California Deficits, California's Pot of Gold, State Deficit Spending, Flat Tax, Value Added Tax. p
Be sure to subscribe to ZingerKing. Enter your email address in the subscribe box to the right.
Wed/Thurs May 20,21 2009
Today’s Zinger:
When You Spend More Than You Take In... Inhale Deeply
The Morning Briefing:
California, the Golden State, doesn’t have enough gold to pay the state debts. The cost of California’s social values exceeds its ability to pay. A land of plenty, California has the natural resources and an underground economy large enough to fill their revenue gap but as yet the Governor has not cast some of that California sunshine on the shadow economy. But that may be coming soon.
California, and most other states, are running large deficits. Each state is looking for new ways to generate tax revenue. Governor Swarzenegger wasn’t just blowing smoke when he legalized marijuana and started taxing the medical miracle as a way to generate a pot of gold. How long will it be before state Governors, and even President Obama, consider new taxes and tax methods to backfill the enormous deficits? The flat tax advocates will get their day in court. The potheads may finally get their wish. Both will lead to new taxes to pay for government's addiction to spending.
The Discussion:
California is going broke. A state rich in sunshine, natural resources, bountiful harvests, vacation meccas and a corporate hotbed for technology companies is spending more than they take in. Not just a little more, a lot more. A state with the second highest income taxes and highest property values can’t balance their budget. A state with vast offshore oil reserves, that remain untapped, doesn’t have enough money to pay their bills. A state that is most concerned about its environment, paying civil servants extremely well, providing a free education to its residents (whether they are legal or illegal) as well as health care and other government support to illegal immigrants, is looking east for the rest of us to support their habits. Unfortunately, they are looking to the President, also addicted to deficit spending, who may like to pay off California for their electoral support in 2008 but has little cash in pocket and is about to be cut off by his lending friends (China).
Less than six months ago the State of California was staring down a $6 billion deficit. The recession has taken an additional toll on the state with most estimates now predicting a $21 billion deficit. The “Governator”, Arnold Swarzenegger, has threatened to fire teachers, close fire stations and release 50,000 prisoners to bring the budget in line. This is an obvious attempt to scare the voters into accepting higher taxes and reduced services. This is a state that has refused to lease its oil reserves to generate new sources of tax revenue because they see it as prostituting the land. Instead, they wish to prostitute the taxpayer for their lofty ideals. California's dreamin' if they think the taxpayer is going to accept this.
But Swarzenegger is not alone in trying to balance a state budget with excessive deficit spending. Here is a summary of the state-by-state comparison of the fiscal 2010 top 10 deficit spending states.
Voting Record 2008 Deficit in % of Population in
State Presidential Race Billions General Fund millions 7/09
California Democratic 24.8 22.3 36.8
New York Democratic 13.7 24.3 19.5
New Jersey Democratic 5.0 n/a 8.7
Washington Democratic 3.2 18.5 6.6
Massachusetts Democratic 3.0 10.7 6.5
Arizona Republican 3.0 28.3 6.5
Minnesota Democratic 2.6 14.7 5.2
Florida Democratic 2.5 11.2 18.3
Connecticut Democratic 2.5 13.6 3.5
Wisconsin Democratic 2.5 17.2 5.6
There are a couple of interesting observations:
So what will these states do to resolve their budget deficits? Many will threaten reductions to services and then they will increase taxes. Yes, the 95% of Americans that think there taxes were either going to stay the same or go down will have to pay more to meet the ever growing state and federal deficits.
The tax plan will not be a direct assault on your paycheck. That would be political suicide to the politician, unless the tax is on the “over $250,000 crowd”. Both state and federal governments will look for ways to increase revenue without increasing payroll taxes. We will see higher taxes of the sin products (alcohol, tobacco), the bad products (firearms, gasoline and energy), increases and extension of existing taxes and some taxes we never thought possible, like a tax on legal marijuana.
But all of this may not be enough. President Obama, and even some state governments, may take another bold move and attempt to rewrite the entire tax code under the mantra of tax simplification. A value added tax or a flat tax to replace our progressive tax system would offer the opportunity to increase taxes under the banner of simplification. Zinger supports a simplified tax system. The government and its citizens stand to save significantly on the administration of the tax system and more importantly, it will bring more of the shadow economy to light so they will pay their fair share of the tax burden.
