Medicaid Expansion

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anonymous_coward
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@Bruce: "All this debate

@Bruce: "All this debate about various economic stuff is great and shows how smart you guys are,but so far the answer to the biggest question alludes us .
How are we going to pay for it ???"

Where have you been the last 20 years? We're gonna borrow it!

anonymous_coward
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@Toolsmith: "If you accept

@Toolsmith: "If you accept the premise that economic activity has been suppressed by a high tax, then no need. Income will increase a result, as it did for the Reagan tax cuts. "

Uhhh what if I don't accept that premise?

Economike
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anon -

anon -

Which premise?

Do you mean to say that no tax ever discourages economic activity? Ever?

Or do you mean that no tax can create disincentives costing more than the resulting tax revenues? Is there no such phenomenon we might might call "deadweight cost of taxation?"

Does the law of diminishing returns not apply to tax rates?

In the present case, do you believe that a reduction in corporate income tax from 38% to 21% will result in no (or negative) increased income? Or do you mean that the new tax revenue from the increased income can't (or won't) equal the revenue foregone by the rate reduction?

anonymous_coward
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@Economike: "Do you mean to

@Economike: "Do you mean to say that no tax ever discourages economic activity? Ever?"

Sorry, meant specifically here in Maine. Obviously if you jacked up the tax rate to very high levels you would experience a meltdown but a lot of taxes here are paid by foreigners (meaning, people from Massachusetts) and are ultimately redistributed back to Mainers.

Also generally speaking most entities are on the left side of the Laffer curve (Kansas being the obvious datapoint) so decreasing the tax rate would generally not spur enough economic growth to make up for the lack of revenue.

Economike
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Thanks for the clarification.

Thanks for the clarification. I agree that the Kansas is a good example of how tax rate reductions don't necessarily pay for themselves by matching (or surpassing) status quo ante revenue.

As a matter of economic principle, supply-side tax cuts succeed in cases where a reduction in the highest marginal tax rate incentivizes greater productive activity. It's the incentive to earn the next dollar that counts. I should, in order to keep up my reputation as a wonk, add that there's more than one way to measure the success of a rate cut. One is to count tax revenue and another is to count gross product, or income, on the X-axis of the Laffer Curve.

Also as a matter of economic logic, I dispute the notion that non-residents can bear any portion of a state's tax burden, despite the obvious fact of tax incidence applying to non-residents. I think Maine's tax regime, in comparison with most other states, could be reduced to good effect. We've had a lot discussion on these topics on AMG, so I won't repeat my ideas here.

Just a couple of ideas for your consideration: Tax incidence is not tax burden. Tax rate is not tax revenue.

Robert Reed
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If only these ballot

If only these ballot intiatives came with pricetags that explain what it will cost in taxes or in other services lost....

anonymous_coward
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@Economike: "As a matter of

@Economike: "As a matter of economic principle, supply-side tax cuts succeed in cases where a reduction in the highest marginal tax rate incentivizes greater productive activity. It's the incentive to earn the next dollar that counts. I should, in order to keep up my reputation as a wonk, add that there's more than one way to measure the success of a rate cut. One is to count tax revenue and another is to count gross product, or income, on the X-axis of the Laffer Curve."

Do you have some concrete examples where these conditions apply? Would be interested in understanding this better.

"Also as a matter of economic logic, I dispute the notion that non-residents can bear any portion of a state's tax burden, despite the obvious fact of tax incidence applying to non-residents. I think Maine's tax regime, in comparison with most other states, could be reduced to good effect. We've had a lot discussion on these topics on AMG, so I won't repeat my ideas here."

Well consider as an example, an ocean-front town like Wells where the property tax burden is heavily borne by the beach front property owners - most of whom are out of state residents.

Obviously that's a localized example, and the state level has different forces at play.

Economike
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Examples? Kennedy and Reagan

Examples? Kennedy and Reagan income tax cuts, G.W.Bush capital gains cuts. A supply-side tax cut succeeds when a reduction in the top marginal rate reduces the cost of gaining the next dollar of income. The rate cut must be significant enough to motivate producers (and to measure its effect). In all three of these examples, actual post-rate-cut receipts exceeded pre-tax-rate-cut revenue expectations.

One might also imagine a tax-rate reduction that resulted in less government revenue but incentivized private gain greater than the foregone tax receipts.

