A caller to my last radio appearance did not understand my issue with the North Dakota Legacy. For readers unfamiliar, this fund takes thirty percent of collections from oil and gas taxes and has some limitations on its use as far as spending purposes, such as no more than 15 percent of principal expended during a biennium and so on.
Paul Ryan is pressing hard for tax changes to be permanent rather than temporary (see a representative article here). From a traditional economic perspective he is probably right to do so if he wants policy to have maximum impact on the economy, regardless of your preferred performance metric. There exists no shortage of empirical research on this topic and I include a link here to a research note that seems typical (and more importantly is not paywalled).
I think it hardly needs mentioning again, but I guess I will: the legislative process in North Dakota probably makes it even more important that we have some confidence in our revenue forecasts. Our legislators are meeting for three months to determine budgets for the next two years. There is always the possibility of a special session if need arises, but you want that to be the truly exceptional case. Now I am not suggesting that anyone will ever get the numbers spot on, 100% accurate, but we can get closer.
The state released an updated forecast from Moody’s today along with some slides that make little sense (found here). I would go into the details of the forecast but why bother? We have absolutely no insight into the forecast process followed, the assumptions underlying any model relationships, or even a list of variables employed and the time period considered. Seriously, if this were my forecasting class, they would fail.
For the last few days I focused on state level tax data. The release of a new forecast and the general state of the forecast process promises many more posts to come on this topic. I thought for today I would turn toward a more local number. Grand Forks had its largest month for sales tax collections in its recorded history. What does this look like?
I continue to think about the tax situation in North Dakota right now, particularly trying to understand what the data are trying to tell us. Obviously I want to avoid a situation of torturing the data until they confess, but that should not stop us from slicing and dicing the data to find something meaningful.
We are getting a new forecast this week for tax revenues in North Dakota. Or so we are told. I’ve written about the problems with these forecasts in the past, but there is a further issue here needing discussion. The simple fact of the matter is a lack of good practice in the overall approach, particularly with how forecast results are disseminated.
Just a few further thoughts, as yet completely unrefined, about the radio program today. The major discussion on the radio today was taxes. This is always an interesting topic because callers often provide multiple, and often contradictory, views of taxation. It is good that radio is not a visual medium (for many, many reasons) but the confused look on my face when listening to some of the callers would not be taken well I am sure.
Yesterday’s post (found here) mentioned Grand Forks retail and the fact that sales were behind last year’s level. As a recap, the accumulated total of monthly collections in 2016, when compared to the same month in 2015, were all lower, and in some cases by significant amounts. Collections from a few specific months were ahead of the same month the year before, but the accumulated total never got higher than 2015.
Location matters. A lot. The more I read and study about the North Dakota economy the clearer that becomes. As I go through this I am looking more and more at the various locations for economic activity in the state, as the following map demonstrates.