Conclusion:
Politicians, from both parties, are known for bringing home the bacon to their constituents in the form of new projects, new services and new entitlements. These programs and services have all added to the fixed cost of government. These costs are driving huge deficits that are becoming increasingly difficult to repay. The bacon is turning rancid, as taxpayers will revolt against greater taxation to pay the bills.
The states are united in their need for cash. The majority of states are pinching pennies when a fundamental restructuring of spending may be in order. Hoping for a rapid recovery of our economy to fill the revenue void is dangerous. Anticipating a prolonged recovery is a painful thought as it means the budget problems will continue with additional deficit spending ahead.
Unique approaches to new tax revenue will be tested. The flat tax may finally get its day in court. The proponents of the flat tax point to fairness and simplicity, words not normally associated with the tax code. The potheads may finally get what they want, legalized marijuana. Marijuana is to the 21st century what alcohol was to the 40’s, an opportunity to generate new tax revenues through a product that most Americans will not be impacted by, and for those impacted, they will gladly pay the tax to finally get their buds legalized.
Shameless Request For Support:
Have you Zinged someone lately. Please forward a link to ZingerKing to a friend, family member or neighbor. If you enjoy the Zinger please subscribe (see the subscribe box at the top of the article in the purple side band). Subscribers receive the "Morning Briefing" when published with a link to the full article. Your email address will not sold to others and will not be shared.
Wed/Thurs May 20,21 2009
Today’s Zinger:
When You Spend More Than You Take In... Inhale Deeply
The Morning Briefing:
California, the Golden State, doesn’t have enough gold to pay the state debts. The cost of California’s social values exceeds its ability to pay. A land of plenty, California has the natural resources and an underground economy large enough to fill their revenue gap but as yet the Governor has not cast some of that California sunshine on the shadow economy. But that may be coming soon.
California, and most other states, are running large deficits. Each state is looking for new ways to generate tax revenue. Governor Swarzenegger wasn’t just blowing smoke when he legalized marijuana and started taxing the medical miracle as a way to generate a pot of gold. How long will it be before state Governors, and even President Obama, consider new taxes and tax methods to backfill the enormous deficits? The flat tax advocates will get their day in court. The potheads may finally get their wish. Both will lead to new taxes to pay for government's addiction to spending.
The Discussion:
California is going broke. A state rich in sunshine, natural resources, bountiful harvests, vacation meccas and a corporate hotbed for technology companies is spending more than they take in. Not just a little more, a lot more. A state with the second highest income taxes and highest property values can’t balance their budget. A state with vast offshore oil reserves, that remain untapped, doesn’t have enough money to pay their bills. A state that is most concerned about its environment, paying civil servants extremely well, providing a free education to its residents (whether they are legal or illegal) as well as health care and other government support to illegal immigrants, is looking east for the rest of us to support their habits. Unfortunately, they are looking to the President, also addicted to deficit spending, who may like to pay off California for their electoral support in 2008 but has little cash in pocket and is about to be cut off by his lending friends (China).
Less than six months ago the State of California was staring down a $6 billion deficit. The recession has taken an additional toll on the state with most estimates now predicting a $21 billion deficit. The “Governator”, Arnold Swarzenegger, has threatened to fire teachers, close fire stations and release 50,000 prisoners to bring the budget in line. This is an obvious attempt to scare the voters into accepting higher taxes and reduced services. This is a state that has refused to lease its oil reserves to generate new sources of tax revenue because they see it as prostituting the land. Instead, they wish to prostitute the taxpayer for their lofty ideals. California's dreamin' if they think the taxpayer is going to accept this.
But Swarzenegger is not alone in trying to balance a state budget with excessive deficit spending. Here is a summary of the state-by-state comparison of the fiscal 2010 top 10 deficit spending states.
