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MANAGEMENT UPDATE.

THE PERIL OF UNINTENDED CONSEQUENCES

Some people collect stamps. Others collect coins. And (increasingly now, in the wake of the hit movie) still others collect old Barbie dolls. Among our collections are files full of promising state and local government policies that produce unexpected and surprising results when implemented.


In November, we added two striking examples. 



The first one we came across was Wisconsin’s longstanding birth cost recovery policy. In that state, unwed noncustodial fathers can be ordered to pay some of the costs associated with the birth of their child when the mother is covered by Medicaid. Advocates of this policy see it as an important way to establish paternal responsibility and alleviate county, state and federal costs. But a November 8 podcast from the Institute for Research on Poverty at the University of Wisconsin-Madison, provides research evidence that the policy appears to yield decidedly perverse results. 


According to the study, this policy actually reduces future child support, which is administered by counties. 


Here’s the story: Dr. Tiffany Green, an associate professor in the School of Medicine and Public Health at UW-Madison, and her colleagues, compared Dane County, which stopped collecting the cost of births from fathers in 2020, to other Wisconsin counties that continued the practice.

With access to a wide array of child support and employment information, Green found that birth cost recovery cessation in Dane County was linked to greater subsequent compliance with child support orders, and payments that were significantly increased after birth cost recovery stopped. Ceasing the policy “tends to get more money into the hands of mothers,” she says. 

It’s not entirely clear why this is the case, but the research bears scrutiny. 


Here’s another story that caught our eye in the week before Thanksgiving. This one concerns a tax proposal that is intended to “increase economic vibrancy” by raising  the taxes on land in Michigan cities with populations over 500,000 (that means Detroit), while lowering taxes on built structures, including businesses and homes of residents. 


There are lots of good reasons to adjust tax policy in Detroit, and the idea of a land-value tax is one that is supported by Detroit’s mayor. The appeal of the proposal  -- and its potential unintended effects -- are nicely explained in a November analysis by James Tatum, director of the Detroit Bureau of the Citizens Research Council of Michigan.


On the positive side, he points out the obvious appeal of raising land taxes in order to lower the very high taxes that Detroiters pay on businesses and homes – considerably more than those in other major cities and surrounding suburbs. Those high taxes, Tatum points out, contributed to a drop in homeownership in Detroit between 2002 and 2019.


But if taxes are higher on land, the choice to relinquish ownership may be more attractive, especially when one “considers how cheaply the land was purchased in the first place,” he writes.

So, increased taxes on land can result in a decline in their salability, leading potentially to more abandoned property and more vacant land. 


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