Four Corners Media

Tuesday, June 23, 2009

States Face Fiscal Reality

California's income tax is the most progressive of all 50 states, with the second highest top rate (10.55%) after New York City's 12.62%. The Governor's revenue office calculates that between 50% and 55% of the income tax in the state comes from Kobe Bryant and the rest of the richest 1% of taxpayers.

This sounds like a liberal's tax paradise, but the "soak the rich" system has imploded on itself. As tax rates keep rising, more Californians move to places like Nevada and Texas where they can pay zero income tax, leaving Sacramento with fewer revenue sources. Moreover, the progressive rate structure means that California experiences more extreme gyrations in its revenues than any other state.

According to the finance & economics blog CalculatedRisk www.calculatedriskblog.com data from the Nelson Rockerfeller Institute of Government indicated that state government income tax collections for the first 4 months of 2009 is down by 26% as compared to 2008. At the NR Institute site www.rockinst.org you can click through to the full report on state income tax collections. Some highlights of the “Change in Personal Income Tax FY 2008 compared FY 2009” : The largest drop in Personal Income Tax (PIT) collections is Arizona at -54.9%. States with Personal Income Tax (PIT) that is more than 45% of the state tax base: New York (down 31.8%), California (down 33.8%), Massachusetts (down 28.5%), Oregon (down 27.0%), Connecticut (down 25.9%), Colorado (down 25.4%), Virginia (down 17%), and Georgia (down 20.9%). According to the NR Institute, estimated tax payments (first quarter 2009) were down by 30.4% (January through April), and these estimated tax payments were down by 41% in April 2009 (as compared to 2008). Arizona, Colorado, Indiana and New York had drops of 37% or more (comparing Jan to April 2009 to 2008 period).

According to a recent report by the National Conference of State Legislatures, “In comparing personal income tax collections through April 2009 to the latest estimate, more than half the states were below target.”3 This is particularly bad news for the states that rely most heavily on personal income tax. A number of states already have enacted or recommended increases in personal income tax rates and other revenue-raising steps such as reductions in tax credits. Such proposals would increase personal income tax collections by more than $7 billion in two states alone: $4.7 billion in California and $2.9 billion in Illinois.

So just how bad are the revenue shortfalls? Let’s look at Colorado, whose new budget year begins on July 1, 2009: The forecast, released Monday, showed the state with a budget deficit of $249 million for fiscal 2009, which ends June 30. State officials will need to borrow that much from the 2009-1010 budget, which will push the fiscal 2010 deficit to $384 million, according to the state forecast. www.gjsentinal.com Republican Minority Leaders Josh Penry predicted that the new FY 2010 budget would only be in balance for 45 days (based on May 6^th legislative session ending, until the new budget year begins). The Democrat majority legislature in Colorado passed new taxes on hospitials (provider fee), transporations (vehicle registration) and revoked a seniors property tax exemption. But these tax increases will not be able to balance the Colorado budget. Only budget cuts will balance the budget.

In Arizona, the FY 2010 budget shortfall is estimated at $4 Billion, with the Democrat Governor’s office presently in at an impasse with the Republican controlled legislature over the FY 2010 budget. The GOP passed a FY 2010 budget on June 4^th, but has delayed sending it to the Governor, who has said she’d veto it (and ask the voters to raise taxes). With the Governor asking the Arizona Supreme Court to intervene, the state may shut down state offices on next week, due to no budget for the next Fiscal Year.

How is your state doing? For a review of various states and their tax rates (personal income, property, sales tax, etc), the Retirement Living Information Center has a good summary plus “state by state” information: http://www.retirementliving.com/RLtaxes.html

In the meantime, the fiscal reality of an economic downturn is hitting the state governments (and local governments) hard. About the only answer left is to cut spending and programs, as raising taxes (which a number of states have enacted or will try to enact) may just contribute to additional taxpayers moving to more favorable states. You may want to consider Wyoming: No personal income tax, fuel taxes on 14 per gallon (New York is 42 cents!), a 1% sales tax and low property taxes.

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.

Tuesday, April 14, 2009

Tea Party Movement Gains Momentum

Of course, what’s interesting about the Tea Party movement, whatever its success, is that it is pretty much about what it says it is - lower taxes and less government spending. A lot of people, Republican and Democrat, are concerned about our escalating debt and what this might mean for future generations. This is clearly a serious subject for serious discussion from whatever side of the issue you fall out on, but… no matter… the moment something gains momentum out comes the derangement crowd. In a certain way, it’s a sign of success. Roger Simon http://pajamasmedia.com

Taxed Enough Already (TEA) information can be found at http://taxdayteaparty.com (Be patient with URL, as the server is getting double duty on US Tax deadline day!) The web site has a state-by-state “find a tea party in your state” list of cities that the grassroots movement has sprung up in, and where the Tea Party (round 2) will be held. In this blog, we posted about the original Rick Santelli (CNBC business reporter) on his ‘rant and rave’ about higher gov’t spending and too much government, and his call for a Chicago Tea Party (March 3^rd post). On February 27^th, a number of 1^st round Tea Party protests and rallies were held. Now the second round is planned for US Tax day: the April 15^th deadline to pay your 2008 income taxes.

