La Follette School of Public Affairs, UW-Madison
Public Affairs 891: State and Local Government Finance
Spring 2014, Tuesday, 6:00 pm – 7:55 pm, 6101 Social Science
The course
PA 891 is a master’s level graduate course examining financing of state and local governments. Since PA 892 covers
public budgeting, this course focuses mainly on the revenue side of the ledger, including commonly used state and
local taxes, user charges, intergovernmental aid and grants, and debt financing. The primary texts are Fisher’s [F] State
& Local Public Finance (3 ed.) and Brunori’s [B] The Future of State Taxation, along with journal articles and book chapters
available through the course site on Learn@UW (* on reading schedule).
The instructor
Todd A. Berry, PhD
Contacts: Work, pres1@wistax.org, 241-9789; home, berrylew@chorus.net, 831-3736
Office hours: Before class or by appointment, either on campus or at my Madison office (401 N. Lawn Ave.)
Mr. Berry, a Wisconsin native, holds B.A. and Ph.D. degrees from UW-Madison and master’s degrees from Chicago
(MBA) and Harvard (policy analysis/planning). His career includes work in state government, elective service on
county and school boards, private industry marketing, and the nonprofit sector. For the past 20 years, he has been
president of the nonprofit, nonpartisan Wisconsin Taxpayers Alliance, an 82-year 501(c)(3) civic research organization
dedicated to informing the press and public about state and local government. In addition to part-time teaching at
UW-Madison for the past five years, Berry has taught at Harvard, UW-Whitewater, and Gallaudet College. He is
married to former UW System VP and State Rep. Margaret Lewis and has three adult children (28, 26 and 23).
Expectations
▪ Mature, graduate-level writing
▪ Thoughtful and rigorous analysis
▪ Completion of all assigned material before class
▪ Unquestioned honesty and integrity
▪ Prompt and faithful attendance
Evaluation
▪ Census data and revenue forecasting exercises; highest of two grades is counted
▪ Revenue issue paper 4-5 pp. (20) and presentation (5), topics provided
▪ Team debate (12), questions provided; joint 1-2 pp. outline of pro and con arguments (8)
▪ Policy memo (5 pp.), topic (s) provided
▪ Mid-term quiz (8) and final exam (12), “closed book, notes” no make-ups (see alternative below)
10%
25
20
25
20
100%
All written assignments should be typed one-sided, with 1” margins, all sides. Line spacing is left to the author, but
spacing of at least 1.5 is helpful. A paper copy should be handed in at the start of class on the due-date assigned. If an
absence is excused ahead of time, a student may submit an assignment by e-mail up until the start of class. Late papers
will be penalized 10 points for each day late. Quality of writing, including grammar and punctuation, will affect
grading; feel free to use the UW’s writing center. Specified paper lengths do not include tabular appendices, if any..
Exercises
Two exercises involving data use and analysis are required. The first encourages familiarity with widely used state-local
finance data from the US Census Bureau; the second, some facility with revenue forecasting. Data sets will be posted
on L@UW site. You are encouraged to do both exercises, though only the highest grade will count. If you submit
two exercises, there will be a two-point bonus on your graded exercise (e.g., 91 “AB” becomes 93 “A”).
Quiz/Exam
There is a lot of good reading in this course for anyone wanting a solid background in basic state and local government
finance. It is worth your time, but some students need more encouragement than others. The initial course plan is for
a 30/45-minute mid-term quiz and a 60/90-minute final exam, each covering readings not previously tested.
Questions will be short answer and identification, with the possibility of multiple choice and short essay. If, at the
initial class, students prefer an alternative – periodic short quizzes; or just one final exam – that can be accommodated.
Revenue issue paper and presentation
The goal of this assignment is to explore a class topic in more depth and to expose classmates to a wider range of tax
policy issues. Each student should pick at least one topic from the list below; other topics are possible if they are
negotiated with the instructor no later than February 4. You may pick two topics, in which case the paper and
presentation lengths are halved and the grades are averaged. You will be graded on both the paper (4 pp. suggested)
and on your class presentation of the material (10-15 min.).
