Capitol Fax.com - Your Illinois News Radar

Fun with numbers

Posted in:

Illinois

* Let’s circle back to the Illinois Department of Revenue’s use of dynamic scoring that helped kill off a progressive income tax. You’ll recall that the scoring came up with these results…

After 14 years of implementation of this tax policy (year 2030) the main economic effects of this tax policy are:

* Disposable Personal Income decreases $2.8 Billion per year compared with the baseline scenario (current conditions and economic trend).

* Real Gross Domestic Product of the state decreases $1.7 Billion compared with the baseline scenario (current conditions and economic trend).

* Total Employment decreases almost 18,000 jobs compared with the baseline scenario (current conditions and economic trend).

* Governing magazine…

While dynamic models do not generate a margin-of-error estimate for dynamic effects, research has shown that traditional revenue estimates carry an error rate of around 3 percent.

* Wordslinger did the math…

The projections from “Gov. Rauner’s Department of Revenue” are ridiculously precise, given the scales of the base numbers and all the dynamics that go into economic forecasting.

GRDOR estimates a job loss of 43,000 from a current base of 6,100,000. That’s .7 of 1%.

GRDOR estimates a GDP loss of $2B from a current base of $736.3B. That’s .27 of 1%.

Wow, those guys are goooooood. Who’s doin’ the modelin’ and projectin’ — freakin’ sharks with freakin’ lasers on their heads?

Yet not even ballpark projections on the ROI for The Turnaround Agenda. Go figure. Or not, in this case.

I’m thinking they just made it up on the fly and nobody put the “work” to the Absurdity Test. They were supposed to add some zeroes on the back ends of those “projections.”

And he didn’t even factor into the equation that these projections cover a time period of 14 years.

There is simply no way to say with any sort of authority that these statistically tiny predicted changes have any solid significance.

posted by Rich Miller
Thursday, May 5, 16 @ 10:49 am

Comments

I’m sure there are a lot of people who’d like to know with that degree of certainty what the economy will be doing 14 years from now. Did anyone see the Great Recession coming in, say, 1994?

Comment by Commander Norton Thursday, May 5, 16 @ 10:56 am
—
… that these statistically tiny predicted changes have any solid significance.
—

Maybe not statistical significance. But rhetorical significance?

In spades.

Comment by Formerly Known as Frenchie M Thursday, May 5, 16 @ 10:58 am
“How to Lie with Statistics” is a book written by Darrell Huff in 1954 and reading it should be required in High School Consumer Economic or Government classes.

Comment by Beaner Thursday, May 5, 16 @ 10:59 am
Thanks to Word for teasing-out the math a bit. Here are a few more calculations to add to the mix -

– Loss of 43,000 jobs over 14 years averages about 260 jobs/mo, which the Guv thinks is a terrible tragedy

– IL gained almost 80,000 jobs over the last year, which averages to about 6,500/mo …. which the Guv’s office wants to ignore, as it undercuts his “we’re all going to hell/let’s do the Turnaround” motif.

Comment by Linus Thursday, May 5, 16 @ 11:00 am
Exactly. That is the margin of syatistical error on the “traditional model” and not the REMI Dynamic model. So it’s actually even more prone to error. The whole dynamic modeling approach was invented by supply siders to justify the “trickle down theory” which David Stockman famously derided as “voodoo economics.” They get away with this garbage because no one bothers to check it out and actually research the data and validity. A big thanks to Word!

Comment by Old and In the Way Thursday, May 5, 16 @ 11:01 am
Since the margin of error includes positive values, we could be adding a whole lot of jobs and be making billions if we did adopt a progressive income tax.

Comment by very old soil Thursday, May 5, 16 @ 11:03 am
If you can’t dazzle them with brilliance, then baffle them with …

Comment by Rufus Thursday, May 5, 16 @ 11:06 am
I wonder if they bothered to factor in the the increased comsumer spending from vendors and employees actually getting paid what they are owed by the State?

Comment by RNUG Thursday, May 5, 16 @ 11:06 am
Who allows themselves to be manipulated by such garbage?

I really am disappointed that I allowed myself to be hopeful there really was a Grand Compromise.

Once again not even numerical truth is safe.

Comment by cdog Thursday, May 5, 16 @ 11:06 am
===There is simply no way to say with any sort of authority that these statistically tiny predicted changes have any solid significance.===

And yet Team Rauner will state it as fact, incontrovertible, unvarnished, plain as the nose on your face truth. They have their reality. End of discussion.

This should be called dagnabbit scoring.

