August 2, 2008

Are there any more tax or budget "tricks" left?

The true scope of the recession is now becoming clear. The recession in the so called "private sector" is finally starting to hit home in the public sector. Here come the tax increases. And new taxes in areas or on items you have not seen before. You see while people in the private sector and at home learn to do with less, the little piggies in the public sector can't as they have never learned how to do that. Every year must bring new ("well deserved") raises, more pension goodies and more perks like cars and blackberries. Well its going to be really hard to "sell" these new state and local tax increases to people in the private sector now netting less money (due to inflation, energy and food prices, and home devaluations). The private sector is saying "Hey why should we be financing you fat government cats when we dont get the same". Good question. I guess it finally will be the sour economy that gets the taxpayers to stop swallowing the BS. Quite frankly I could do with less government "social" programs at the state and local level. Use what money you have for infrastructure. And lets cut way back on the billion wasted on forest fires. As you have surely read from the latest news posts on this we are pouring money down the fire department "overtime rathole" when it some to fighting the wildland fires that are not endangering homes.

August 2, 2008

State, local governments flirt with fiscal disaster as budgets grow bigger

State and local governments in this country seem to be running out of budgetary tricks.

In June Delaware's General Assembly had to swallow hard and cut deep into the state budget.

In California this week, Gov. Schwarzenegger escalated his fiscal battle with the Democratic Legislature by cutting the pay of 200,000 state employees. In New York, Gov. Paterson called the state's revenue situation dire, asked for federal help and suggested privatizing the New York City subway.

The economic slowdown is hurting revenues. In addition, expenses at the state and local levels are mounting across the country.

USA Today estimated on Friday that state and local governments are likely to spend $3 trillion in 2008. That's about 13 percent of the country's gross domestic product.

On top of that, many state and local governments are in hock for pension and post-employment health benefits they have promised an ever-growing number of public employees. In addition, every state has seen mounting costs for the state share of Medicaid health and nursing costs.

The federal General Accountability Office warned earlier this year that those bills will come due within 10 years as the employees begin retiring in large numbers and more older citizens need long-term care paid for by Medicaid.

The scramble is on for extra sources of revenue. And that's where the tricks are starting to miss. Maryland, for example, just raised its tax on cigarettes by $1 a pack. But so many people have simply stopped smoking that despite the tax increase the state will be short $40 million t0 $60 million in revenue this year.

The rise in gasoline prices forced Americans to cut driving so much that the Highway Trust Fund is near bankruptcy. Fewer driven miles translates into fewer dollars collected from gasoline taxes. The downturn in the financial markets is crippling New York's economy and reducing revenues in every state, including Delaware, that depends on the credit industry for revenue.

The housing slump has cut revenue from real estate transfer taxes. Likewise, the high cost of gasoline and the shaky economy have depressed the market for cars. That, in turn, means fewer autoworkers.

Help from the federal government is likely to be limited. Just this week it was announced that the 2009 budget deficit will be $482 billion. That is beginning to worry a lot of investors.

Some of these developments may turn out to be temporary. But others won't. The long-term outlook, at least, calls for an end to tinkering with budget. Cuts are in order. So are better management and, unfortunately, increased fees and taxes where appropriate.

Most of all, the tricks must stop.

Lakewood Accountability Action Group™ LAAG | | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

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