Suggested topics (for others, see instructor)
▪ Federal income tax deductibility of state-local taxes (evaluation? state impacts? federal reform and consequences?)
▪ State income taxation of high-income/-wealth individuals and migration (existence? when/where?)
▪ Using state income tax for income maintenance, e.g., EITC
▪ State income tax simplification (need? approaches? successes? issues?)
▪ Municipal, local, county income taxes (viability, mechanics, experience)
▪ Sales tax on food (and perhaps other essentials, e.g., drugs and clothing, exemption?, equity issues, revenue loss)
▪ Sales tax on services (which? states’ practices, mechanics, issues of equity, efficiency, problems)
▪ Legal issues and developments in sales taxation of non-store electronic and catalog purchases
▪ State streamlined sales tax effort (SST), history? need? mechanics? issues? success?
▪ Municipal sales tax (viability, mechanics, experience)
▪ California experience with Proposition 13
▪ NH experience with no income, sales taxes (pros/cons, consequences for revenues, services; growth, equity)
▪ Design of state tax/spending limitation (use/experience in states, mechanical issues, pros/cons, alternatives)
▪ Evaluation of state lottery experiences after 50+ years (history? approaches? lessons? evaluation?)
▪ Cigarette/tobacco tax avoidance and evasion
▪ Taxation of legalized drugs (e.g., marijuana), problems? approaches? mechanics?
▪ Enterprise zone tax credits for businesses and employers (use, evaluation)
▪ Tax incentives for attracting businesses across state borders (approaches? successes? failures? evaluation?)
▪ Combined reporting of parent and subsidiary business income in states
▪ Is taxation of business income by local or state governments feasible? (problems? solutions? better approaches?)
▪ Do businesses pay income taxes—or does someone else? (When? when not?)
▪ The change in and evolution of business organization and implications for income taxation
▪ Case for/against/alternatives to state taxation of estates or inheritances
▪ Alternatives to Wisconsin (and others) interjurisdictional equalization of property values (one-tier approach?)
▪ The concept of land (“site-value”) taxation (Henry George, history, feasibility, use/experience?, pro-con)
▪ Property tax relief via fixed-dollar “homestead exemption,” assessment freeze or growth caps, or rate limit (e.g., 1%)
▪ Alternatives to municipal assessment of property (e.g., county in Wisconsin, regional, statewide; approaches, issues)
▪ Mandatory annual full-market value assessment (mechanics, desirability, use?) vs. current periodic reassessment
▪ A property tax on renters (use? mechanics? problems? evaluation?)
▪ Success/failure/use/abuse of tax-incremental finance (TIF)
▪ Approaches to tax funding of technical colleges in Wisconsin (status quo vs. alternatives? mechanics? issues?)
Team debate assignment
Taxation and public finance are rife with fun controversies. This assignment requires teams of two to debate a
resolution from the list provided. One team (1A and 1B) will support the resolution; the other team (2A and 2B) will
oppose it. The “pro” team must offer arguments to defend its position, define any terms it chooses, and briefly
indicate how it would accomplish the task being debated; i.e., it needs to offer a plan. The format will more or less
follow standard debate procedure, with a few tweaks, as outlined below. For example, the first round will have 1A and
2A making opening, 2.5-minute statements for their respective positions.
Grading will be equally weighted between team debate performance and team preparation of a joint paper (2 pp.) that
(1) reviews the key points the team will make and (2) more briefly recaps main arguments anticipated from opponents.
Thus, the written part of the assignment need be nothing more than an outline or a list of key points with a supporting
sentence or three where appropriate. More than half of the two pages should be devoted to the team’s case, while
space devoted to the opposition can be more brief.
Round
Purpose
Min’s.
Tot.
Speaking order
I.
Opening remarks
2.5 ea
5
1A
2A
II.
Rebuttal remarks
2.5
5
2B
1B
III.
Cross questioning
1.5 each
3
1A or 1B asks 2A/2B
2A or 2B asks 1A/1B
IV.
Class questions
1.5 each
6
Q1: 1A/1B respond, 2A/2B respond
Q2: 2A/2B respond, 1A/1B respond
V.
Closing remarks
2.5 ea.