Comment by 47th Ward Thursday, May 5, 16 @ 11:07 am
CK from the Governor’s Office doesn’t want to respond on this! Only things she can twist to their advantage. What will the Governor do next year if the Democrats gain seats in the house or Senate and gain a increase with the super majority. Do we have any projections on whether they have a chance of gaining seats in the House or Senate?

Comment by Coach Thursday, May 5, 16 @ 11:07 am
==Who allows themselves to be manipulated by such garbage?==

Answer- Mark Batinick, 97th Dist. State Rep

Comment by Markus Thursday, May 5, 16 @ 11:12 am
My guess is some math-challenged political Superstar just made up the numbers, claimed they were done by IDOR, but didn’t realize how absurdly minuscule they were.

There were supposed to be more zeroes on the end of those projections for them to bite.

Comment by wordslinger Thursday, May 5, 16 @ 11:22 am
===And yet Team Rauner will state it as fact, incontrovertible, unvarnished, plain as the nose on your face truth. They have their reality. End of discussion.===

Are we surprised? The guy hires Laffer disciples.

Comment by Ducky LaMoore Thursday, May 5, 16 @ 11:23 am
I am shocked, just SHOCKED, that their BS math is really BS, supporting a BS narrative.

Seriously shocked……/s

Comment by JS Mill Thursday, May 5, 16 @ 11:24 am
Thanks Word for doing the work.

Trust has not been an issue with Rauner of late. There is none.

That being said. The politically timid (bi-partisan) ruled the day.

Comment by Norseman Thursday, May 5, 16 @ 11:25 am
Auditioning for T-Rump campaign

Comment by D.P.Gumby Thursday, May 5, 16 @ 11:26 am
Is it coincidence that the “loss” they came up with sufficient to erase the projected $2B bump in revenue? Has to be, right? This is math and numbers don’t lie.

Comment by illini97 Thursday, May 5, 16 @ 11:26 am
Again, I am elated we’ve elected a sharp mind to run the state like a business.

If this level of BS was exposed at a corporation, the stock tanks and executives get walked out. If a corporation just flat out doesn’t pay it’s bills for a year, they stop doing business.

Stop electing anyone who tells you they’ll run the government like a business. It is not a business. It’s inherently different.

Comment by illini97 Thursday, May 5, 16 @ 11:30 am
The more I think about it, the release of this ridiculous “analysis” reminds me of the “Stonehenge” scene in “This is Spinal Tap.”

Remember? To great fanfare, they lowered their Stonehenge props on the stage, but they had been scaled in inches, rather than feet?

Comment by wordslinger Thursday, May 5, 16 @ 11:31 am
The Rauner folks just don’t care what it takes to “win” as long as they win.
Is it any wonder that Madigan discouraged his members from trusting him?

Comment by Austin Blvd Thursday, May 5, 16 @ 11:32 am
This smells of Darth Arduin. She is an associate of Arthur Laffer, of Laffer curve/supply side infamy. This analysis has her smell all over it.

Comment by Honeybear Thursday, May 5, 16 @ 11:39 am
Laser sharks - good one!

Comment by siriusly Thursday, May 5, 16 @ 11:44 am
It’s really not hard to come up with a precise number for events far off in the future and with a number of assumptions. Actuaries do that all the time. For instance, a prediction can be set at the 50% confidence level, the point where half of the possible outcomes come in over and half the outcomes come in under. I have no idea whether Revenue’s predictive model is any good in this instance, but the mere fact that it generates a precise number may not be very troublesome at all.

Comment by 39th Ward Thursday, May 5, 16 @ 11:45 am
The article also states:

“None of this is to suggest that dynamic scoring can’t be useful in comparing economic tradeoffs among different tax-policy choices or even among different tax and expenditure mixes. States such as Nebraska that have approached dynamic models in this spirit — using the model as a source of information rather than a budget tool — have had a much more successful and productive experience. These models can also be customized to show the distributional effects of tax-policy changes across income classes or industry types.”

May explain why this method is still around after a quarter of a century.

Comment by Louis G. Atsaves Thursday, May 5, 16 @ 11:45 am
A great many people need to read up on the Laffer Curve before they start reaching ridiculous conclusions (the Rauner administration) or think that Laffer Curve is invalid (most commenters here). The bottom line is, Illinois would have to increase taxes on the wealthy well above the highest tax rate I’ve seen proposed, higher than California’s rates, before we reached the revenue maximizing point on the Laffer Curve.

