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Accountability local leaders moral hazard porkbarrel politics responsibility tax policy too much government

Panic in the Prairie State

When your state has the lowest credit rating in the union, the highest population decline rate, and spends nearly a quarter of its annual budget on an out-​of-​control government-​employee pension system, what do you do?

Raise taxes, of course!

That’s the advice of experts in Illinois, anyway.

You can see why they panic: The unfunded portion of Illinois’s public employee pension system amounts to $11,000 per person in the state. Something extraordinary must be done.

Yet, as Pat Hughes at the Illinois Opportunity Project insists, taxpayers need relief — not a statewide 1 percent property tax increase.

Besides, it is not as if tax hikes could solve the problem. “It was just last year that politicians raised the state income tax by 32 percent in a desperate attempt to balance the budget,” Hughes explains. “Despite over $5 billion in new taxes, the state was back in deficit spending in less than a year.” 

Hughes mentions a number of tax limitation measures in the works. More power to them. 

But what’s needed even more? Spending limitation measures.

No government can be trusted to offer anything but defined-​contribution pensions — and no government, at any level, should ever manage a pension system. Politicians can’t help themselves. They just cannot resist the temptation to buy off the government-​worker constituency by promising more in the future than financially feasible (or just plain old politically possible) to pay for now. 

Other people’s money is theirs to spend. And a future financial bind? Some other politician’s problem. 

This is Common Sense. I’m Paul Jacob.

 


N.B. Congratulations to the Illinois Policy Institute for its Liberty Center, which won its case against forced unionization, Janus v. American Federation, on June 27. Commentary about this Supreme Court case appeared on this site in early May, “Post Blindfold.”

 

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Accountability folly ideological culture national politics & policies responsibility

Politics as Painfully Usual

The crazed nature of our leaders’ willingness to spend beyond revenue, and accumulate debt, is not limited to one party. Both Democrats and Republicans are responsible for their outrageously perverse fiscal policies. 

Their irresponsibility hides in plain view, and can be seen in most of the major policy discussions of our time. Take two: 

  1. the Democrats’ idea of putting every American on Medicare and 
  2. the Republicans’ current tax reduction bill.

Though the Republicans often pretend to be all about something called “fiscal conservatism,” their murky tax plan is not fiscally sound. Not yet, anyway — after all, it is “evolving.”

And I expect it to get worse, not better.

“The current plan proposes about $5.8 trillion in tax reduction offset by about $3.6 trillion in base-​broadening offsets, meaning that it would result in a $2.2 trillion deficit increase over the next decade,” Peter Suderman summarizes over at Reason.

They have a number of cuts in the works, but also plan to spend more on defense and the like. The debt would go up.

But if the Republicans are hypocritical and irresponsible, the Democrats add sheer insanity to their irresponsibility. 

“Medicare for All” is pushed by Senator Bernie Sanders, who serves Vermont, where a similar universal system was enacted, only to be repealed after it proved unaffordable even with huge tax increases. All single-​payer/​socialized medicine proposals would require whopping tax increases to work, and the increases in spending would inevitably yield greater deficits.

Besides, Medicare is heading for financial Armageddon. Adding more burdens to a system that they cannot (or simply will not) now make solvent? 

Only a politician could consider such a “solution.”

This is Common Sense. I’m Paul Jacob.


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Art by John Goodridge on Flickr

 

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Accountability free trade & free markets general freedom local leaders media and media people nannyism national politics & policies porkbarrel politics responsibility tax policy too much government

Ballots & Books

The people of Roseburg, Oregon, aren’t paying enough in taxes. That’s the upshot of Kirk Johnson’s recent New York Times article, “Where Anti-​Tax Fervor Means ‘All Services Will Cease.’”

“For generations in America,” readers are informed, “small cities … declared their optimism and civic purpose with grand libraries that rose above the clutter of daily life and commerce.” 

And then, the unthinkable: “last fall, Douglas County residents voted down a ballot measure that would have added about $6 a month to the tax bill on a median-​priced home and saved the libraries from a funding crisis.”

How dare voters so vote? Didn’t they know the Times wanted those libraries fully funded? Where was the “optimism and civic purpose” of Roseburgians?

“We pay enough taxes,” said auto mechanic Zach Holly.

“The trust is gone from people who are paying the bills,” acknowledged an elected commissioner one county over.

Even Jerry Wyatt, who voted for the library tax, decried that, “There’s no end of waste” in government, adding, “We need less people on the county payroll.”

Meanwhile, the Times reporter explained that “few places” are confronting “the tangled implications … more vividly than in southwest Oregon.” It’s not merely “lights out, one by one, for the [library] system’s 11 branches.” There have also been “cuts to the sheriff’s budget … [ending] round-​the-​clock staffing.” 

“If a crime is reported after midnight there,” Johnson wrote, “best not hold your breath for a response.” 

This is “what happens when citizens push the logic of shrinking government to its extremes.” 

To the extreme, eh? Hmmm. Doesn’t seem bad at all. 

Douglas County voters made a free choice about libraries and taxes. 

Close the book on it.

This is Common Sense. I’m Paul Jacob.

 

* There have also been worthwhile innovations in county government due to the budget cuts. Nearby Curry County combined its juvenile justice department with its parks department to save scarce funds. Then, the parks department began using juvenile offenders to clean up the parks. By engaging teenagers in meaningful work, the policy pushed recidivism rates way down and now Curry County has one of the lowest rates of youths committing a second offense.


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national politics & policies tax policy

Tax Reductions Ahead?

As the president yammers on about making the rich “pay their fair share,” behind the scenes his administration has suggested reducing corporate tax rates by seven points. Meanwhile, Obama’s main challenger, Mitt Romney, promised a full ten point rate cut, if elected.

Why? By international standards, American corporate taxes are obviously way too high.

The U.S. effective tax rate on new corporate investment sits at 35.6 percent today, which, write Duanjie Chen and Jack Mintz for the Cato Institute, “is almost twice the average rate for the 90 countries” the duo studied, in “Corporate Tax Competitiveness Rankings for 2012.”

The U.S. has higher corporate tax rates than France.

And India, Colombia, Brazil, Japan, Venezuela, Korea, Russia, Costa Rica, you name it. This is not something we want to be No. 1 at.

Well, at least Argentina, Chad and Uzbekistan tax at even higher rates.

There’s no consolation in others’ folly, though.

The authors look northward, to Canada, which, since 2000, made some huge adjustments downward on tax rates affecting businesses: 15 percent cuts in federal statutory tax rates, eliminating most capital taxes, removing sales taxes on capital goods, and scaling back on special preferences that tend to make taxation such a mess there as well as here. And all the while revenues from these taxes have remained stable per GDP.

Could we get lower corporate taxes, here? Well, this is not an area where those on the left can enviously eye their beloved European social democracies to make their usual, tedious case for higher taxes. Norway’s rates are ten percent lower than ours, and Sweden’s, Denmark’s and Finland’s are lower yet.

This is Common Sense. I’m Paul Jacob.