5
1A or 1B or both; 2A or 2B or both
VI.
VII.
Class votes winner
Class discussion
1
5
1
5
30
Debate questions to choose from follow. If two teams want to suggest a question not listed, they should obtain
permission from the instructor on or before Feb. 4. “Resolved that . . . ”
1. . . . the state of Wisconsin end property tax financing of K-12 education.
2. . . . the state of Wisconsin repeal its corporate income tax.
3. . . . the legislature and people of Wisconsin repeal the constitutional amendment authorizing a state lottery.
4. . . . the state of Wisconsin raise its tax on beer to $1.00 per gallon.
5. . . . the legislature and people of Wisconsin repeal the “tax uniformity” clause of the state constitution.
6. . . . the state of Wisconsin increase its tax on cigarettes to $5.00 per pack.
7. . . . the state of Wisconsin enact a law implementing Colorado’s TABOR limit on spending.
8. . . . the state of Wisconsin end “use value” assessment of farmland and return to market-value assessment.
9. . . . the state of Wisconsin end its personal property tax.
10. . . . the state of Wisconsin increase its gas tax on automobiles by $.10/gallon and restore rate “indexing.”
11. . . . the local property tax is a useful and needed part of any state-local tax system.
12. . . . high state income tax burdens have no effect on state economic growth.
Policy memo assignment
This assignment requires a 4-5pp. memorandum from you to a governor or state lawmaker that succinctly states the
problem, offers supporting and opposing arguments, and makes recommendations. The memo will be in reaction to a
case study distributed in class. Any student draft memos submitted on or before April 14 will be read, provisionally
graded, and returned by April 29. All final memos are due in class on May 6. Class time that day will be devoted to
careful discussion of the case; important student contributions in class could positively impact a paper grade.
Grading method
All items are graded 0 to 100 and then adjusted to the percentage share of final grade (e.g, 93 x 20% = 18.6). General
scheme is: 97, A+; 95, A; 93 A-; 90, AB; 87, B+; 85, B; 83, B-; 80, BC; 77, C+; 75 C; etc.
Topic and assignment schedule
Date
Topics
Readings
Assignments
Rev. paper Debate Exercise due/Test
[Topic selections] [Census data intro]
1/21
Intro. to state-local government structures and finance
F-1, FYWG*, Foc08-26,13-14*
Census*: summary, intro, map, table
1/28
Rationales: Public vs. private, federal vs. state-local
F-2, Wolf*
R1
2/4
Criteria of “good” tax systems
F-12, Smith*, NCSL07*, Groves (opt.)*
R2/3
2/11
Income tax
F-16, B-11, Sjoquist11*, WTP12-4*,
Foc12-04,20*
2/18
Sales and consumption taxes
2/25
-
► US Census data
D1
—
R4
-
—
F-15, B-2/3, WTP12-2*
R5
-
—
Sin taxes and gaming
F-15 pt. , 18
R6
D2
3/4
Business taxes; taxes, growth & development
F-17, 22 (skim); B-4/6, WTP12-9*
R7
-
3/11
User charges and fees; TELS
F-8, 7(skim), TELsKioko11*, AEI13*
R8
-
► Mid-term quiz
3/18
Spring break
-
-
Work on policy memo?
3/25
Property tax, I (mechanics)
F-13, B- 7, Foc06-9*, 08-12*, DOR13*
UrbInst13*
R9
-
—
4/1
Property tax, II (policy issues)
F-14, B-8, Zodrow08*,
LincLand08*, LLFisher09*
R10
-
—
—
-
► Rev. estimating
—
4/8
Intergovernmental finance
F-9,WTP12-06/07,13-04*, Oates99*
Tiebout56*, Yeung09*
R11
-
4/15
Capital finance and debt
F-10, “Basics”*
R12/13
D3
4/22
Special topic, I: School finance
F-19, B-9
R14
-
—
4/29
Special topics, II: Transportation finance
F-20, WTP13-5*
R15
D4
—
5/6
Policy memo discussion
Distributed case material
R16-17
-
► Final memo
5/13
Final exam
-
-
► Final exam
► Policy memo draft