Tuesday, April 14, 2009

Another Dozen Reasons Why Tax Day Tea Parties Are the Place to Meet

In last Thursday's issue of The Wall Street Journal, Leslie Eaton pointed out that major tax increases are coming at the state level:

At least 10 states are considering some kind of major increase in sales or income taxes: Arizona, Connecticut, Delaware, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Washington and Wisconsin. California and New York lawmakers already have agreed on multibillion-dollar tax increases that went into effect earlier this year.

States have been painted into a corner by legislators' unwillingness to exert fiscal restraint at a time when many people have lost jobs or are earning less. With less income, people pay less (or no) state income tax; with less money to spend, they contribute less to their state's sales tax coffers.

As Eaton points out, Arizona has recently lost more than 10% of its sales tax revenue and almost 16% of its income tax revenue, about matching what the Federal Government has been losing in income tax receipts for the last 6 months. Next year for Arizona, the gap between money in and money out will be $3.4 billion. That's a lot to make up in taxes. Oregon is looking at losing a third of its tax revenue; Pennsylvania about 7%.

According to the Nelson A. Rockefeller Institute of Government, for fiscal year 2010 in New York State, where I live, the difference between money in and money out will equal nearly 25% of this year's state budget! That means a world of hurt is coming to my little corner of Progressive Paradise. Just for starters, residents of New York State are getting hit with "100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents." New York City has lost more than 75,000 jobs since last August.

Similar gaps between state income and state outgo in 2010 are expected to equal nearly 30% of 2009 government spending in Arizona and Nevada, 25% in California, 23% in Connecticut and Florida, 22% in New Jersey and Louisiana, and 21% in Vermont.

Time for a hold-your-nose, count-on-your-fingers math exercise. Suppose you had the nerve to look at your 401(k) statement and found out that it is down, say 50%. The government has recently printed a great deal of money to grease the skids, enough to dilute the value of whatever money you've got left in your 401(k). Let's be generous and say that means you now have 40% of your original 401(k) holdings.

Printing extra money means the money in your wallet, piggybank, mattress, and CD is worth less too. But, deflation is rolling along, meaning that goods cost less, which offsets some of your money losses temporarily. For example, if you do manage to scrape together enough money to buy a car this year, you will pay less for it than you would have last year.

However, if you have savings tied up in something that is not money, like that piece of property you are paying more taxes on each and every year, these assets are getting to be worth less and less each day and will continue to be worth less as long as prices keep falling, which they probably will for a good long while yet.

Eventually, prices won't be able to get any lower, and inflation will start (probably helped along by the government). That's another story, and I don't even want to talk about what inflation will do to your job search and buying power. It's not pretty.

Considering that genius types who do the really hard number crunching have concluded that the national debt will skyrocket to 20 trillion in 10 years or less, I don't give the states much chance of breaking even any time soon. The federal government will be taxing more and more, states will be taxing more and more, counties will be taxing more and more, and so will municipalities. No end is in sight.

Tax Day Tea Parties will be held in 28 cities in New York State and in hundreds of other cities across the country tomorrow, on April 15. Many of these gatherings will be held after 5:00 p.m. to accommodate many working people. Click here to find a location near you, and join others to tell Congress what you think of tax servitude and their involvement in it.

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