Hands off my beer

As a home brewing enthusiast (currently drinking an O.E. clone, Oktoberfest in the bottle, and plans for a double brew of a Black and a Tan in the next few weeks) and craft beer drinker, the recent news about licensing changes has confused and concerned me. The Alcoholic Beverages Control Commission plans to make it difficult for craft brewers, unless 50 percent of their grains and hops are grown in state.

While I'm sure there was deep thought, and a detailed Cost Benefit Analysis of the new proposal, I'm unable to find it.

Increasing costs, and implementing barriers to entry, on an emerging industry, which provides the best regional beers in the US (in my expert opinion) in addition to many local jobs is no way to encourage job growth.

Promoting rent seeking in the agriculture industry, does little to encourage axillary industry boosts, such as tourism.

I think of my daily afternoon lesson on my walk home, presented by the Duckboat Captains the local version of oral history on wheels, 'the Beantown Pub is the only Pub in the world where you can drink a Sam Adams while looking at his grave.'

Helping the local hops industry, in favor of the local craft brewing industry is down right ridiculous. I have seen many policy proposals that use bad logic and reasoning to justify them, but this policy lacks even that low bar (pun intended). It is on par with the Candlemaker's Petition for trade protections from an unfair foreign power, The Sun.

BHI releases study on education spending in Massachusetts

The Commonwealth of Massachusetts could cut more than a billion dollars from education spending without measurably affecting the performance of public schools. This is a finding of a study released today by the Beacon Hill Institute and entitled, Why Massachusetts Should Spend Less on Education. Read more.

Complete study is available at beaconhill.org.

"Taxachusetts Minus"

Jon Keller interviews BHI's David Tuerck on taxes in Massachusetts

Major takeaway: "Our competitiveness is a fragile thing."

BHI releases revenue estimates for FY 2011, FY 2012

At a Joint Ways and Means Committee hearing on Tuesday, December 14, the institute presented its annual revenue estimates. BHI estimates that Massachusetts state tax revenues will come in at $20.363 billion for Fiscal Year 2011, a growth of 9.8% over FY 2010. Revenues will be $21.265 billion for FY 2012, 4.4% above 2011.

Read more about Tuesday's revenue hearing here.

BHI in the Boston Globe: Sales tax hike necessary?

BHI Executive Director David G. Tuerck in today's Boston Globe:

On this matter, it is the governor who is right and the bill's sponsors who are being "disingenuous." For one thing, the $900 million estimate apparently ignores the fact that sales taxes drive business to other states and to the Internet. Under the new law, a TV set that could be bought for $1,000 in New Hampshire will cost $1,062.50 in Massachusetts, just another reason to drive an hour to make a big purchase and to stock up, along the way, on liquor, cigarettes, and other items.

The proposed tax hike will have negative consequences for the state economy. We predict a loss of 12,666 private-sector jobs, as stores in Lawrence and Lowell lose business to stores in Salem and Nashua. And because unemployed workers stop paying income taxes, the state will lose revenue from that source even as it gains revenue from the sales tax. In fact, the higher sales tax can be expected to yield only about $674 million in new revenue when losses in other revenues are accounted for.

Before the Legislature decides to inflict a new burden on state taxpayers, retailers, and workers, it would do well to ask just why it wants to enact a broad-based tax increase in the first place. A 25 percent increase in the sales tax would be a panicky response to what was seen just a few years ago as an exercise not in fiscal ruin but in fiscal dexterity.

BHI Releases Question 1 Study

On Tuesday BHI released a new study on the impacts that Question 1 would have on state residents. The majority of the current research on the effects of the elimination of the state personal income tax looks at an all or nothing case, with both sides arguing that the others vote would lead to lower economic outcomes.

The real world, especially politics, rarely operate with black or white but more often gray areas. Using this rational we examined cases where the Commonwealth could cut line-item spending to that of comparable states, thereby supplying the same amount of services of states such as New Hampshire, Colorado and Texas and increasing other taxes. This template could be used by the legislature to get though the income tax elimination, should voters support the ballot measure, and expand the economy.

The cuts in service to comparable states levels accounted for 70% of the lost income tax revenue. The remaining 30% is made up thought cost cuts (amending the state Prevailing Wage Law) and higher sales and property taxes.

These adjustments would enable the economy of Massachusetts to grow by 80k jobs and increase disposable income per household by $1,461.

EOT Cost Report

The Executive Office of Transportation and Public Works (EOT) has released its Road Flagger & Police Detail Cost Report & Analysis. The EOT findings include projected cost savings of between $5.7 million and $7.2 million in the first year. This is the money that the police union is working to preserve with the rent-seeking activity exclusive to the Commonwealth of Massachusetts.