Regarding non-residents bearing the in-state tax burden, you're looking at half of the picture. Sure, it's apparent that tax incidence falls on non-resident owners of ocean-front. But there's an offsetting opportunity cost. When Maine residents sell property to non-residents they forego the income they'd otherwise receive from ownership of that property. Ask yourself, if non-resident ownership of Maine property eases the tax burden for Maine residents, would Maine residents be better off if they sold their houses to non-residents? To assess the effect on tax burden, you'd need to consider consequential benefits and costs.

Obviously, it makes economic sense for non-residents to be able to own property in any state. However, it is mistaken to conclude that the tax incidence arising from that ownership is identical to the tax burden. As a rule, the burden of taxation falls on those who can't avoid it.

Watcher
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Geeze Economike..."Tax

Geeze Economike..."Tax Incidence"..."Offset Opportunity Cost"..."Consequential Benefits and Costs", "...income received from Ownership"

None of your post makes any sense whatsoever. Sounds like the obfuscating crap we hear from Liberal/Socialists.

Economike
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I'm sorry that my post makes

I'm sorry that my post makes no sense to you, Watcher. And I'm alarmed that it sounds like obfuscating crap. I try to be precise, so as not to be misunderstood. And, behold, I'm misunderstood. Or, more precisely, not understood. Do you grasp the difference, or is that also Greek to you?

What can I do to resolve this? I assure you I'm not a "Liberal/Socialist."

I wouldn't have thought "tax incidence" was a challenging concept. You could look it up.

Mike G
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Watcher I suspect that emike

Watcher I suspect that emike works with or within the US Tax Code.

Bruce Libby
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Mike G

Mike G
I suspect this thread has been hijacked and is on the road far away from an answer to the question,
"how are we going to pay for it"?
Now Anon. has offered a example albeit sarcastic, "we are going to borrow it".
That lacks the various specific forms of borrowing that can be used to do so.

Given that there are at least two estimates of costs neither of which are probably accurate, all this economic stuff does nothing for average
tax payer who will ultimately foot the bill.

The only concrete point is the process used to enact the expansion ,is so flawed ,none of the economic jargon talk matters.
Robert got it correct ,if the ballot had shown the numbers it probably stood a fair chance ,to not have been passed.
So far if he does "work with in or with",that has Economike in the lead.
Let the pissing contest continue.

Watcher
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Economike...I did look it up

Economike...I did look it up and boy, that really "splains" things so clearly, to wit:

"In economics, tax incidence or tax burden is the analysis of the effect of a particular tax on the distribution of economic welfare. ... The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply."

Economike
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First, apologies to Bruce for

First, apologies to Bruce for wandering off-topic.

Second, Watcher, I don't know where you found the quote about tax incidence/tax burden. I wouldn't say it's wrong, but it's not how I use those terms. (And, in addition, the quote assumes one knows about "price elasticity of demand" and so on.) Here's an example of how I think about the difference:

"Some would admit to the negative consequences of capital gains tax, but argue that governments cannot afford to get rid of a tax 'on rich people.' But the incidence of taxes is not the same thing as their burden. The burden always falls on those who cannot escape it, rather than on the legal entity targeted by governments."

(In case you're interested, the quote is from this article:
http://www.iedm.org/1586-nipping-wealth-in-the-bud-the-effect-of-capital...)

And now I apologize for what might seem like more obfuscation: here's a hypothetical example of how tax incidence isn't the same as tax burden.

Let's imagine that Gotham City Airport enacts a $40 tax on all car rentals. We would describe the incidence of this tax as falling on everyone who rents a car at the airport. OK so far? The target of the tax is the renter.

But what is the burden of this tax? It turns out that car rentals fall by, let's say, 20% at the airport. Since it costs $10 to take a bus into town to rent a car without paying the airport's tax, a lot of travelers take a few extra minutes to rent a car in town. So what's the burden of the airport's car rental tax? First, (as intended) the tax burden partly falls on the tax-paying car renters at the airport. Second, the tax burden partly falls on the rental agencies; the tax costs them 20% of their revenues. Third, the burden falls on the travelers who pay bus fare and extra time to rent a car in town. And, finally, we might say that car rental agencies in town enjoy a negative tax burden from the increase in their business.

My point is that it's worthwhile to think through the consequences of tax policies. In the example you responded to, I was trying to explain to anonymous coward that when non-residents pay Maine property taxes, that revenue does not necessarily relieve the tax burden for Maine residents.

