane’s words, “provide a quality education (defined by what characteristics and metrics they feel are most important) and leav[e] schools that aren’t.”

Finally, allowing families to choose the schools that best fit the needs of their children would hold educational institutions more financially accountable via “programs that put student school funding into flexible-use spending accounts that families control and can spend across a host of academic providers. Unlike traditional public schools,” writes McShane, “they have strong incentives to care about cost, as the more cost conscious they are, the more they can purchase with their… funding. They can make the tradeoffs between cost and quality with better information and a stronger motivation than someone not intimately involved in the decision making.” Alaska has already taken steps in this direction, but the state’s efforts could be stronger and more deliberate.

More specifically, Alaska should support alternative educational models and allow funding to follow the students, not the schools. For some families, a traditional public school will still be the best fit, and that’s great! But for many families, traditional public schools are not able to meet the educational needs of their children. At the end of the day, Alaska should be supporting quality education for all our children, not administrators’ and union bosses’ bank

August 22, 2022 In In The News

K-12 Education Spending Spotlight: An in-depth look at school finance data and trends

From: Reason Foundation

Introduction

Reason Foundation’s 2022 K-12 Education Spending Spotlight includes both real and nominal U.S. Census Bureau data for all 50 states dating back to 2002, which is the starting point for continuous state-level summary figures.

Reporting from the 2020 fiscal year is the most recent school finance data available at this time. Reason Foundation’s K-12 Education Spending Spotlight data analysis and dashboard with 2019 data can be found here.

2020 Data Highlights

Inflation-adjusted per-pupil education revenue increased in 49 of 50 states between 2002 and 2020.
While spending went up, 22 states plus the District of Columbia saw declines in student enrollment during this time.
Between 2002 and 2020 total education spending on employee benefits (such as pensions and healthcare) in the U.S. nearly doubled from $90 billion to $164 billion a year.
Overall inflation-adjusted spending on salaries grew much less – from $342 billion to $372 billion – in this time period.
Per-pupil education spending on total benefits increased by an average of $1,499 while per-pupil spending on total salaries increased by $492 between 2002 and 2020.
All 50 states saw real per-pupil spending increases on total benefits between 2002 and 2020. During that time, 14 states saw benefit spending grow by over 100% and two states saw growth of 200% or more.
In 2020, total education system long-term debt surpassed $500 billion, reaching a total of $505 billion in the U.S. Between 2002 and 2020 long-term debt grew by $188 billion or $3,798 per student.

K-12 Education Revenue Growth

Nationwide, inflation-adjusted per-pupil K-12 revenues grew by 25%—or by $3,211 per student—between 2002 and 2020. During this time, per-pupil revenues increased in all but one state (North Carolina). Sixteen states, plus D.C., increased their education funding by 30% or more during this time period. In the most recent year, education spending grew by $8 billion across the United States, for an average increase of $169 per-pupil from the 2018-2019 school year to the 2019-2020 school year.

Read more here and explore various data and national education spending trends using the drop-down and slider in the interactive map.

August 19, 2022 In Blog

Increased Tax-Free Benefits for Military Retired: Too Little, Too Late?

From: Kathleen Rutherford, Executive Director, A Better Delaware

On July 21, 2022, Governor Carney signed SB 188-1 into law before a roomful of National Guard who will not benefit from it.

Amending Delaware Code, Title 30 will exclude an additional $10.5K of military pensions from taxable income. Lawmakers in Dover say it’s “an incentive for military retirees under age 60 to locate in Delaware,” ignoring three dozen other states where military pensions are 100% tax-free.

Many others, like Virginia, are working to phase in tax exemptions in progressive $10K increments to a maximum of $40K in 2025.

In 2004, when advocates first began beating the 100%-military-pension-exemption-drum, about 20 States were income tax-free. SB 95 was born in 2005, SB 48 followed two years later. Both ended up in desk drawers.

Senator Mantzavinos introduced SB 188 (originally 100% tax-free) in January 2022 when there were 26 tax-free states. While Delaware struggled to whittle SB 188 down to an amended $10.5K benefit immediately upon retirement, two more States came on line. On the day SB 188-1 became law, Delaware trailed 75% of America.