Comment by AC Thursday, May 5, 16 @ 11:48 am
@Louis G Atsaves- is this the modeling they have used so successfully in GOP dominated Kansas? Nice results there /s

Comment by JS Mill Thursday, May 5, 16 @ 11:54 am
@ Louis

So what’s your point? that quote seems to suggest that the model is simply another data point or consideration and not something to write a full year budget around.

My guess is that goes triply true for whether or not to keep an inequity enshrined in our constitution into perpetuity. Sheesh. You are proving the wrong point.

Comment by Abe the Babe Thursday, May 5, 16 @ 11:59 am
@AC

No doubt their have to be significantly high taxes before a reduction could actually grow the tax base. My criticism of Laffer people is that they fully acknowledge that point, and then counter intuitively sign off on Brownback/Rauner type state policies that in way have anything to do with a prohibitively high federal tax.

Comment by Ducky LaMoore Thursday, May 5, 16 @ 12:00 pm
The only numbers that appear to count are campaign $$ Rauner controls. House Republicans, turn your eyes to the number of hurting social service providers in your community, state vendors, higher education institutions. Everything else is a smokescreen.

Comment by Earnest Thursday, May 5, 16 @ 12:04 pm
@JS Mill, they also still use these models to project economic rippling effects of publicly financed stadiums, arenas, auditoriums, museums, exhibition halls, etc.

Dismissing these models as total failures? After a quarter of a century? I don’t know what is more absurd at the moment, using the word absurd to describe this analysis form (as happened yesterday), or just dismissing it out of hand.

Comment by Louis G. Atsaves Thursday, May 5, 16 @ 12:04 pm
Louis - May explain why this model has been around for a quarter of a century….

Please give us examples when this model successfully predicted outcomes.

Comment by Chicago 20 Thursday, May 5, 16 @ 12:11 pm
This is what’s known as false precision. It adds up to no measurable impact.

Comment by Joe Biden Was Here Thursday, May 5, 16 @ 12:12 pm
Thank you Wordslinger!

Comment by burbanite Thursday, May 5, 16 @ 12:22 pm
For anyone who is interested in reading about the REMI model’s strengths and weaknesses - this is a good summary article written last year.
https://www.uvm.edu/~vlrs/EconomicIssues/REMI.pdf

Comment by Natalie Thursday, May 5, 16 @ 12:28 pm
Rauner’s words to the Dept of Revenue:

I want a want a report on Progressive taxes and I want it to show ___________…

Comment by Mouthy Thursday, May 5, 16 @ 12:30 pm
The study was done by undergraduate students at the University of Vermont under the supervision of two professors. Not a reviewed journal nor a peer reviewed article. This is more of a review of the literature on the model (referred to as lit reviews) as opposed to a critical analysis of the model.

I have had two court cases involving this and I can point to a host of analysis on both sides.. It’s really pretty well divided between great and garbage so take your pick. The
point is less about the validity of the model and more to the indisputable fact that the data was cherry picked and made to appear even more conclusive than even the REMI model suggests. No context for the numbers and no mention of the margin of error. Even a margin of error of 3% plus or minus invalidates their assertion since each was well below 1%. “Sharks with lasers” or “Weasels with calculators” take your pick.

Comment by Old and In the Way Thursday, May 5, 16 @ 12:52 pm
So let me clarify. I think the Laffer curve is certainly valid, if not sound in certain situations. However it is simply a theory, in my opinion, that is utilized mostly for it’s political outcomes. But look at Kansas. Look at Louisiana. One can see the real effects of the Laffer curve on social policy and the social safety net. That’s not theory. That’s reality. What is happening in my beloved Southern Illinois is a reality. The wealthy are getting wealthier at an astounding rate while the rest are sinking fast. Not only that corporations, the beneficiaries of the Laffer curve (actually the owner/investor class) are pocketing the money, not plowing it back into the economy, not reinvesting, not creating jobs (the term “job creator” 100 times more offensive to me than the f-bomb), not expanding businesses. They are holding the profits from the Laffer curve in investments which only serve to enrich them or the park it offshore to get away from taxes. So yes the Laffer curve is valid, but NOT sound for Illinois. It is a libertarian self centered welfare check for the privileged and undeserving.

Comment by Honeybear Thursday, May 5, 16 @ 1:01 pm
Ducky LaMoore - agreed, Brownback/Rauner policies are a failure. Now, if we were contemplating a 50% state income tax on the wealthy, in addition to federal taxes, we might receive less revenue, but no one is suggesting that. I’m also quite confident that the impact of not having a budget far exceeds that of any reasonable tax proposal.

Comment by AC Thursday, May 5, 16 @ 1:13 pm
Rauner’s IDOR director appointee, Connie Beard, “is best known for her long service as head of the Illinois State Chamber of Commerce Tax Institute.”