Voting Record 2008 Deficit in % of Population in
State Presidential Race Billions General Fund millions 7/09
California Democratic 24.8 22.3 36.8
New York Democratic 13.7 24.3 19.5
New Jersey Democratic 5.0 n/a 8.7
Washington Democratic 3.2 18.5 6.6
Massachusetts Democratic 3.0 10.7 6.5
Arizona Republican 3.0 28.3 6.5
Minnesota Democratic 2.6 14.7 5.2
Florida Democratic 2.5 11.2 18.3
Connecticut Democratic 2.5 13.6 3.5
Wisconsin Democratic 2.5 17.2 5.6
There are a couple of interesting observations:
- Michigan, one of the hardest hit states due to recession, does not appear in the top 10. With a $1.2 billion deficit, Michigan finds itself in the middle of the pack.
- There are a lot of "blue" states in the top 10. 90% of the top ten deficit states voted democratic in the last election. The top five states have voted democratic in the last four presidential elections.
- Arizona, the only state voting Republican of the top 10, has the highest deficit spending relative to their general fund. Twenty-eight cents of every dollar spent by the Arizona government is borrowed. To put things in perspective, the Federal government will borrow approximately 60 cents of every dollar they spend this year.
- On a per capita basis, the amount of debt incurred for each person residing in the state, Florida is (1/3) one-third that of most of the other top 10 states.
- Nevada is gambling with its general fund. Spending $1 billion more than they collect in taxes, Nevada is spending 38 cents of every dollar through deficits.
So what will these states do to resolve their budget deficits? Many will threaten reductions to services and then they will increase taxes. Yes, the 95% of Americans that think there taxes were either going to stay the same or go down will have to pay more to meet the ever growing state and federal deficits.
The tax plan will not be a direct assault on your paycheck. That would be political suicide to the politician, unless the tax is on the “over $250,000 crowd”. Both state and federal governments will look for ways to increase revenue without increasing payroll taxes. We will see higher taxes of the sin products (alcohol, tobacco), the bad products (firearms, gasoline and energy), increases and extension of existing taxes and some taxes we never thought possible, like a tax on legal marijuana.
But all of this may not be enough. President Obama, and even some state governments, may take another bold move and attempt to rewrite the entire tax code under the mantra of tax simplification. A value added tax or a flat tax to replace our progressive tax system would offer the opportunity to increase taxes under the banner of simplification. Zinger supports a simplified tax system. The government and its citizens stand to save significantly on the administration of the tax system and more importantly, it will bring more of the shadow economy to light so they will pay their fair share of the tax burden.
Conclusion:
Politicians, from both parties, are known for bringing home the bacon to their constituents in the form of new projects, new services and new entitlements. These programs and services have all added to the fixed cost of government. These costs are driving huge deficits that are becoming increasingly difficult to repay. The bacon is turning rancid, as taxpayers will revolt against greater taxation to pay the bills.
The states are united in their need for cash. The majority of states are pinching pennies when a fundamental restructuring of spending may be in order. Hoping for a rapid recovery of our economy to fill the revenue void is dangerous. Anticipating a prolonged recovery is a painful thought as it means the budget problems will continue with additional deficit spending ahead.
Unique approaches to new tax revenue will be tested. The flat tax may finally get its day in court. The proponents of the flat tax point to fairness and simplicity, words not normally associated with the tax code. The potheads may finally get what they want, legalized marijuana. Marijuana is to the 21st century what alcohol was to the 40’s, an opportunity to generate new tax revenues through a product that most Americans will not be impacted by, and for those impacted, they will gladly pay the tax to finally get their buds legalized.
Shameless Request For Support:
Have you Zinged someone lately. Please forward a link to ZingerKing to a friend, family member or neighbor. If you enjoy the Zinger please subscribe (see the subscribe box at the top of the article in the purple side band). Subscribers receive the "Morning Briefing" when published with a link to the full article. Your email address will not sold to others and will not be shared.
Trackbacks
-
6/9/2009 4:52 PM
ZingerKing wrote:
To subscribe to ZingerKing enter your email address in the Subscribe box located towards the top of the purple sidebar on the website. Subscribers receive “The Morning Briefing” at each new publishing with a link to the full story. ZingerKing is Published on Monday, Wednesday and Friday of each week. Wed/Thurs June 10/11, 2009 Today's Zinger: The Needs Of A Nation vs. The Ideology Of An Administration: Congress Is Between a Barack And A Hard PlaceThe Morning Briefing: The government is racking up deficits and debt that ...
Comments