Furthermore, the bill excludes National Guard even though the Reserve Component (RC) was in previous versions. One “grey zone retiree” –an RC member with “20 good years,” vested for retirement but not yet 60, the age at which they draw their pension–told me he will leave Delaware so he can keep all his military pension.

Delaware’s new law is unlikely to entice anyone unless they were already coming for other reasons. Our Governor points to our excellent retiree tax benefits. Kiplinger Newsletter agrees: Delaware is the most tax-friendly place to retire.

And that is precisely the problem! With so many retirees flocking to Delaware, who will provide goods and services to this aging population? Veterans and Military Retirees (MR) provide a solution since they tend to be community-minded, physically fit, and with solid work ethics in skill sets employers seek.

Delaware ranks 15% in the nation based on the percentage of veterans (in 2019, 66,896 of them –8.8%– were veterans.) But working-age veterans only make up 18% of that total (12,053 are Gulf War II era vets). The same is true for our 9,000 MR; less than 2,000 are of “working age.”

Veteran v. Retiree. According to USC Title 38, a veteran is anyone who served on active duty for as little as 180 days and was not dishonorably discharged. The majority of veterans (81%) never reach retirement, either by their own choice or the military’s up or out system. While 85% of veterans receive Honorable discharges, a veteran may be homeless or have been terminated for medical problems or needs of the service. On the other hand, MR stood the test of time, proven worthy in the knowledge of the job, of dedication to duty, and leadership.

Civilian v Military Retirees: Whereas retired civilians cease working, the MR is just beginning a new career. The average MR is a 38-year-old sergeant with a working spouse and college-aged kids. Officers might be 52 because they entered after college. Enlisted or officers, most MR are college educated. Eighty percent of the force are enlisted, so 80% of retirees are enlisted. The average enlisted military pension is < $35K per year, <$46K for officers.

Unlike civilians, MR earns more in their second careers than the amount of their military pension. Hence, a tax-free MR pension is a “loss leader” to attract highly skilled talent to Delaware, whose civilian income (and that of their spouse) remains 100% taxable.

Military skills are needed. Most MR excel in highly technical jobs that are in demand. Any job you can think of, there is a military MOS equivalent. But we cannot attract these skills because Delaware ranks middling to worst as a place for RM.

Kiplinger Newsletter ranks Delaware as worst in “The Ten Least Tax-Friendly States for Military Retirees”. According to Kiplinger, our $12,500 tax-free pensions “is smaller than similar exemptions available in other states that do not fully exclude military pension.” Our new bill does not change this fact. It only makes it available sooner.

Delaware fares better in WalletHub, ranking 26^th because WalletHub included non-financial comparisons, one of which is Delaware’s low homeless vet population. This factor may apply to veterans but rarely to MR.

Too little, too late. Delaware needs 100% tax relief on military pensions now, not just an additional $10.5 tax-free advantage for those under 60.

August 18, 2022 In In The News

“Inflation Reduction Act”: Tax Burden to Fall Heaviest on the Poor

From: John Locke Foundation

A newly-released analysis from the bipartisan Joint Committee on Taxation (JCT) shows that the negative impacts of the tax hikes in the “Inflation Reduction Act” would fall hardest on low-income households.

My colleague Paige Terryberry earlier this week exposed how the bill would actually increase inflation, a burden that falls hardest on low-income households.

Adding onto this burden, the JCT analysis estimates that the tax burden would fall disproportionately on the poorest households. Specifically, households with less than $10,000 in income would see their tax burden rise by 3.1%, compared to just 0.4% for those earning above $200,000 in the bill’s first year. Estimates of future burdens yield similar results, with the lowest income households seeing the largest percentage increase in tax burden.

Indeed, taxpayers of all levels would see an increase in their burdens under this bill.

The JCT report most likely attempts to estimate the tax incidence of the bill’s provisions, rather than just a static look at who the new taxes are directly levied on.

