Sunday, May 23, 2010

Governor's Race

I have no wild enthusiasm for Governor Otter, who is running for re-election in the Republican primary.  But the news coverage that I have seen suggests that he has a sincere desire to make the state government operate within its limits.  The battle between Otter and the legislature last year over gas tax and road improvements suggests that Otter is part of the wing of the Republican Party that recognizes that government can perform a legitimately positive function in growing the economy by making road improvements.  I wouldn't want this to go too far--we don't need four lane highways in every corner of the state--but he represents a useful counterbalance to those members of the legislature who don't seem to see the economic growth advantages of building transportation infrastructure.

Otter's most serious opponent is Rex Rammel.  As I mentioned some months back:
I've been aware of a politician named Rex Rammel who is running for governor against Otter, but I didn't have much of an impression, positive or negative. Purportedly he's a conservative of some sort. Listening to him interviewed by Nate Shelman on KBOI AM 670 this evening Rammel certainly made an impression on me alright: and not a good one.

Rammel's position of how to deal with the budget shortfall is to eliminate the personal and corporate income taxes and increase sales tax rates as a way to create jobs. While I'm no fan of income taxes because they encourage a variety of manipulative and economical inefficient tax shelters, it is generally very high marginal rates that create this sort of idiocy. Federal income tax rates can be a real problem, because the marginal rates are high enough to make people do dumb things. But Idaho personal income tax rates (like most states) are pretty low. It is hard to imagine that our 8% state income rate is making much of a difference in how anyone in this state decides what investments to make, how many people to hire, what factories to build.

Even more absurd: because state income taxes are deductible on your Form 1040, Schedule A, those Idahoans in the top marginal state income tax bracket (as I was until last year) were reducing their federal income tax by 35-40% of their highest marginal state income tax rate. Eliminating the Idaho state income tax would put perhaps $5000 in the pocket of the top 5% of the state's income earners--but probably $2000-$2300 of it would end up paid as federal income tax, instead. The gain for the taxpayers, even for the high end Idaho taxpayers, isn't as impressive as it first sounds.

The notion that reducing personal and corporate state income taxes is going to be a big win for creating new jobs here, or moving existing jobs from other states, is really hare-brained. Yes, they do probably impair job growth a bit--but it is a minor factor when you consider how low the rates are. (At the federal level, it is a stronger argument, where the marginal rates are much higher.) In a thriving economy, there might be a stronger argument for eliminating these taxes to encourage growth--but the only thing growing in Idaho (and much of the rest of the country), is discouragement about jobs.


Then Rammel proposed that the loss of about 1.25 billion dollars from our budget by eliminating these two taxes could be handled by turning all the public schools back to the local governments, and wiping out those parts of the state board of education handling K-12. Again, I am skeptical of the value of much of the centralized state bureaucracy, but I am very skeptical that's this is where most of the money being spent on public education in this state is going.

There's a case for pretty radical transformation of our education system, perhaps using vouchers to create more competition for schools. I just don't get the impression that Rammel has given much thought to what he is talking about.
It also appears that Otter has the race in the bag, anyway. The May 22, 2010 Spokane Spokesman-Review reports on a statewide poll:
In the governor’s race, the poll showed Gov. Butch Otter with 60 percent, 25 percent undecided, and none of the five GOP challengers rising beyond single digits, with Rex Rammell highest at 6 percent followed by Sharon Ullman at 4 percent.

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