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June 29, 2010

Baltimore budget proves power of special interests

Baltimore's budget demonstrates one of democracy's well-known flaws. The squealing wheel gets the oil; the silent majority gets the shaft. Baltimore's proposed bottle tax got cut in half because a coalition of retailers and beverage distributors mustered extraordinary resources to oppose it. Newspaper ads were bought. Superlobbyists were hired. Doom was predicted.

Public choice theory teaches that democracy is often tilted to respond to the interests of the few at the expense of the many. The bottle tax would have benefited Baltimore as a whole, but in a diffuse way. Its effect on any one household (in terms of saving police jobs etc.) would have been hard to measure. So for the majority of Baltimore residents, there wasn't much incentive to strongly support the bottle tax.

However there WAS incentive for beverage sellers to oppose it. It was aimed directly at them. The threat they perceived in the bottle tax was much bigger than any possible benefit to them from balancing the city budget. So they fought hard and partly won.

Meanwhile the city passed a broad, personal-income tax increase with hardly a hint of opposition. Where was the lobbying campaign against that? Where were the newspaper ads against raising taxes on already-overtaxed Baltimoreans? Where were the counterparts to lobbyist Bruce Bereano, hovering around council members to warn them of disaster? Of course there weren't any. The body politic doesn't have lobbyists. It has elected representatives. But too often they're too busy listening to the special interests.

Posted by Jay Hancock at 8:44 AM | | Comments (16)
Categories: Taxes
        

Comments

The residents of the city closely resemble sheep................

Well said.

This is an old story, but it's sad every time it's retold. I thought the four-cent bottle tsx was a great idea. Common Cause was (maybe still is) a citizens' lobby; can we start a chapter here?

you mean they raised income tax but let the sode and beer off the hook , PATHETIC

Well, you just made the most obvious post of your career, Mr. Hancock. No one is shocked by any of this. What is really disturbing is how little attention the local media (including the Sun) paid to the increase in the income tax. That should have been a top story on Fox 45 or been blasted on WBAL and WYPR day and night. But it wasn't. The bottle tax got all of the attention because the Media is beholden to many of those retailers who opposed the bottle tax. They did their bidding because the media never wants to upset potential advertisers. The Fourth Estate is as guilty as anyone on this.

Well, you just made the most obvious post of your career, Mr. Hancock. No one is shocked by any of this. What is really disturbing is how little attention the local media (including the Sun) paid to the increase in the income tax. That should have been a top story on Fox 45 or been blasted on WBAL and WYPR day and night. But it wasn't. The bottle tax got all of the attention because the Media is beholden to many of those retailers who opposed the bottle tax. They did their bidding because the media never wants to upset potential advertisers. The Fourth Estate is as guilty as anyone on this.

Good question Jay...why didn't the Sun...Baltimore's only daily newspaper run stories and editorials alerting the public to the income tax hike? Don't you think the print media has a responsibility to its readership to be a counter-balance to paid lobbyists? What about the Sun having the courage to take a position that encourages the city government to make more substantial and far reaching cuts to a bloated budget (suited for a city with a much larger population) so that tax-increases wouldn't be necessary?
The answers to questions such as these would seem to be more useful than bashing a legitimate business organization attempting to protect its members from a predatory, regressive and very short-sighted tax.

Yeah, I suppose the failure of the full bottle tax is what proves the power of special interests. Definitely not the bevy of groups demanding city provided services. And certainly not the public sector unions seeking to protect their salaries and pensions.

The special interest groups that involved themselves with tax hikes are inconsequential compared to the special interest groups that are heavily invested in even more spending.

I knew about the income tax and strongly supported the bottle tax. For that matter I am a big advocate of consumption taxes in general--they make taxes somewhat discretionary. Like others commenting here, I am equally frustrated by lack of information regarding the income tax. What is the rate? Does it affect city residents or people working in the city? What about people living in the burbs that earn their living here downtown? What about people living in the city commuting to the suburbs? I'm dumbfounded by the lack of information and opposition.

Lets have a tax on liberal blogs ; )

Good blog Jay. As to "Mike's" comment - there is nothing legitimate about the industry which relied on baltent lies and distortion in its opposition to the bottle tax. I want to see the huge nonsense the next time a bottle of soda increases by 25 cents each, purely to increase profits. Let me hear this so-called legitimate industry say that they are foregoing an increase so that the public good can be served! Instead, all we get is falsehoods, whining, and sanctimonious self-interest promotion! But, in this age where Bush and Cheney are considered saints by some instead of criminals, I guess that is to be what is expected!

True special interests triumphed here, but given the numbers involved, this is more a story of tax increases triumphing over spending cuts. The additional $5 million from the full 4 cent tax simply would not have been enough to avoid other big tax increases or spending cuts to close the $121 million gap. The beverage industry didn't cause the income tax to increase to the state maximum of 3.2%. Politicians' refusal to significantly cut spending did. Depending on how fast this blitzkrieg was launched, those who cover the city council are partly culpable as well.

What will next year look like given that about half the gap was closed by pulling from a rainy day fund?

Jay,

here is a noble idea that no one (you included) seems to comprehend.... STOP SPENDING MONEY WE DO NOT HAVE! Why don't you do some investigative research (not sure if that is allowed unless it makes corporate america look bad) on all the moronic things the city spends it money on, and them maybe we can have a discussion on taxes. Til then, you're far left ideology is better served for a Sons of Marx get together.

Its real simple folks, look at the blueprint Bob McDonnell in VA. has done & what Chris Christie is NJ has done. Copy that and ignore the leftist morons that have for the most part got us into this mess. If Gubmit workers don't like it.... move to Cuba.

while the income tax is far from ideal the real comparison should be between the bottle tax lobby and the raid on the rainy day fund to balance (for one year) a structural deficit. almost $60 million was pulled from the rainy day fund when the two winter storms collectively cost $30 million. If the rainy day fund is for once in lifetime expenses or even once in a decade expenses, then maybe we should have pulled $30 million from the fund (minus whatever the feds are chipinng in). But since we know that at least one of those storms is more like once in a decade and similar less costly storms are likely to occur every 5 years or so, we should have been budgeting for a significant portion of those storms. Nobody lobbies for true fiscal discipline. Our children get hurt when we burn our fiscal reserves to avoid some pain today. Last time I checked children dont even vote, let alone lobby. Shame the mayor, and all the reps who voted to raid the rainy day fund, especially with no plan to quickly repay it. I can only pray we dont have a significant unexpected expenses anytime soon.

Some of these comments about government spending prove that teabaggers hate America and want to see our society crumble. We need taxes and we need to INCREASE them on high income earners. Why? Because government services allow our society to function. Who do you think runs the schools, builds the roads, opens the libraries, pays out the Medicare checks, hires the cops, etc, etc. That's "gubmit" you morons! Do you think Wall Street would do a better job?!?! Are you kidding?? In countries with "big government" people live longer, have lower health care costs, and don't need to own cars because there's a train or subway to take them wherever they want. How about we just give the teabaggers their own little piece of this country (they can have Texas, for all I care) and let them do their own thing. I've had enough of these people!

772 city employees made over $100,000 last year. I wish I could import it into Excel and total it multiplying the median it's at least $83 million.

What's an "Executive Level li?" There's a ton of them making 100k+.

At 225k/year our state's attorney makes more than the mayor AND even more than the Chief Justice of the US Supreme Court.

Data is from the Sun's top article which has a tool bar you can use to sort city payroll data: http://data.baltimoresun.com/salary_database/

Protesting your government, especially wasteful government, is distinctly American.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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