In Colorado, Tea Party events are to be held in Colorado Springs, Craig, Delta, Denver, Durango, Loveland, Montrose, Grand Junction, Fort Collins, Pueblo, Steamboat Springs, Walsenburg and Woodland Park. (Blogger note: Boulder and Aspen are absent from list. Do the fine residents of these towns really think all is well, and taxes are too low?)

In New Mexico, Tea Party events are to be held on April 15^th in Artesia, Albuquerque, Alamogordo, Carlsbad, Clovis, Farmington, Hobbs, Las Cruces, Roswell, Ruidoso, Santa Fe, Silver City and Taos.

Meanwhile the political left is trying their level best to discount, diminish and dumb down the Tea Party political movement. In fact at the Huffington Post, “citizen journalists” can sign up to cover the Tea Parties: “The Huffington Post wants to have citizen journalists at as many of these events as possible. If you think you'd be interested in attending one of the Tea Parties and reporting back to us with dispatches, photos, or video, click here to sign up. We'll contact you shortly with further instructions.” http://www.huffingtonpost.com

We’ll contact you shortly with further instructions? From whom? To really cover the Tea Party events, or just try to discount this grass roots American movement?

Back to the Tea Party movement. Many Americans, from the political left and right, Republican & Democrat, independent and other political parties are alarmed as the massive US Government spending, expansion of Federal programs coming from Washington DC and the Congressional appetite for more spending, more taxes and more government “top down” solutions. Thus the Tea Party movement.

On April 14^th, at the National Press Club http://npc.press.org the Citizens Against Government Waste http://www.cagw.org gave their annual press conference on the 2009 Pig (pork) Book. This well researched document (available from the web site) details wasteful US government spending and pork. While it is disappointing for taxpayers to read, the annual Pig Book details the members of Congress and their pork spending ways. You can find the “Porker of the Year” and the other details on the big spenders in the Congress.

Let’s look at what the wasteful government spending leads to: Higher taxes at the local, state and Federal level. In 2008, the “Cost of Government Day” was July 16^th. According to Citizens Against Government Waste, “Cost of Government Day for 2008 is July 16. Americans now work more than half of the year 197 days to pay their share of the cost of government with 84 of those days due to federal spending alone. This year, the average American will need to work an additional 16 days out of the year to pay off his or her cost of government compared to 2000 and four days compared to last year.”

Will the massive spending in 2009 push the “Cost of Government Day” into August?

If you are tired of more government programs, irresponsible spending and inevitable tax increases, we’ll see you tomorrow at the Tea Party event near you.

Thursday, April 9, 2009

The Other (GOP) Federal Budget

The Democrat Majority in the US House and US Senate passed the US Federal FY2010 budget, without one Republican member voting for it, and 20 “blue dog Democrats” voting against it. $3.6 Trillion of largess, earmarks (8,500 of them), increased social spending and decreased military spending. And a structural deficit in the US budget due to overspending by Congress of will be laid at the feet of our children and their children. And, despite promises of only “taxing the rich”, over time the Congress will raise taxes on all American’s, just to cover the new government programs, spending and interest on debt.

So what was alternative budget to the massive Democrat Federal budget, as put forth by the Republicans?

Answering President Obama's challenge for critics to present alternatives, the House Republicans have offered a responsible budget blueprint that:

+Borrows $3.6 trillion less than the President's budget;

+Would create $23,000 less debt per household than the President's budget;

+Keeps federal spending just above 20 percent of the gross domestic product (GDP)—the same level as before the recession;

+Avoids all tax increases and even simplifies the overly complex tax code;

+Includes a temporary moratorium on earmarks; and

+Begins reforming the unsustainable costs of Social Security, Medicare, and Medicaid

http://www.heritage.org/Research/Budget/wm2377.cfm

The House Republican alternative rejects all tax increases. It would permanently extend the 2001 and 2003 tax cuts, as well as the AMT patch. It would also finally reform the complex income tax code by allowing individuals the choice of opting into a simplified tax system with a 10 percent marginal tax rate on incomes below $100,000 and a 25 percent marginal tax rate on incomes above $100,000. It would also encourage economic growth by reducing the corporate tax rate from 35 percent to 25 percent and suspending capital gains taxes through 2010. From the Heritage Foundation www.heritage.org

Let’s compare the sensible Republican alternative (that unfortunately was defeated by the Democrat majority in the US House in early April 2009) to what is being predicted by the Heritage Foundation of the US tax system in heading higher and by 2050 will be like the high tax countries in Europe:

According to the CBO’s long-run forecast in December 2005, federal taxes under current law will rise from 18.3 percent of GDP to nearly 19 percent within five years and reach almost 24 percent of GDP by 2050. This means that the federal tax burden on Americans, as a proportion of income, will increase by almost one-fourth. When state and local taxes are included, the U.S. tax burden will be comparable to the burden in today’s slow-growth Europe.

