Four Corners Media: May 2009

Saturday, May 30, 2009

A New Era of Fiscal Irresponsibility

Since regaining control of Congress, the Democrats with the help of the newly elected spend & tax President, have been on a spending spree never seen before in America. The USA triple A bond rating is in jeopardy, as rating agencies are beginning to question the financial viability of the USA government, with looming debt and unfunded entitlement programs. While former Congresses and former Presidents are convenient targets to blame, the Democrats in Congress shoulder the responsibility for this current fiscal irresponsibility. For a graphic view of the problem, here is a web site that gives a visual of just how much trouble the US is in, given the misguided spend & tax approach the Democrats, with the signature support of President Obama have gotten us into: www.gop.gov/accountability

For some specifics on US government waste and lack of accountability, check out Citizens Against Government Waste www.cagw.org See the recent 2009 Congressional Pig Book, where over 10,000 Congressional earmarks are detailed, including the newer stealth earmarks, designed to circumvent taxpayer scrutiny.

In addition to the Federal government budget having problems, many of states are in dire financial straights. But they cannot borrow like the Federal government (probably a good thing) and must balance their budgets. For more detail on metrics for each state in the US, the US Census Bureau has some good statistics: www.census.gov/compendia/statab/rankings.html

According to the Center on Budget and Policy Priorities www.cbpp.org the budget crises for state governments continues to worsen in 2009, but unlike the Federal government, they cannot borrow money to cover deficits.

Here is an insight from the Center: “ The vast majority of states cannot run a deficit or borrow to cover their operating expenditures. As a result, states have three primary actions they can take during a fiscal crisis: they can draw down available reserves, they can cut expenditures, or they can raise taxes. States already have begun drawing down reserves; the remaining reserves are not sufficient to allow states to weather a significant downturn or recession. The other alternatives — spending cuts and tax increases — can further slow a state’s economy during a downturn and contribute to the further slowing of the national economy, as well.”

The overview from the Center continues: “States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $59 billion (some 9 percent of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to 16 percent of budgets.”

According to recent Gallup poll, states such as Wyoming and Louisiana are in the best shape (energy related economies) whereas the higher tax states, those with housing bubbles and those related to financial markets (New York, New Jersey, California, Arizona) are in the worst shape. www.gallup.com

But some states are doing much better, during this economic downtown, according to Gallup polling and research. “In addition to South Dakota and the four oil-producing states mentioned above, other "best job market" states include oil states like North Dakota, those benefiting from coal like West Virginia, and farm states with comparatively good economies from ethanol and a strong commodities market like Nebraska. Financial-crisis states in the Northeast, including Rhode Island, Delaware, Vermont, New Jersey, Connecticut, and Maine are some of the "worst job market" states, as is the housing crash state of California.

The second quartile of "better job market" states includes those with comparatively better economies because they are also energy-related, like Alaska, and farm-related, like Kansas. Similarly, the second-worst quintile of "poor job market" states have economies damaged by the financial debacle, like New York; the manufacturing depression, like Ohio; and the housing disaster, like Arizona.”

For the higher income tax individuals, states like New York, Minnesota, New Jersey and California are raising taxes from 5% and 6% to rates at the 8% to 10% level. Combined with the new Obama ‘tax the rich plan’ to raise individual income taxes to 39%, high-income earner is looking at a 50% tax rate! The assumption from the “tax the rich” camp is that higher income earners will just stay put and be a bigger tax target. But there are nine states that may have the welcome mat that these higher income producers may want to step across to and end up with lower taxes.

So what states don’t have a state income tax: Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas and Wyoming. www.irs.gov You may want to look at moving and/or retiring in one of these nine “no income tax” states as the California and New York type of high tax states look at raising the state income tax rates to the 10% level (or approaching the 50% combined Federal + state rate for the high tax states).