Watcher
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Thank you Economike. The

Thank you Economike. The post was very illuminating and instructive. It seems like it is much like the trickle-down theory of tax decreases...only in reverse. I will say that in your rental car example, the only time the off-airport rentals gain and the on-airport receives less revenue is if the tax is not passed on to the consumer. If it is passed on, you are correct and the town agencies will probably get some business. If it is eaten by the renting agency, the customer sees no change and no alteration of rentals is noted.

Thanks

mainemom
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If Bruce's original question

If Bruce's original question was, how will Maine pay for its share of the MaineCare expansion, then the answer is NOT: by borrowing.

The possibilities are: diverting surplus tax revenues in a given budget cycle (should there be any) to offset the new expenses; raising new revenues through taxation; spending less than planned on other programs; cutting reimbursements to providers; or some combination of these.

Did I miss any?

Bruce Libby
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No mainemom that covers the

No mainemom that covers the various mechanism that are all essentially borrowing in one form or another.
I never suggested borrowing, that was Anon. C statement. The question just never got really dealt with in original post.

Thank you though for a clear list of options that could be utilized to fund expansion.
Taking any of those things one could then proceed with various economic theories of how they would work or not.

Mike G
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Bruce

Bruce

Robert got it correct ,if the ballot had shown the numbers it probably stood a fair chance ,to not have been passed.

That is a poor assumption considering the history of Maine voters to pass any spending or bond issue. I've noticed that 55-60% of Maine Voters will vote yes on any spending question, any question that will be a freebee as they imagine it. The skeptics and realists among us vote no on any of the bond spending issues regardless of the worth of the initiative, because we know that they all get overwhelmingly passed.

How will we pay for it? The majority of voters don't care and there lies the harm of the people's initiatives and failure of the legislature to take responsibility for providing funds out of the general fund for infrastructure and health care spending, etc. Let the people borrow it?

Economike
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Someone once said "The

Someone once said "The spending IS the tax." Milton Friedman, maybe?

In any case, once the state commits to pay for the medicaid expansion, the taxpayers are liable. Unless that man behind the tree shows up.

Economike
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Robert got it correct ,if the

Robert got it correct ,if the ballot had shown the numbers it probably stood a fair chance ,to not have been passed.

I thought my idea of having to pay to vote "yes" would have worked.

Watcher
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Mike G, I think it is more

Mike G, I think it is more likely that lots of voters don't have a clue what a "bond issue" is. We do have incredibly dumb voters in America. If the ballot issue said "Shall we borrow $40 billion to spend on reducing student loan debt and you will have to pay it back by paying more taxes?" the votes just might turn it down.

Bruce Libby
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Thee is some hope maybe, when

There is some hope maybe, when enough realize they are paying for some twenty something lay about
recovering from his Narcan rescue in basement of Mom and Dads place, on their dime.

anonymous_coward
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@Economike: "Examples?

@Economike: "Examples? Kennedy and Reagan income tax cuts, G.W.Bush capital gains cuts. A supply-side tax cut succeeds when a reduction in the top marginal rate reduces the cost of gaining the next dollar of income. The rate cut must be significant enough to motivate producers (and to measure its effect). In all three of these examples, actual post-rate-cut receipts exceeded pre-tax-rate-cut revenue expectations."

The first two were also accompanied with a massive increase in fiscal spending as well. The Bush 43 cuts also coincided with Greenspan's eternally low rates (which produced growth even under Clinton's non-tax cut years).

Can you necessarily disambiguate the effects of the tax cut with the other fiscal/monetary forces? (For example, we had growth under Obama because of the massive fiscal stimulus, but he had no top rate tax cuts.)

"Regarding non-residents bearing the in-state tax burden, you're looking at half of the picture. Sure, it's apparent that tax incidence falls on non-resident owners of ocean-front. But there's an offsetting opportunity cost. When Maine residents sell property to non-residents they forego the income they'd otherwise receive from ownership of that property. Ask yourself, if non-resident ownership of Maine property eases the tax burden for Maine residents, would Maine residents be better off if they sold their houses to non-residents? To assess the effect on tax burden, you'd need to consider consequential benefits and costs."

You're assuming there's a transfer between Mainers to non-Mainers. I'm talking about a rate assessment on existing property. If foreigners own the $10mm homes, and Mainers own the $300k homes, and you assess a mill rate increase, foreigners are going to bear the brunt of that increase.

