"imagine if your local government allowed you to take 75 percent of your yearly property tax payment and apply that amount directly to your mortgage "
The excerpted question: why shouldn’t the gov. do that? It helps to remember that tax money is actually the property of the earner. The gov. takes it from its owner in exchange for services. So if the owner intends to provide services to the gov. as well, why shouldn’t the gov. let the owner keep more of what is his (or “its” in the case of a business) to begin with?
The only problem is the selectivity. The gov. is in effect choosing to fund some things this way while not choosing others. But if the standard is that the local gov believes the project will produce substantial revenue for them in the future… doesn’t that pretty much make sense?
Views expressed are always my own and not my employer's, my church's, my family's, my neighbors', or my pets'. The house plants have authorized me to speak for them, however, and they always agree with me.
Yes, I agree. I’m waiting for Jim to strike! He doesn’t like the Ark Encounter … :)
Tyler is a pastor in Olympia, WA and works in State government.
[TylerR]Yes, I agree. I’m waiting for Jim to strike! He doesn’t like the Ark Encounter …
I’m opposed (generally) to TIF (Tax increment financing) and the way the Ark Encounter was financed. And then skeptical about the concept of the Ark Encounter (but not the creation museum)
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Side note: I am adamantly opposed to public subsidies of MLB / NFL stadiums. See How Cincinnati got Suckered into Two Stadium Plans
On TIF: the basic idea is that you have property that is not living up to its potential to pay property tax to the State. So the state makes a deal with the property developer. The state agrees to get less property tax on the upgraded property but that property tax is more than they get with the undeveloped property. And then the developed property spurs nearby development and thus property taxes go up for those properties too. It’s property tax alchemy. Sometimes it works. Sometimes it leads to overdevelopment and wasteful development. As a further aside on overdevelopment consider all the abandoned malls. I’m sure some of them relied on TIF. The photos are stunning. Also see Deadmalls. If the redevelopment works … TIF is the hero … if not … the chump. More. The case of Best Buy’s HQs in Richfiled MN (Twin Cities)
On funding for the Ark Encounter: If its a good Christian idea … let good Christians fund it.
Appreciate the “dummies” explanation of TIF. I’m not a finance guy. I know you are!
Tyler is a pastor in Olympia, WA and works in State government.
[TylerR]Appreciate the “dummies” explanation of TIF. I’m not a finance guy. I know you are!
I’ve been heavily influenced by the economic theory of Milton Friedman as explained in his book (1975) No Such Thing as a Free Lunch. From the Wiki article: “His political philosophy extolled the virtues of a free market economic system with minimal intervention”
How it applies to:
- TIFs … you cannot make $$ out of nothing. You are basically robbing one entity for another
- On stadiums: If there is a market need for a a stadium, those who enjoy the stadium (the owners and the fans) should pay for it
- On gambling. And this is so funny. The idea that you can build casinos to spur development. (See Atlantic City). In Minnesota the casino idea comes up almost every year. The latest was to have a downtown casino for the failed Block E development. (Never passed and now another idea has taken root). Casinos really rob people of wealth
God has definitely made us all different. You enjoy read Milton Friedman and pondering economics. I am reading about the naval war between Britain and Germany in World War I, and wondering why poor Admiral Cradock decided to fight at the Battle of Coronel!
Tyler is a pastor in Olympia, WA and works in State government.
“The bond documents cite at least 39 risks to investors, ranging from the potential for the animals to catch infectious diseases to the unclear constitutionality of the tax incentives Williamstown is offering for a Biblically themed attraction. The park “may never achieve positive cash flow,” which documents say would lead to default.”
http://www.businessweek.com/articles/2013-11-21/noahs-ark-replica-finan…
There are tax breaks and local incentives for all industries that businesses take advantage of, and well they should. I am not a big fan of the ark project, but why isolate criticism on this business when all of them benefit from certain parts of tax law?
I guess the author never has taken a mortgage or charitable deduction, dependents, etc. That’s not really fair to the renters and single people.
If a junk bond has a rating of ‘BB’ or lower by Standard & Poor’s (source) and is not considered investment grade, how would one view unrated bonds?
[Jim]If a junk bond has a rating of ‘BB’ or lower by Standard & Poor’s (source) and is not considered investment grade, how would one view unrated bonds?
“It should be noted that “unrated” bonds are legally in the “junk” category and may or may not be speculative in terms of credit quality.” - http://www.expertlaw.com/library/business/junk_bonds.html
“Fitch, Moody’s, and Standard and Poor’s are the three credit rating agencies that assess the quality of debt securities in the United States. These firms analyze the financial strength of the bond issuer, the creditor’s options in the event of default, and other issues such as the viability of the project being financed. All three firms use a system within which the lowest risk bonds receive AAA or Aaa ratings and the lowest rated bonds receive C or D ratings. If you buy a rated bond, you have an idea of the risk that your are taking. When you buy an unrated bond, you take a leap of faith because no third party can attest to the quality of the security you are purchasing.” - http://wiki.fool.com/Rated_Debt_vs._Unrated_Debt
It’s probably relevant to consider where value (which is what “wealth” is) comes from. It does not actually come from “stuff” ultimately, but from people and their desires. Consequently, while a project may seem to shuffle money from one coffer to another, in between, value may be created.
But do I like the idea of government picking and choosing which projects to fund via tax breaks? I don’t, but not because value isn’t created. Sometimes it is, sometimes it isn’t. But to me the problem is that gov. is basically obtaining revenue in a backhanded way. We should stick to (i.e., get back to) direct and simple taxation that makes the link between cost and benefit as clear as possible. Complex value-creating (and risk taking) transactions belong in the private sector.
Where I’m sympathetic with the Ark case is that there is too much taxation in general, so other things being equal, I’m always a little bit heartened to see tax dollars going in the other direction—back to their sources.
Views expressed are always my own and not my employer's, my church's, my family's, my neighbors', or my pets'. The house plants have authorized me to speak for them, however, and they always agree with me.
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