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March 19, 2008

Wednesday Update


Wisconsin Club for Growth 

March 19, 2008
Volume 2, Number 12

The Wednesday Update 

In This Issue

1. Thank you Sir

2. Gov.Strikes Out, 
    Assembly Swings
    and Misses

3. March Madness




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Thank You Sir, May I Have Another?


If you're a fan of the current health care system, prepare to be dazzled - Governor Doyle is about to offer you more of the same at a higher price!  Hold on to your toupee!

With Wisconsin facing a $652 million budget deficit, Doyle has introduced a plan to raise taxes on hospitals and consumers in order to attract more federal matching funds.  As noted previously in this newsletter, Doyle's tax increase will increase health care costs for consumers, when the hospitals pass the tax on to sick people.

Plan supporters say that all the new federal matching money will go to hospitals to boost Medicaid reimbursement, thereby holding down costs to hospital consumers.  This line has apparently been swallowed whole by the state's largest business organization, Wisconsin Manufacturers and Commerce, who count Aurora Health as one of their members.  WMC previously opposed the Governor's new Medicaid funding scheme precisely because it raises health care costs for consumers and because there's no guarantee the federal government will continue the funding rate in the future.

While some of the federal money may make its way back to hospitals, it will be funneled to hospitals with high Medicaid-funded patient loads - specifically, hospitals in poorer areas. So essentially, it's just another income redistribution scheme meant to micromanage the flow of wealth, millions for Milwaukee, and pennies for Polk!

Of course, all of this assumes that Doyle will actually send the new money to these hospitals - not exactly a sure thing, given the Governor's affinity for raiding pots of money.  But, if he does break with tradition and keep his word, in every other hospital in the state, it will be more expensive for you to have your broken ankle examined, since your emergency room is going to pass the tax on to you.

Furthermore, the hospital tax is a one-time fix, a band-aid on the festering boil known as our state budget debt.  There's no guarantee the federal match will be available to fuel future budgets, but once the state increases base spending, we're stuck with it.  Pennsylvania is planning the same type of hospital tax matching fund scheme, and once enough states come calling with their hands out, the feds are quite likely to just turn off the spigot. 

At the same time, the Milwaukee Journal Sentinel highlighted a very real change that can save consumers money - medical billing transparency.  Instead of "fixing" health care by raising taxes, costs can be held in check by providing free market price transparency.  When health providers can no longer hide the cost of their medical procedures, consumers will be empowered to shop around for business.  As a result, they will receive better care and lower prices.

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Governor Strikes Out, Assembly Swings and Misses

While Governor Doyle's budget fix was the equivalent of a pop up fly --- disappointing and easily caught --- the State Assembly swung wildly and missed with its own version of a budget repair bill.

Sure, the Assembly bill does provide an across the board cut to state general purpose expenditures. But since much of those expenditures are aids to local governments, taxpayers would simply enjoy higher property taxes.

The Assembly plan does dip into the state's rainy day fund to a greater extent than Doyle's plan, which is reasonable.  It is, after all, raining.  The problem is that even though the weatherman has seen this precipitation coming for years, Wisconsin's rainy day fund is really more like a Christmas account, and once that budget stabilization cash is gone, it's gone for good, leaving the state to find more cash in the next biennium to fund whatever government giveaway the rainy day money is plugging in the short-term. 

Perhaps most egregiously, the Assembly shifts a school aid payment from this biennium to next biennium, which blows a hole in tax revenues for the next two years.  It is precisely this kind of lazy, uninspired budgeting that has gotten Wisconsin into its current budget predicament.  And by balancing the books with this kind of shoestring gimmickry, the state will find itself in a worse jam the next time an economic downturn comes along.

While both plans balance the state's budget on a cash basis, both leave significant problems in the future for the state to fix.  And here's a hint: when the state needs to "fix" funding programs, it never means "lower taxes."  If the current economic downturn continues to lurch forward, new tax increases will make the hospital tax increase look like your kids' piggy bank, all because our legislators and Governor don't have the political courage to make a serious effort at reforming our state's budget.



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March Tax Madness 

On Sunday, both the Wisconsin Badgers and the Marquette Warriors found out they will be traveling to other states to play in the NCAA tournament.  If there's a silver lining to Wisconsin's high taxation levels, it's that there will likely be plenty of former Wisconsin residents living in Nebraska and Colorado to cheer both teams on.

Several months ago, the Public Policy Forum demonstrated that Wisconsin was hemorrhaging residents to other, more tax-friendly states.  When these individuals take their income with them, it leaves the rest of us to pick up the tab.  On the other hand, if Wisconsin were to go the other way and reduce taxes, it could begin to attract higher incomes from other states.

So not only will the expatriate Wisconsin and Marquette fans get to see their favorite teams, they'll also actually be able to afford popcorn at the game.  

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