The tax incidence evaluates who bears the actual burden of a tax. For instance, the corporate tax increase’s burden will fall on workers in the form of suppressed wages and lost jobs. The tax on crude oil will be passed along to customers in higher gas prices.

At a time when the low income communities are being mercilessly hammered by inflation, the so-called Inflation Reduction Act would both make inflation worse and increase the tax burden borne by those who can least afford it.

August 18, 2022 In In The News

Rhode Island governor signs legislation benefiting military veterans

From: The Center Square

Through signing a package of veteran-focused legislation Thursday, Rhode Island will no longer tax military pensions, Gov. Dan McKee said.

The Democratic governor announced he has signed legislation designed to support and benefit veterans through a series of budget initiatives.

“As I travel the state, talking with veterans, active duty, guard and reservists, and military families is always a highpoint,” McKee said in the release. “Veterans want to continue to make the Ocean State their home and remain a part of the communities and places that matter to them. Now, when military retirees look at where they want to move after service, Rhode Island will be at the top of that list.”

According to the release, the U.S. Department of Veterans Affairs reports there are 5,252 military retirees making their permanent home in Rhode Island, and 4,845 were paid by the U.S. Department of Defense.

“Ending taxation of military service pensions is not only the right thing to in recognition of the many Rhode Islanders who fought courageously for our freedom, but it’s also an investment in our state’s workforce,” Office of Veterans Services Director Kasim Yarn said in the release. “This change will allow us to retain top-tier talent which can drive Rhode Island’s economy forward. Military retirees bring a wealth of knowledge and backgrounds, benefitting Rhode Island in innumerable ways.”

According to the release, the taxation on military service pension will end with tax year 2023, and is a result of House Bill 7338, sponsored by Rep. Camille F.J. Vella-Wilkinson, D-Warwick, and Senate Bill 2268A, sponsored by Sen. Walter S. Felag, D-Bristol.

House Bill 7714A, sponsored by Rep. Samuel A. Azzinaro, D-Westerly, and Senate Bill 2425A, sponsored by Sen. Roger A. Picard, D-Woonsocket, will make “stolen valor” a crime in Rhode Island, according to the release.

The law, according to the release, makes it illegal to “fraudulently represent oneself as an active or veteran member of the miliary” to obtain money, property, or other benefits.

August 17, 2022 In In The News

Reminder that Corporate Taxes Are the Most Economically Damaging Way to Raise Revenue

From: Tax Institute

In the rush to pass the Inflation Reduction Act, which features an ill-conceived tax on the book income of U.S. corporations, it is worth reminding policymakers of a well-established finding in the economic literature: that among all the major ways to raise revenue, increasing the corporate tax is the most economically destructive due to its impact on incentives to invest.

Economists have found in more than two dozen published studies that corporate taxes harm economic growth. An OECD study examining data from 63 countries concluded that corporate income taxes are the most economically damaging way to raise revenue, followed by individual income taxes, consumption taxes, and property taxes. A study on taxes in the United Kingdom found that taxes on consumption are less economically damaging than taxes on corporate and individual income. A study of U.S. tax changes since World War II found that a 1 percentage point cut in the average corporate tax rate raises real GDP per capita by 0.6 percent after one year, a somewhat larger impact than a similarly sized cut in individual income taxes. Based on U.S. state taxes, a study found that a 1 percentage point cut in the corporate tax rate leads to a 0.2 percent increase in employment and a 0.3 percent increase in wages.

While the Inflation Reduction Act book tax is an unconventional way to raise corporate taxes, that doesn’t make it any less economically destructive. In fact, it falls particularly heavy on companies using accelerated depreciation provisions, especially bonus depreciation, that are shown to be very effective at stimulating investment. Economists Eric Zwick and James Mahon found that the bonus depreciation policies in the early 2000s raised qualifying capital investment by 10 percent in the years they were in effect, and then increased investment by 16 percent near the end of the decade when the policy was reinstated and expanded. Economist Eric Ohrn and coauthors came to similar conclusions when looking at the impact of bonus depreciation on the manufacturing sector, finding that the policy increased capital formation by about 8 percent and employment by almost 10 percent, with gains concentrated among production workers.