Hans Zigmund, who runs IDOR research office is a devotee of the Austrian school of economics.

https://twitter.com/hanszigmund

That should tell you all you need to know about the IDOR “study”.

Comment by skeptic Thursday, May 5, 16 @ 1:21 pm
Honeybear, I can not speak to the specifics of this particular analysis, but as a long time (24 years) but infrequent user of REMI, I can assure you that the model is not built on any “theory” from which the Laffer curve is derived. It is based on mainstream economic principles and theory.

Comment by Natalie Thursday, May 5, 16 @ 1:30 pm
==One can see the real effects of the Laffer curve on social policy and the social safety net.==

Honeybear - it’s just a theory, but it explains a lot. For example, when taxes were lowered at the federal level in the 60’s from a stratospheric 90% at the highest marginal rate, more revenue was collected. This even helped fund new social programs at the time. When the same thing was tried in the 2000s it didn’t work. The Laffer Curve provides an answer for that too. The general consensus is the revenue maximizing total tax rate is somewhere around 70%. Of course lowering taxes in Kansas generated less revenue, total taxation was already lower than the revenue maximizing point. It’s even consistent with the theory.

Comment by AC Thursday, May 5, 16 @ 1:30 pm
How many jobs will be lost if some public universities close, as this Governor is insisting on?

Comment by Mike Cirrincione Thursday, May 5, 16 @ 1:50 pm
Louis, what a shock, you’re all in.

Then, by the governor’s own numbers, you must agree that the purported “impact” over 14 years is statistically insignificant.

Comment by wordslinger Thursday, May 5, 16 @ 2:17 pm
==the “Stonehenge” scene in “This is Spinal Tap.”==

“Nobody knows who they were…or what they were doing.”

Comment by Excessively Rabid Thursday, May 5, 16 @ 2:37 pm
Well when Good Ol’BR throws out them there big numbers us common folk get feelin’ a bit uneasy. We have a hard time pronouncing statistical significance let alone understandin’ it. But the rhetorical significance he gets is huge!!
Wish WS’ers math would make the front page!!

Comment by hayseed Thursday, May 5, 16 @ 2:38 pm
Mean Old Rauner’s Dept of Revenue = MORDOR

Comment by Nazgul Thursday, May 5, 16 @ 2:51 pm
Nazgul- I don’t know if you’ve seen the cut of LOTR with the “Mouth of Sauren” when they come to the Black gate. Here it is…..Goldberg: “My master Rauner the Great bids thee welcome. Is there anyone amongst this route with the authority to treat with me?” I love that thought.

Comment by Honeybear Thursday, May 5, 16 @ 3:12 pm
- Louis, what a shock, you’re all in.

Then, by the governor’s own numbers, you must agree that the purported “impact” over 14 years is statistically insignificant. -

Yes Word, but the real impact of Gov. Rauner on the Atsaves household income over the next 3 years is quite significant.

Comment by Daniel Plainview Thursday, May 5, 16 @ 3:30 pm
Norseman’s quote says it all: “Trust has not been an issue with Rauner of late. There is none.”
“That being said. The politically timid (bi-partisan) ruled the day.”

Comment by Mama Thursday, May 5, 16 @ 5:14 pm
Keep reminding the voters:

“Stop electing anyone who tells you they’ll run the government like a business. It is not a business. It’s inherently different.”

Comment by Mama Thursday, May 5, 16 @ 5:18 pm
Rauner does not care if the numbers are false. Why? He knows the general public does not check his numbers.

Comment by Mama Thursday, May 5, 16 @ 5:25 pm
Just for the record Hans Zigmund has been doing this for a while and during the Quinn Admin too. I like how the non-professionals here are quick to criticize. I like how you ignore the projections that IDOR has done over the years and most of the time their analysis is proved legitimate. We are in this budget mess from Legislative staffers who think they are better at perdicting revenue projections than the folks who do it for a living with PHDs. Example is the last Cigarette tax increase that the Legislator so inflated the the projections so they could spend the money. IDOR research nailed the projection, but our elected officials don’t let facts stop them from spending more money.

Comment by Fly On the Wall Thursday, May 5, 16 @ 10:12 pm
Wait if my govenor took his cayman cash and created jobs in Illinois things would be different?

Comment by Rabid Friday, May 6, 16 @ 5:08 am
Fly On the Wall - so are you saying that IDOR routinely uses REMI for their revenue projections, and that they routinely turn off the “increased spending” assumption?

Comment by Whatever Friday, May 6, 16 @ 8:38 am