Search Results for: favorite economist Larry DeBoer

Larry DeBoer, Everybody’s Favorite Economist (TM), has a good post on the subject of how inflation might impact local government finance in Indiana. If inflation caused property values, assessed values, income, and permitted levies to all increase at the same time, it wouldn’t be that much of a problem. But the system isn’t structured to allow that to happen. There is a lag between properties increasing in value, the properties being assessed for that increased value, and the increased assessment hitting the tax bill. Permissible tax levies are allowed to increase by the state’s growth quotient which takes into consideration the previous 6 years, so low inflation years prior to a high inflation year will limit the inflationary effect on the growth quotient. There’s also a 6% limit on the increase in maximum levies, so such levies could not catch up to inflation that exceeds 6%.

Larry explains the issues better and in more depth than I do, so his post is definitely worth checking out directly.

I have long been neglectful of Prof. Larry DeBoer’s (Everybody’s Favorite Economist ™) Capital Comments. November’s installment explains the “fiscal cliff” and why going over it is a bad idea.

Come Jan. 1, the Bush-era tax cuts expire, so everyone’s tax rates will increase. The two-year cut in the Social Security payroll tax will expire, raising taxes some more. The Alternative Minimum Tax won’t be adjusted for inflation, so millions of people will see their taxes rise still more. Automatic spending cuts will kick in, reducing both defense and entitlement spending. Extended unemployment insurance will expire; so two million people will lose benefits. And Medicare payment rates to doctors will be cut.

All told, it yanks about $500 billion out of the economy. That’s bad. But it cuts the deficit, that’s good, right? Well, yes, but it’s a matter of competing priorities. Pick you poison – slow or receding economy on the one hand or large deficits on the other. Right now, the deficits are the lesser poison because there is a lot of idle capacity in the economy. Demand created by the government isn’t pushing out or competing much with private sector demand so, at the moment, printed money isn’t driving inflation. In fact, interest rates are very low.

Yank the deficit money out of the economy, and businesses will have less reason to produce goods and services, will cut production, and you probably end up in vicious circle territory.

It’s a nasty choice: recession and unemployment now, or high interest rates, inflation and slower growth later.

DeBoer recommends coming up with a plan now that tackles deficits when the economy has recovered, not while it’s in the process of recovery.

Larry DeBoer, long known in these parts as “Everybody’s Favorite Economist” gets a little recognition from Maureen Hayden with CNHI.

He is a professor of agricultural economics at Purdue University, but he also works part time at the Indiana Legislative Services Agency and is a go-to guy for lawmakers and other groups who want to get a handle on the finer points of Indiana state and local government financing. His monthly Capital Comments column is definitely worth a read.

(I’m paraphrasing). According to an AP story, Everybody’s Favorite Economist ™, Larry DeBoer, says that 2011 is going to be the year that the recession hits local governments, with an 18-20% drop in income tax revenue for counties statewide.

Professor Larry DeBoer told a meeting of Allen County officials on Tuesday that 2011 will be the year the recession hits local governments in Indiana. DeBoer warned that with less money from property tax, local governments will have to rely more on unstable revenue such as income taxes and fees.

(It’s worth noting how we got to where we are.)

Everybody’s Favorite Economist (tm), Larry DeBoer, has a good post at Capital Comments about the nation’s budget deficits, the national debt, and the likely consequences of austerity measures during a recession.

Big future deficits are a problem. Big deficits now, not so much. They’re the result of the recession. Tax revenues are way down because of all that unemployment. Spending is up, partly because of added entitlement payments, and partly because of the government’s stimulus spending. But deficits during a recession help. The extra spending and reduced taxes increase the sales of goods and services, which give businesses a reason to employ more people. Without the deficits, unemployment would be even higher.

With unemployment near 10 percent it wouldn’t do to try to reduce the deficit now. The federal government tried that during 1937-38. With the unemployment rate still at 14 percent, the Roosevelt administration cut spending, and Social Security taxes were first collected. The deficit was reduced to near zero – and the economy dropped into recession. Unemployment rose to 19 percent.

We do need a long-range plan to reduce deficits to less than 3 percent of GDP. We need to balance the budget eventually. But not now.

Douglas Walker of the Muncie Star Press has an article about a speech given by Everybody’s Favorite Economist, Larry DeBoer. Professor DeBoer is an economist at Purdue and frequently assists the Indiana General Assembly with property tax matters.

He suggested that Delaware County got hit third hardest by property tax restructuring behind St. Joseph and Lake Counties. The combination of high property taxes and a loss of manufacturers results in Delaware County getting hit hard, and once the impact of the recession ripples through the tax system, the county is going to get hit like a ton of bricks. They have not, apparently, implemented a local option income tax which is the tool given to local governments by the General Assembly for local governments to deal with the General Assembly’s property tax changes. That’s a neat trick by the General Assembly, by the way — they get to “cut” your taxes and leave it to local government to raise them again.

Dealing with the loss of revenue, Muncie has closed two library facilities, closed a fire station, anticipates closing a second fire station, and anticipates laying off 32 other firefighters. So, in a way, Muncie is a little like ancient Alexandria which lost its Great Library to fire. But, in most other respects, obviously, it’s not. I’m sure Alexandria did not have very many great Pizza Kings.

Dorothy Schneider, writing for the Lafayette Journal & Courier has an article entitled New mayors expect to face steadier conditions which features Everybody’s Favorite Economist, Larry DeBoer.

New mayors won’t, apparently, have rosy financial circumstances under which to begin their terms, but conditions seem to have plateaued. He makes an important point about local finances:

“In this day and age, you’ve got to watch everyone else’s budget as well as your own. Where tax caps are in effect, your city could be being frugal and keeping its tax rate down, but then if the schools or the county go above (the limit), you lose money.”

And then there is this:

Given that tax caps now are in the state constitution, DeBoer said local leaders shouldn’t expect any relief on property tax revenues coming down the line. The only hope for mayors is to add to the property tax base through new developments in the community.

DeBoer expects more municipalities and counties will have to adopt Local Option Income Taxes in the next decade to help offset revenue losses.

“They’ll probably also be looking at user fees,” DeBoer said. “I expect once the economy gets going again … we’ll see more of that.”

I think what we’ll find is not so much a reduction in the tax burden from property tax caps but a shift in the burden from property owners to income earners. (Obviously, there is a lot of overlap in those categories.)