Furthermore, several studies demonstrate that the corporate tax is borne in part by workers. For instance, a study of corporate taxes in Germany found that workers bear about half of the tax burden in the form of lower wages, with low-skilled, young, and female employees disproportionately harmed.

The corporate tax is also borne by owners of shares, including retirees and others earning considerably less than $400,000. In the short run, the Joint Committee on Taxation (JCT) assumes owners of capital bear all of the corporate tax, yet that includes more than 90 million tax filers earning less than $200,000. In the long run, JCT assumes workers bear a portion of the corporate tax, such that the burden falls on more than 150 million tax filers earning less than $200,000.

While there is always a populist appeal to raising corporate taxes, based on the misunderstanding that the burden is somehow only felt by a small number of rich people, it is the job of economists to remind people of the facts and resist political efforts that have no basis in economic reality. Corporate taxes do not come freely but rather at the expense of more investment, more job opportunities, and higher wages. Raising corporate taxes now at a time of economic uncertainty and a slowing economy as the Inflation Reduction Act does would be particularly irresponsible.

August 16, 2022 In In The News

INFLATION CRISIS IS VEXING, BUT TAX CUTS CAN HELP

From: Oklahoma Council of Public Affairs

There’s no easy answer for solving the inflation crisis. It is time for policymakers to admit that and to take a humble approach.

Major economic shocks are rarely predicted. When the housing bubble burst in 2008 it caught most of us by surprise (aside from Christian Bale). No one was anticipating a worldwide pandemic in 2020. Russia’s invasion of Ukraine wasn’t a part of the Federal Reserve’s economic outlook beginning in 2022. There is a reason we describe these as economic “shocks”—they shock the system because no one saw them coming.

Oklahoma is no stranger to these types of events. When OPEC refused to cut production in 2015 oil prices continued to fall, declining from more than $100 a barrel to just under $30. This was the primary driver in the budget shortfalls plaguing the state over the next few years.

The point is that as the world economy becomes more intertwined, the more complicated and harder to predict it becomes. This was highlighted at the federal level with officials backpedaling on “transitory inflation.” Egos in D.C. are legendarily large, but Oklahoma lawmakers have a chance to show they’re different.

An economy grows by entrepreneurs taking risks, investors trying to make wise decisions, and consumers deciding how to spend or not spend their money. Targeted tax breaks and short-term rebates are misguided solutions that imply the government is the guiding hand for the economy. Rather than assume that they know best how to run Oklahoma’s economy, politicians should trust that their constituents know what is best for themselves. Broad income tax cuts put dollars back in families’ pockets and allow them to make their own decisions. Trusting in free markets isn’t about trusting an ideology. It’s about believing in people and admitting that we can’t know everything.

More than half a dozen states have already cut taxes this year. The current special legislative session gives Oklahoma a chance to join that group and not get left behind.

August 12, 2022 In In The News

Inflation makes the case for lowering Colorado’s income tax

From: Independence Institute

Inflation hit another 40-year high in June, according to federal inflation data released yesterday. Coloradans have taken the fight against rising costs into their own hands with a citizens’ initiative to lower the income tax rate and put the state on a path to zero.

Last July, as high CPI began to rear its ugly head, CNBC prophetically reported, “Inflation is the silent killer.”

Coloradans have certainly felt its sting.

Someone earning $70,000 per year in January of 2020, would now need to earn over $80,000 to maintain the same standard of living today as then. Many Colorado households and businesses have struggled to keep up.

According to the Bureau of Labor Statistics’ Consumer Price Index (CPI) report, inflation last month increased by 9.1% from a year prior. That’s up from 8.6% in May, reaching the highest level since November 1981.

An astounding $6.3 trillion increase in the U.S. money supply, combined with supply shocks induced by government-mandated economic lockdowns, has largely driven the record CPI print.

The Fed is now combating inflation by crushing consumer demand through higher interest rates and tight money—a move likely to trigger a recession. State lawmakers can do their part to help bring down prices in the Centennial State by rolling back many of their recent policies, which have pushed prices up.

