The governor’s ‘tax relief’ sleight-of-hand

Ever hear of the con game pulled on bartenders in busy pubs? A guy strikes up a conversation with a bartender at one end of the bar and says he can make a $100 bill disappear and reappear. He asks the bartender to take $100 bill out of the cash register. The guy marks the bill, performs a simple sleight-of-hand, and the bill disappears. Meanwhile, he slips the $100 to a confederate sitting next to him. The confederate strolls to the other end of the bar and orders a drink from another bartender. He pays with the $100. As soon as the magician sees that the bill is back in the drawer, he tells the first bartender to go check the register. Sure enough, the marked bill has reappeared. The duo, however, has used the bar’s own money to pay for a drink and leave a little tip, but walked away with most of the money.

That’s basically how Governor Douglas’s plan for reducing property taxes would work. He wants local school districts to cut their school budgets. He’ll take the savings, give people a little of their own money as a property tax cut, and keep the rest.

Here’s how the governor does his sleight of hand. He wants to use money from the Education Fund to help close the gap in the state’s General Fund budget. Using money this way from the Education Fund necessarily drives up property taxes, but the governor wants people to think they’re getting a tax cut. His plan would force local school districts to reduce their spending—that’s like asking them to hand over $100 from the cash register. Then he gives them a tax cut—that’s like paying for the drink and leaving a tip. But the tax cut is much less than the reductions local districts would be forced to make, and the difference is the amount the governor wants to keep—like the change from the $100.

The governor’s plan would reduce payments to schools by about $60 million—$18.4 million the Legislature already has diverted to other General Fund uses; $37.1 million in assumed “efficiency” savings; and $5.3 million from reductions to small schools grants, adult education, and reimbursement for state-placed students. In addition, he would take money for teachers’ retirement ($10 million) and school construction ($5 million), which used to be General Fund obligations, out of the Education Fund. In all, the governor’s plan would reduce money available to local schools from the Education Fund by over $80 million.

Of that $80 million, the governor wants to give back $20 million as tax cuts: $4.2 million for primary residences, $3.4 million for renters, and $12.4 million for vacation-home owners and businesses. Not all residential taxpayers would get a cut, though. The governor would actually increase taxes on middle-income families with household incomes between $60,000 and $90,000 who now pay school taxes based on income. The residential tax cuts would go to families with incomes greater than $90,000.

Like the scam in the bar, this trick takes two players. Let’s hope the Legislature doesn’t go along.