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).
© 2009, Jasper Welch, Four Corners Media, www.jasperwelch.org