These remedies, however, will take time to work their way through the economy. Meanwhile, the dark clouds of high (and rising) CPI have already brought financial storms over Colorado households and small businesses.

Coloradans need immediate relief.

They can take matters into their own hands with Initiative 31.

The citizen ballot measure will appear before voters this November and if adopted will reduce the state income tax rate from 4.55% to 4.40% starting this year. State analysts estimate the decrease would save Coloradans $382 million or an average of about $120 per taxpayer in year one.

The rate reduction would directly increase household budgets, helping Coloradans to afford the rising costs imposed on them by government, and provide a more effective reprieve than direct government aid.

When the federal government deployed stimulus during the pandemic, they effectively had to print new money. The decision devalued the dollar and created massive inflation.

Like federal stimulus, an income tax cut would put more money in Coloradans’ pockets. But rather than printing new money, the policy simply allows Coloradans to keep more of their own money.

This is the way forward.

The policy will increase incomes and allow families and businesses to absorb increased costs, but its benefits go much further.

More money remaining in the private sector means more investment in our communities and local economies. With it, the economy will grow and catch up with the expansion in the money supply, making it easier for everyday Coloradans to afford the “new normal” prices brought on by government.

The last couple of years have demonstrated that when politicians and bureaucrats have more money and power, they botch it.

As inflation began to exceed historic norms last spring, the Biden Administration and the alleged experts at the Federal Reserve refused to address the problem, calling it “transitory.”

Echoing those faulty conclusions, Colorado’s Legislative Council Staff economists concluded in their June 2021 economic forecast, “Inflation shoots above Federal Reserve target, but is expected to moderate throughout 2021.”

The experts and central planners, with all their wisdom and PhDs in economics, failed to understand that their policies would bring about historic and persistent inflation. And yet they still do not learn.

In response to yesterday’s inflation announcement, the White House’s chief economic advisor, Brian Deese, called on Congress to print and spend more money to bring down inflation.

Policymakers created the mess we find ourselves in now. Reducing the income tax will equip hardworking Americans to clean up after them.

Allow Colorado families and businesses to keep more of what they earn, and they will strengthen the economy.

But we will not get there with Initiative 31 alone.

Denver-based think tank Independence Institute has proposed a Path to Zero, which would gradually reduce Colorado’s income tax rate until we have joined the nine other states that have eliminated their income tax entirely.

This November, voters will have a chance to ease the burden of inflation with Initiative 31. After that, it will be up to all of us to put Colorado on the path to zero.

August 11, 2022 In In The News

Consumer Price Index Data Reveals High Wage Areas Are Experiencing Higher Inflation

From: Minimum Wage Facts & Analysis

Inflation continues to rise to historic heights, and rapidly rising state minimum wages appear to be adding fuel to the fire. As employers feel the pinch of operating costs rising on many fronts, Bureau of Labor Statistics (BLS) data shows areas with steeper minimum wage mandates have higher inflation rates for food purchased in restaurants or take-out establishments.

The Bureau of Labor Statistics collects data on inflation through growth in the consumer price index (CPI), which measures price increases for goods commonly purchased by the average consumer. BLS also measures inflation by specific categories of goods, including food prices both “at home” including groceries, and “away from home” which includes various take-out, fast-food dining, and full-service meals.

As the restaurant industry historically employs the majority of minimum wage earners, rising mandates are most likely to affect price increases in restaurant establishments in this “away from home” category.

West Coast states have had notoriously high minimum wage requirements – reaching $15 per hour this year in California and $14.49 per hour in Washington. Despite experiencing similar levels of overall inflation (i.e. CPI increase for “all items”), these West Coast areas have experienced inflation for food away from home as much as 10 percentage points higher than areas that have not raised their mandate above the federal minimum requirement of $7.25 per hour.

While each group (high wage states and $7.25 wage states) each experienced overall inflation averaging 20% from 2017 to 2022, inflation of food away from home was significantly different. The CA and WA regions experienced on average a 25% increase in prices of food away from home, compared to less than 18.7% increases for Georgia and Texas regions abiding by a $7.25 minimum wage and a $2.13 tipped wage.