It would be as if we were taxing something only out of staters buy, like "I love Maine" T-shirts (not that we don't love Maine, just that we wouldn't be caught dead wearing a t-shirt like that).

Economike
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anon -

anon -

"...actual post-rate-cut receipts exceeded pre-tax-cut revenue expectation."

Applying to my three examples, this is the metric that defines the result called "supply-side tax cut." It's as close to disambiguation as we're going to get. Look at the sequence of events. A subsequent increase in fiscal spending is a result, not a cause, of the increased revenue following the rate cut.

Speaking of disambiguation, why should anyone conclude that economic "growth under Obama" resulted from "massive fiscal stimulus?" With equal plausibility, I'd argue that the "massive stimulus" retarded the (below-baseline) growth during the Obama years.

"You're assuming there's a transfer....."

Of course there's a transfer. In the first place, we're positing a transfer of tax burden from resident to non-resident when the non-resident pays tax in Maine. How, we ask, does this happen? What is exchanged?

Suppose that half the residents of Wiscasset found jobs in Massachusetts and moved there, keeping their houses in Wiscasset. Would we describe this as a transfer of tax burden from Maine to Massachusetts?

My point is that incidence of non-residents volunteering to pay tax in Maine is not necessarily evidence of a transfer of tax burden. We'd need to consider the costs of that transfer.

Watcher
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Paying tax (property tax in

Paying tax (property tax in your example) is actually buying something from your local government. If I live in Portland and find a job in NH and move there but continue to own my Portland house of course I have to pay property taxes on the Portland house to continue to get fire, police, garbage pickup, road plowing et al for my property. This is not like a double income tax in two states...although the same logic might hold as well.

Clearly this is a difficult concept to get a handle on. Non residents are buying something in Maine when they pay their property taxes. If it is value for money is a different discussion.

SALES TAX

anonymous_coward
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"Applying to my three

"Applying to my three examples, this is the metric that defines the result called "supply-side tax cut." It's as close to disambiguation as we're going to get. Look at the sequence of events. A subsequent increase in fiscal spending is a result, not a cause, of the increased revenue following the rate cut."

Ummm, no, he increased spending (particularly defense spending) and cut taxes at the same time. But also consider that unemployment was around 7-8%, which is a situation that lends itself to massive fiscal stimulus (slack in the labor market).

Right now, we have 4% unemployment. Sure, one might quibble over the nature of the metric but no one would argue that we have a slack labor force compared to 1981.

"Speaking of disambiguation, why should anyone conclude that economic "growth under Obama" resulted from "massive fiscal stimulus?" With equal plausibility, I'd argue that the "massive stimulus" retarded the (below-baseline) growth during the Obama years."

Because it worked for Reagan too? It always works.... when there is slack in the labor force. When there isn't you get a stagflation a la Nixon/Carter.

"Of course there's a transfer. In the first place, we're positing a transfer of tax burden from resident to non-resident when the non-resident pays tax in Maine. How, we ask, does this happen? What is exchanged?"

Nothing is exchanged. If we tax something that non-residents buy more of (say, hotel stays, or beach parking passes that residents can buy at a discount), then they are being taxed at a higher rate than residents. I'm not sure how this is considered a transfer? Maybe I'm not understanding you... sorry.

I can understand how taxing non-residents would apply market pressure to force them slightly towards, say, a different beach location (or reduce the amount of money they have to spend on lobster rolls). But we have a monopoly on awesome beaches here so there's a bit of rent seeking involved (hee hee).

anonymous_coward
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@Watcher: "Clearly this is a

@Watcher: "Clearly this is a difficult concept to get a handle on. Non residents are buying something in Maine when they pay their property taxes. If it is value for money is a different discussion."

Sure but the cost they pay is significantly larger than the actual cost of the services. They are paying for the year round residents' children to go to school too.

Toolsmith
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With the labor participation

With the labor participation rate at a historic low, I'd argue there's quite a bit of slack in the labor market. They've been fudging the unemployment numbers by omitting long term unemployed for decades.

Bruce Libby
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Choices for solution to

Choices for solution to funding Expansion.
Mainemom offered the following funding mechaanisms:

" diverting surplus tax revenues in a given budget cycle (should there be any) to offset the new expenses; raising new revenues through taxation; spending less than planned on other programs; cutting reimbursements to providers; or some combination of these"

What would be your preference ?

mainemom
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My choice would be spending

My choice would be spending less than planned on other programs.
Specifically, education.

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