Friday, November 20, 2009

Promises of tax cuts and the state's $851 million budget deficit

The state of Ohio is facing an $851 million budget deficit following a decision from the Ohio Supreme Court that a source of funding, income from slot machines at racetracks, is subject to a ballot challenge and cannot be implemented as planned.

Just like most politicians who don't want to make the tough decisions, Gov. Ted Strickland and the Democrats in Columbus have decided that the best thing for the state, the residents and our current economy, is to 'delay' a planned income tax cut.

Yes, you heard me correctly. They believe that the best thing to do is to raise your taxes, taking more of your money for their purposes. The tax cut they want to 'delay' is part of a phased-in plan that was passed several years ago. Interestingly, most of the organizations that rank states for business-friendliness or for tax purposes have touted this phased-in plan as a good thing for Ohio.

But despite the fact that the lower tax rates appear to be working in our favor, the easiest way to deal with a budget deficit is to raise taxes - no matter the dire negative consequences to the residents and the state economy.

Now comes some members of the Republican Party who think that 'delaying' only two-thirds of the cut is a good thing.

Perhaps they've missed the lesson.

The Plain Dealer has some interesting quotes in their story on the GOP plan:

Ohio Senate Republicans rolled out their plan to fill an $851 million hole in the current state budget Wednesday, but Senate Democrats immediately shot it down.

"It is in conflict with our core values and counts on money that can't be relied on," said Senate Minority Leader Capri Cafaro, a Youngstown-area Democrat.

Let's start with this one... Is Cafaro really saying that letting Ohioans keep their money that was promised to them 'is in conflict with' his core values? I'm not really sure.

And the hypocrisy of criticizing the Republican plan that 'counts on money that can't be relied on,' is just priceless. State Auditor Mary Taylor said the entire budget these same people voted for and touted relies upon one time funds that 'can't be relied on' for continuation. And the huge hole in the budget was created for the same reason - relying upon money that can't be relied upon.

Of course, if people and businesses continue to flee the state because of the high tax rates and bad decisions made in Columbus, even the 'delay' in the income tax cuts will turn out to be money that can't be relied upon.

The Republican plan would delay two-thirds of a 4.2 percent state income tax cut. Gov. Ted Strickland and fellow Democrats in the General Assembly want to suspend the entire cut until 2011. Republicans instead proposed that the rest of the money to fill the budget gap -- which resulted from an Ohio Supreme Court decision that slot machines at racetracks are subject to a ballot challenge -- would come from a variety of sources.

Those include $200 million in casino license fees, $50 million from sentencing reforms, a $30 million raid on the state's Housing Trust Fund as well as $10 million from oil and gas drilling at Salt Fork State Park.

So rather than drill for oil and gas at a state park, Democrats want to tax us more. Where are the priorities here? What's more important to them: letting Ohioans keep the money they've earned and keep a tax cut promised several years ago, or drilling in one of the state parks? Seems like a no-brainer to me...

And raiding the Housing Trust Fund appears to be no different than raiding the tobacco settlement fund - the politicians are good at raiding funds designated for a specific purpose whenever they are faced with that choice or cutting spending.

Strickland doesn't think the Republican plan is a responsible way to solve the budget crisis, said his spokeswoman Amanda Wurst.

Really? The 'responsible' way would have been to not rely upon a questionable source of funding in the budget in the first place.

On the other hand, what is more responsible? Keeping a campaign promise to not raise taxes or taking the easy way out of a budget deficit by raising taxes?

I'm sick and tired of politicians telling us they've cut everywhere they possibly can while actually increasing spending in many areas where it is not required. Our elected officials in Columbus should just start eliminating departments, cutting funding to projects and tasks that are not mandated, reducing the szie of Ohio's government and tightening the state's belt.

That's what we're all doing - going without things that we'd like to have because we don't have the funds to cover their costs. Will some special interests be upset? Yes - they will. But better that some special interests be upset over their loss of funding than all Ohio residents have to pay a higher tax just so some politician won't have to explain logic and reason and priorities to them.

As for all of us - let us be sure to learn a very valuable lesson: promises of tax cuts aren't worth the paper they're written on.

3 comments:

skeeter1107 said...

There are two concepts that this story along with other similar stories highlight.

First, politicians seem to have never learned the lesson that taxes are not a static calculation. Raise the rate multiplied by last year's taxable income and voila...more tax money. Incorrect. Lower rates, increase the taxable income base and more tax revenue. Correct.

Second, the perspective that politicians view things from a government centric perspective, instead of a public centric perspective. To explain, the politicians see the government entity's financial needs as more important than that of the public. If there is a tax revenue shortfall, their first reaction is to find new ways to make up the short fall instead of making cuts to match revenue. Whether or not the public can actually afford it is a secondary concern and is only seen in the light of how it affects their reelection chances.

So I've stated the obvious.

What I think Ohio along with other states and of course the City of Toledo need to do, is come to terms with less tax revenue. To understand that revenues will be less and that making up for some shortfall with new fees and taxes are not feasible. To understand that fundamental structural change in the budget and how government actually operates needs to be figured out.

To continue to try to finance government in it's current form will become clearly impossible for financial reasons. Ideology aside with respect to the size and role of government, government will need to shrink to more closely match revenues. If we do not, we may unfortunately find our state going down the path that New York and California have chosen.

Tim Higgins said...

Maggie,

Both sides remain laughable on this subject. Democrats want no tax cuts and no spending cuts, Republicans want less in the way of tax cuts and no spending cuts. It would be funny if it weren't so tragic (and of course our money).

When have these legislators done anything that wasn't based on "unreliable funding"?

The tobacco tax settlement, SCHIP, slot machine revenues, casino licensing fees, THE LOTTERY; they are all subject to the winds of change called the American Economy. They refuse even to acknowledge that part of the problem is the "unreliability" of income tax in a year where income is going down.

Like the man falling down the outside of the skyscraper, they tell themselves "so far, so good", refusing to recognize the reality of the situation.

When will they recognize that the end may be near from "traumatic sudden deceleration" if they do not significantly change the parameters of the situation (as in cutting the budget or seeking some non-income based, non-taxpayer based revenue source)?

When will they begin to remember the proof of history that tax cuts cause an economy to grow instead of continuing to redefine stupidity by "doing the same thing over and over again and expecting a different result"?

Hooda Thunkit (Dave Zawodny) said...

Maggie,

When I read stuff like this, I repeatedly say to myself, "Politicians think that we are stupid," and then it all becomes clear to me.

But, until enough voting patriots understand the same message, the politicians will remain right and get on with destroying our country unhampered by the enlightened few.

Some day though, the worm will turn. . .

Hopefully, sooner than later.

Google Analytics Alternative