Looking at inflation over the last decade reveals this trend is not a recent fluke. California’s state minimum wage has risen by 88% since 2012, and Washington state’s rose by 60% over the same period. Inflation in these areas is up to 20 percentage points higher for food away from home since 2012 compared to states mandating the federal minimum wage.

This finding concurs with existing economic research on the link between minimum wage mandates and inflation cycles.

One review of the existing economic literature on the inflationary effects of wage hikes finds a 10 percent minimum wage increase raises prices by up to 0.3%. Another study by the American Enterprise Institute found the same wage hike could cause more dramatic inflation in the southern U.S. – up to 2.7% increases in price. A Stanford University economist also found raising the minimum wage drives the largest price increases for the poorest 20% of families.

August 10, 2022 In In The News

The best US states for freelancers

From: Tipalti

The pandemic gave workers the opportunity to step back and reflect on their careers with many of them reevaluating their priorities, quitting their jobs and going freelance. Workers are now less willing to stay in jobs that they don’t find fulfilling and self-employment gives people a chance to take control of their professional lives, making their jobs work for them by allowing for greater flexibility and higher wages.

So which countries around the world and which US states are the best for freelancers? We’ve delved into the data to find out, analyzing the number of freelancers and coworking spaces, the cost of living, broadband and mobile speeds and costs and the demand for freelancers to find out.

The best US States for freelancers

Texas 8.2/10: Texas can be crowned the top state for freelancers in the US. Freelancers in the state are in high demand as it ranks in the top 3 for annual searches. The Lone Star State also has one of the fastest broadband speeds in the country, ranking in the top 10.

Tennessee 7.2/10: Next up is Tennessee, scoring highly in the index thanks to its low cost of living. The Volunteer State ranks in the top 10 for this factor. It also has a high proportion of self-employed workers, ranking just outside the top 10.

Georgia 7.1/10: Georgia ranks third, thanks to it placing in the top 10 for 3 factors. Georgia places in the top 10 for the lowest cost of living so freelancers won’t have to be worried about their finances. Demand for freelancers is also high in the state, placing in the top 10.

Number of self-employed people (per 100,000 residents)

Montana 8,600: Taking the top spot for the highest proportion of self-employed workers is Montanna. Agriculture is the largest industry in The Treasure State, and self-employment in agriculture is commonplace creating the largest proportion of self-employed workers in the US.

Maine 8,400: Self-employment means you are fully in control, setting your own hours and following your passion. Nobody knows this more than workers in The Pine Tree State as Maine takes second place with 8,400 self-employed workers per 100,000 people.

Vermont 8,200: Vermont is one of the most entrepreneurial states on our list with 8,200 self-employed people per 100,000. Most of the self-employed citizens of The Green Mountain State have jobs in the construction industry, followed by jobs in real estate.

The Monthly Cost of Living

Mississippi $4,401: Taking the top spot for the lowest cost of living is The Magnolia State. Rent and land prices in the state are lower than the other 49 states by 37% and the ease of shipping means prices for goods are kept low.

Arkansas $4,442: In second place is Arkansas with a monthly cost of living of $4,442. The low average salary in the state means the cost of living is lower across the board and property taxes are some of the lowest in the country.

Oklahoma $4,447: Up next is Oklahoma, ranking third as one of the US’s most affordable states. Housing and rent prices are nearly half that of the national average, thanks to a large amount of affordable land. Utility bills are also roughly 8% lower than the national average.

Number of coworking spaces (per 100,000 people)

Colorado 2.4: One of the most important benefits of coworking spaces is the motivation they provide by getting rid of distractions and increasing productivity. This is important to the self-employed workers in Colorado as they top the ranking for the most coworking spaces per 100,000 people.

New York 1.9: The Big Apple ranks second for this factor, with many self-employed New Yorkers thriving in coworking spaces thanks to the flexibility they provide and their communal atmospheres. The state has 1.9 coworking spaces per 100,000 people.

California 1.6: Next up is The Golden State with 1.6 coworking spaces per 100,000 people. Coworking spaces have flourished in the state thanks to the high commercial rent prices making office spaces less affordable for smaller businesses.