Saturday, May 16, 2009

Overspending Swells Federal Deficit in April 2009

What does massive government spending by the US government result it? The inability to even show a monthly surplus in April, the historical high point of tax collections during the fiscal year (October through September), reflects the out of control spending by the Federal Government. In fact the US treasury has not shown a negative monthly gap in April (spending vs. taxes collected) since 1983. Thanks to the ongoing economic downturn, combined to massive Federal spending authorized by Congress, first April monthly shortfall in 26 years was experienced in Washington DC. President Obama and the Congress Democrats appear to be determined to spend money US government doesn’t have, to fund programs we don’t need, that will cause increased taxes we don’t want.

WASHINGTON (Reuters) - The United States posted its first April deficit in 26 years, a record $20.91 billion shortfall as a deep recession caused revenues to collapse in the year's biggest tax collection month, the U.S. Treasury said on Tuesday.

The deficit, the first for April since a $3.3 billion gap in 1983 as the country emerged from a deep recession, was largely in line with forecasts from Wall Street economists polled by Reuters. It brought the deficit for the first seven months of fiscal 2009 to a record $802.29 billion after a major positive accounting adjustment for the government's bailout investments.

Receipts for April, normally the year's biggest revenue month due to the April 15 deadline for federal income tax filing, fell to $266.23 billion from $403.75 billion in April 2008. Both individual and corporate income tax payments fell sharply from a year earlier. But outlays set another April record, rising to $287.14 billion from $244.47 billion a year earlier. www.reuters.com

Saturday, May 2, 2009

Spending + Borrowing = Higher Taxes

This week, Kansas Republican Lynn Jenkins gave the GOP response to President Obama’s weekly presidential address: “The pace that Democrats in Congress and the White House are spending your tax dollars is simply staggering…know a thing or two about handling taxpayer dollars. I was the state treasurer in Kansas for six years before I came to Congress, and before that I practiced public accounting as a certified public accountant for nearly two decades.

So trust me when I say Washington’s books are a mess.

It’s quickly turning into a symbol of everything wrong with Washington, D.C. – unchecked spending, no accountability and oversight, and more and more debt piled onto our children and grandchildren.  This week, we marked the president’s 100th day in office. And while, like most of you, I like the president personally, I think the Democrats’ first 100 days running Washington can be summed up in three words: spending, taxing, and borrowing.” http://lynnjenkins.house.gov/

If you have had enough of overspending, taxing and waste in Washington, DC and throughout the Federal government, the next TEA Party Tax day will be Saturday July 4^th, as a TEA Party Day really near you. With US national debt at $11 Trillion and counting, the TEA party organizers are reporting that 574+ rallies against higher taxes, excess spending and bloated government are planned for July 4^th 2009. What does TEA stand for? Taxed Enough Already! http://www.teapartyday.com/

So just how much are US Taxpayers paying, as a percentage of their annual income in Federal taxes? At the turn of the century, prior to income taxes at the Federal level, the US taxpayer burden was about 5% of gross income. Tax Freedom Day®, as calculated by the US Tax Foundation www.taxfoundation.org occured in late January of the year. By World War I, the US taxpayer burden was about 10% of gross income. With the passage of the Individual Income tax and World War II (plus the New Deal), the US taxpayer burden rose to about 25% by the end of WWII. It remained steady and rose slightly to top 30% by 1969. It fell slightly during the Regan years (ranged between 29% and 31%), and then peaked again at a post WWII high of 33% at the end of the Clinton era. The Bush tax cuts eased the US taxpayer burden back down to 29%, before slowly climbing back to 31% prior to the Obama election. Here is the Tax Freedom Day® detailed history and tax law details: http://www.taxfoundation.org/files/sr165.pdf

Where did Tax Freedom Day® come from? It was conceived in 1948 by Florida businessman Dallas Hostetler. He originated the concept, calculations and copyrighted the intellectual property. Upon his retirement in 1971, he deeded the intellectual property (IP) to the National Tax Foundation.

So when is National Tax Freedom Day® in 2009? It occurred on April 13^th. But if you add the deficit spending accumulated by the US Government (now at $11 Trillion), it will take American taxpayers until about June 1^st to pay for the ongoing and accumulated cost of the US government.

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