From the Heritage Foundation: http://www.heritage.org/Research/Taxes/bg1957.cfm

So while the Dems in Congress are claming to be moving to Pay-Go (paying for government programs as you go), what is really happening with a $3.6 Trillion budget and projected $1 Trillion deficits per year is this:

Expand US Government programs by spending money we don’t have, so we’ll borrow it from the rest of the world, to spend it on programs that expand the cost, scope and reach of government, which in turn will raise the public debt and desperate politicians in Congress looking to increase taxes on all Americans to pay for it.

Thus, we are heading towards being more like the country of Greece, whose debt as a country is forecast to exceed 100% of its Gross Domestic Product (the US public debt is $6.4 Trillion, which is about 42% of the US GDP). Greece’s financial problem is that their biggest economic burden is interest on their public debt. And Greece has been remanded by the European Commission to keep their continued deficit spending below 3% of GDP. The US budget deficit (just from the official FY 2010 budget) is 1.2 Trillion, or 8% of the US GDP. However, it is now projected at $1.8 Trillion, which is 12% of US GDP. No wonder France and Germany are lecturing the US on overspending, deficits and reining in government spending.

So where is Greece today? At a standstill, as a nationwide public strike over public sector pay and job losses has brought the country to a standstill Wall Street Journal, Page A11, April 3, 2009 As for a public stimulus by the Greek government? They can’t, as they ran out of money and the EU mandated “3% of GDP budget deficit spending cap” precludes the government from spending money.

Does the US want to become a permanent debtor nation, weakened by financial irresponsibility in Congress due to overspending, overreaching government programs and higher taxes? Under Obama and the Democrats in Congress, the US becoming subject to those countries, banks and individuals who hold US debt and leverage over us. Is that what a free, financially responsible and independent America should be doing? For more and more Americans, the answer is No!

Thursday, April 2, 2009

The Devalued Prime Minister of Britain

The devalued Prime Minister of a devalued Government was a three (3) minute speech given in late March 2009 at the EU chambers in Brussels. Daniel Hannan, is a conservative Member of the Parliament in Great Britain, and Mr. Hannan is a Member of the European Parliament (MEP) who formally addressed his fellow EU representatives, including British Prime Minister Gordon Brown. His brief comments on the state of the UK financial conditions and overspending by the British Labor government have resonated throughout the democratic world, as many citizens are questioning the US and UK governments and their massive increases in government programs, spending and (soon to be raised) taxes.

Here is the blog excerpt from Daniel Hannans’ blog www.hannan.co.uk posted March 25, 2009, following his speech at the European Union (EU) parliament entitled, “The Devalued Prime Minister of a Devalued Government” (in which the British Prime Minister Gordon Brown was in the EU chambers):

“The Internet has changed politics - changed it utterly and forever. Twenty-four hours ago, I made a three-minute speech in the European Parliament, aimed at Gordon Brown. I tipped off the BBC and some of the newspaper correspondents but, unsurprisingly, they ignored me: I am, after all, simply a backbench MEP.

When I woke up this morning, my phone was clogged with texts, my email inbox with messages. Overnight, the YouTube clip www.youtube.com of my remarks had attracted over 36,000 hits. By today, it was the most watched video in Britain. (As of 3/31/09, over 1.8 million views).

How did it happen, in the absence of any media coverage? The answer is that political reporters no longer get to decide what's news. The days when a minister gave briefings to a dozen lobby correspondents, and thereby dictated the next day's headlines, are over. Now, a thousand bloggers decide for themselves what is interesting. If enough of them are tickled then, bingo, you're news.” Daniel Hannan, UK blogger & MP.

DANIEL HANNAN is a writer and journalist. He has authored seven books on the EU, contributes regularly to a number of European newspapers, and has served as Conservative MEP for South East England since 1999. He has also written a book called the Plan, which is a blueprint for citizens to shift power from the professional politicians back to the people at the local level.

“Britain is heading in the wrong direction. The Plan shows how to put our country on the right track. Daniel Hannan and Douglas Carswell show how a future government could actually shift powers back, from Brussels to Westminster, from Whitehall to town halls, from the state to the citizens. Their plan aims to restore honour and meaning to the ballot box. It would disperse power among communities, through localism and through referendums. Things do not have to be as they are. The Plan shows how we can change our country for the better.” Book review on in the UK Telegraph www.telegraph.co.uk

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