NC House Republicans Thursday morning performed another act of the Kabuki theater that is the State Budget process. Standing behind a pile of budget reports at a press conference Rep Skip Stam called out for transparency, without any trace of irony. Stam was trying to make a point that Republicans were shut out of the process. He claimed to have been personally turned away from a closed meeting in committee room 612, next door to his own office, but on questioning could not remember by whom and he did not describe the nature of the meeting.

Rep Thom Tillis called for a show of hands from Republican Appropriations Sub-Committee members (seen in the photo). Tillis said that committee meetings were being held elsewhere in the building at the same time. He said that the reason these committee members could be present at the press conference was because they were “not engaged in the process”, again, without any trace of irony.

Rep Pearl Burris-Floyd claimed proposed “draconion” cuts to Health & Human Services were “intended to incite individuals who are the least of us” and that “we believe this is a time for government to do those things for people who cannot do those things for themselves”. When asked “Would you vote for tax increases?” she replied “Absolutely not”, again, without any trace of irony.

Curiously, for someone who chooses and disects words carefully, Stam made a couple of references to opposition to “tax rate increases” but did not broach the subject of increasing revenues by broadening the tax base and lowering tax rates.

Stam claimed, with all the bluster he could muster, that “the Democratic leadership is just not involving Republicans at all” and that it “is time for the Governor to step up to the plate and lead” and that “the crisis is too great for her to remain on the sidelines”. Stam is one of the smarter Republicans and a skilled parliamentarian, or he wouldn’t be House Minority Leader, but this kind of hyperbole is a Hail Mary pass from Monday morning quarterbacks at best.

Stam and Tillis did have valid observations about the House Rules that constrain Committee actions but the ritualistic drama of party politics obscured those points and the absence of specific proposals ensured that the Kabuki House Theater would move on to the next predictable act.

The general consensus at the General Assembly is that following wrap up by committees a budget will be introduced early next week with House votes Wednesday, Thursday and possibly Friday before sending the bill to the Senate. The noise about severe cuts is expected to pave the way for some revenue increases. It is not yet known if these will be in the House budget or left to the conference committee. Also expected are further pay cuts disguised as furloughs for State employees. The word is that the 0.5% cut (AKA 10 hour furlough) produced minimal savings relative to the effort to set it up in the payroll system. Now that the system is in place and employees have gotten used to the idea, deeper cuts and longer furloughs are expected.

Cross posted at BlueNC.com

There’s an interesting report from actuarial consultants Milliman that pours some cold water on the heated debate over State Health Plan costs associated with smokers and people with a high Body Mass Index (BMI). The report, Impact of Height, Weight, and Smoking on Medical Claims Costs, released in April, was an update of Milliman’s Medical Underwriting Guidelines.

Controlling for age and gender, the study found that smokers cost about 9% more than non-smokers. However, when people’s medical histories are known the cost difference is only 5%. The costs associated with BMI are less clear.

The report finds that BMI is not the best way to predict added healthcare costs, even when medical history is known. BMI roughly uses weight divided by height squared and the report finds that weight divided by height cubed (known as Rohrer’s Index) is a better indicator.

Using BMI as a predictor, actual costs are greater for severely underweight and severely overweight people and, for taller people (within a given range of BMI). BMI is also generally criticized because professional athletes can be classified as obese using the measure.

The State Health Plan should be cautious in the use of smoking and BMI criteria for setting premium rates.

Jack Walker, the man who won’t audit North Carolina’s contracts with Blue Cross Blue Shield (BCBS) to control what the State spends on health care wants to audit every teacher and state employee who pays for dependent health coverage and their dependents on the State Health Plan. In a letter to health plan members sent out this week, just on the heels of the decision to audit State Health Plan members for obesity and tobacco, Jack Walker warns that the State Health Plan will audit all dependents covered under the Plan during the 2009 benefit year.

Dependents determined to be ineligible for the Plan will be removed from the Plan. In addition, the Plan may pursue reimbursement for claims paid for ineligible dependents.

Jack Walker, the man with a questionable PhD from a defunct online college, who can’t provide documentation of a dissertation, wants members who pay for dependent coverage to “begin to collect the required documents” to provide evidence to confirm eligibility. Documents include marriage certificates, birth certificate and, tax returns. Eligible dependents under GS 135 are, generally:

Legal spouse
Unmarried children under 19
Unmarried children with disability developed before 19 (or 26 if full time student)
Unmarried children 19-26 who are full time students at a school or college accredited by the state of jurisdiction.

If you take care of nieces, nephews, grandchildren or other kids, they are not covered unless they are legally adopted or foster children. No apparent exception for guardianship or other forms of custody.

I am aghast at Walker’s bravado and the relentless pursuit of remedies for the mismanagement of the State Health Plan on the backs of state employees especially when the buzzards of furloughs and lay-offs are circling over the legislature. Shrinking the pool by scaring off paying customers hardly seems wise unless there is some evidence of massive abuse. I still can’t wrap my brain around the third-party administrator status of BCBS when the plan depends on BCBS’s Preferred Provider Network. Millions are paid out to BCBS with limited oversight yet the people who pay into the Plan for dependent coverage are now to be audited. Just pray that the “College” your child is attending “full-time” has better credentials than “Columbia Pacific University“.

Yesterday in the House Finance Committee, Minority Leader Paul “Skip” Stam tried derailing the Transit Bill H148 by referring to sales tax as an inefficient tax. He claimed that sales tax was not deductible from Federal taxes, as property tax is, and that the effect was to send 15 cents of every dollar in sales tax to the Federal Government. He exchanged words with Rep Deborah Ross, a sponsor of the bill and did not offer an amendment in committee but promised to introduce one on the House floor when the bill is considered. Mr Stam should check with the IRS first.

According to the Internal Revenue Service Topic 503 – Deductible Taxes:

There are four types of deductible nonbusiness taxes:

State, local and foreign income taxes;

Real estate taxes;

Personal property taxes; and

State and local sales taxes.

It is a conservative mantra at the local level that sales tax is better than property tax because everybody pays sales tax. Now we are to believe that property tax is better than sales tax because sales tax is supposedly not deductible on Federal tax returns. The various criticisms are intended to erode taxation anywhere for any reason. In this case the reasoning is wrong.

Generally, sales taxes are not deductible on Schedule A. However, for Tax Years 2005, 2006, 2007, 2008, and 2009 if you file a Form 1040 and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes (you can’t claim both). If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and claim that amount. If you didn’t save all your receipts, you can choose to claim a standard amount for state and local sales taxes. Its easy if you use the Sales Tax Deduction Calculator on IRS.gov for either year (refer to Publication 600 and Form 1040 Instructions).

Update: For taxpayers using the Standard Deduction, there is an additional property tax deduction. However, the maximum additional deduction is $1,000 for married, filing jointly ($500 for singles). As the average property tax bill in Wake County is about $2,000, an increase would not be deductible. Regardless of the merits of property tax versus sales tax as a funding mechanism for transit or other transportation, the federal deductibility argument is a spurious one.