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The Tentacle


July 3, 2012

The Better of Two Worlds

Farrell Keough

The recent tax rebate of $100 from our Board of County Commissioners has created a tremendous stir. Some have argued that the county should keep this money and decide on which non-profit(s) to fund.  Others have suggested the cost to mail out these refund checks is excessive.

 

Let us consider these perspectives and determine if in fact, the commissioners have made the best choices.

 

Non-profits offer many necessary services to those in need – supporting these organizations is crucial. One of our local Democrat organizations presented an interesting alternative on their Facebook site.

 

June 26 at 8:49pm

A local group of citizens is disappointed in the BOCC decision to eliminate funding of our valuable non-profit agencies previously supported by Frederick County government. They will be taking out an ad in the Frederick News Post listing the names of those of us who have pledged to give our $100 property tax rebate to a charity of our own choosing.

 

If you would like to participate, please send a quick email to WeCare@fredneck.net. Simply give your name as you wish it to appear in the newspaper notice. This will be your promise to donate your $100 to a local non-profit. If you prefer to be listed as Anonymous, that's OK, too.

 

Here is the wording of the ad:

 

We, Frederick County citizens, have always benefited from the partnership between County government and our non-profit agencies. This year we, the undersigned, have pledged to give our $100 property tax rebate to a non-profit of our choice. We recognize the needs that fully-funded non-profits meet in our community. We support continued governmental funding.

 

Feel free to forward this request to any people you believe would be supportive!

 

A somewhat unfortunate side note – many who posted to this Facebook thread were more interested in donating their refund to the opposition candidates of the current Board of County Commissioners than in giving to non-profits.

 

Either way, we may hope for a substantial increase in donations to our local non-profits once these checks are mailed. Our expectations are high!

 

And, this is how it should be – these tax dollars are being returned to the citizenry and we should have the liberty to choose how we want to spend them. Choosing a non-profit to support is a wonderful way to spend your own income.

 

The second issue was the decision to mail checks. A $6.7 million budgetary excess will allow for these rebate checks. The cost for mailing them has been estimated at $23,000. Many have suggested that spending the money to mail these checks is a waste of taxpayer dollars. In lieu of mailing these checks, many people have suggested the commissioners credit people’s tax bills instead.

 

Let us consider two areas while addressing this: 1) previous mailing expenditures by past county administrations, and 2) actual outcomes from mailing rebates checks.

 

In addressing the actions of previous county administrations, a friend of mine came across a CD-Rom from 2007 entitled “Emergency Preparedness.” On the back of the CD-ROM, a statement from President Jan Gardner read as follows: "...Government cannot do it all. We need citizens to be prepared for emergencies at home and at their place of business. The information in this presentation is endorsed by the county commissioners and will help you prepare for an emergency. Being prepared not only helps you and your family, it helps the larger community response...”

 

It is important to note that the cost for mailing these CD-ROMs was approximately $30,650 – substantially higher than the $23,000 to return our tax dollars. While comparing a single mailing expenditure to another may not justify an expense, it is reasonable to recognize these expenses have been a common practice by our county commissioners over numerous administrations. (It is worth noting that Commissioners Charles Jenkins and John L. “Lennie” Thompson voted against this $30,650 expenditure)

 

So this brings us to the decision to mail out checks to the citizenry versus applying a credit to their tax bill. Surprisingly, there have been very few studies on the return on investment of local governments mailing checks versus applying a credit for returning taxation overpayments. This might be due to the fact that very few states and local governments actually do return these overpayments. Many studies exist for the federal government deciding on which approach to take – since the federal government can print money, this alternative can present itself much more often.

 

Fortunately, in 2010 a study by Social Security Works was undertaken to determine which method actually produces the best return. The National Bureau of Economic Research determined that sending the public a physical check increased spending by almost twice the rate of a credit!

 

This paper quantifies the spending response to these policies and examines differences in spending by whether the stimulus was delivered as a one-time payment or as a flow of payments from reduced withholding. Based on responses from a representative sample of households in the Thomson Reuters/University of Michigan Surveys of Consumers, the paper finds that the reduction in withholding in 2009 boosted spending at roughly half the rate (13 percent) as the one-time payments (25 percent) in 2008. [Underline added…]

 

In short, sending a physical check pays for the cost and spurs spending – in this case, the spending will likely be local – by almost twice as much!

 

Since local government cannot print money in an attempt to stimulate the economy; and, this proposal is simply returning our own money, it is obvious that the best method is to spend the small processing amount to ensure the public gets a check in hand!

 

As we can see, two possible outcomes will likely occur: an increase in funding to our local non-profits, or an increase in spending to our local businesses. In either case, this is a win-win scenario and the wisest decision the commissioners could have made. Not only has this Board of County Commissioners kept their promises to focus on an efficient government, but it has continued to “fight for the taxpayers”!

 

This rebate plan has the greatest potential to show real economic stimulus in Frederick County – something no other county in Maryland is currently able to accomplish.

 

fkeough@hotmail.com

 



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