The report leaves out any positive effects private flagging firms would bring as a result of competition. By letting the market set the rate, the Commonwealth could reap the benefits of lower wages.

The EOT Report concludes:

Under the draft road flagger and police detail regulations and the revised traffic management plans, the Commonwealth will realize cost savings through lower hourly rates for road flaggers, efficient use of road flaggers and police details on public works projects, and through greater control over the administration of the traffic management plan.

Bailouts and Moral Hazard III

First it was Bear Stearns, Fannie Mae, and Freddie Mac.

Then it was the Massachusetts Turnpike Authority.

Now it's the MBTA.

Given the nature of moral hazard, this could be quite a long series of blog posts.

Broadband Internet as a Public Good

The governor is signing a bill today that would spend $25 million in taxpayer money to bring high-speed broadband internet to communities that do not currently have it.

I must have been out that day in economics class when the professor explained how "really fast internet" was a public good.

As federal judge Janice Rogers Brown once asked "When did government cease to be a necessary evil and become a goody bag to solve our private problems?"

On the brightside, the BHI blog will load much faster in western Massachusetts and the good people out there can more quickly download studies detailing how lower telecommunications taxes lead to more access.

Good Sign from the Senate

In 2006, the Massachusetts General Assembly created a 25% tax credit for film production companies to shoot films in Massachusetts. The legislature believed that this tax credit would attract new business and create jobs in the Commonwealth. However, other states have joined in the act and a film tax credit "arms race" has erupted to see who can offer the biggest subsidies to the film industry.

Remarkably, the Massachusetts Senate has declined to take up the film industry tax credit bill. Senate President Therese Murray said the bill was "not on top of our agenda" as the legislative session ends next Thursday.

Subsidies such as tax credits distort the natural marketplace by favoring one industry over another. BHI suggested that Massachusetts simplify and lower the corporate tax rate to help all industries, not just the film or biotech industries. A uniform, lower tax rate will attract business to Massachusetts. Kudos to the Senate for rejecting this unnecessary tax giveaway.

Electoral College Debate

Massachusetts is currently debating the National Popular Vote Bill. Last week, the House of Representatives passed the bill by a wide margin: 116-39. The Senate is scheduled to vote on the bill tomorrow or early next week.

Defending the electoral college system, Boston Globe columnist Jeff Jacoby prefers the status quo and believes the NPV is a bad idea.

Supporters of NPV believe that presidential candidates would be forced to pay attention to all states rather than swing states. But there's another way to get their attention.

In 2003, James D. Miller, an economist at Smith College, suggested that Massachusetts modify its electoral college system from the current winner-take-all format to proportional representation. Miller argues that this change would force even Democratic standard-bearers to actively campaign in 'safe' states like Massachusetts.

Here is my take on the electoral college.

Moral Hazard and Bailouts II

Governor Patrick is proposing a bailout of the Massachusetts Turnpike Authority.

The House, acting swiftly at the administration's request, gave initial approval yesterday to legislation that would allow the Turnpike Authority to use the state's higher credit rating to refinance its debt to lower its interest costs. The move means taxpayers would be responsible for the turnpike's debt if the agency defaults.

Putting aside the history of mismanagement by the Massachusetts Turnpike Authority and the sorry history of the Big Dig, what incentive do the members of the Turnpike Authority have to make sure taxpayers don't end up shouldering the risk?

Unlike the private sector, where shareholders keep management close to the vest, the overseers of public agencies are long gone after making critical decisions. Such political appointees to the turnpike board will not be around 10 years from now. There isn't an incentive to think long-term.

The debate over financing public infrastructure is not exclusively a political problem to pin upon Democrats or Republicans but a public choice problem. The question is "what is the proper institutional setting to prevent the creation of moral hazards in the first place?"

BHI in Today's Boston Globe: Scrap the police details

David Tuerck, executive director of the Beacon Hill Institute, has another op-ed, "Scrap the police details" in the Boston Globe. In this latest op-ed, David discusses the benefits of hiring civilian flaggers in a competitive system.

On details, BHI leads the way

Seeking to address a nearly $20 billion infrastructure shortfall, Governor Deval Patrick, Senate President Therese Murray and House Speaker Salvatore DiMasi expressed an interest in reforming the state's costly police detail system at a press conference yesterday. Excessive police detail costs have been identified in the past by a 2004 Beacon Hill Institute study, Police Details: Protection or Perks?

Here's a November 2007 Globe op-ed by David Tuerck on police details.