tax policy

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Prop 13 Declared Innocent

Thursday, June 11th, 2009

You hear it all the time: California’s in such a mess “because of Proposition 13.”

You probably wonder how that initiative, passed way back in the ‘70s, could be so key.

Well, it was the first of a long line of voter-instigated tax limitation measures, and it made politicians ache with frustration. Politicians LIKE spending money; Proposition 13 limited, somewhat, their greedy quest for ever more money to spend.

But did it really unbalance California fiscal policy?

Chris Reed, writing in the San Diego Union-Tribune, explains how nutty this charge really is:

[S]ince shortly after Prop. 13’s adoption, property tax revenue increased by 579 percent. That is not a typo. It went up 579 percent.

During the same span, population went from 24 million to 38 million — an increase of 58 percent.

Reed checked his numbers against the inflation rate, and found that “property tax revenue has increased by more than triple the combined rate of inflation and population growth.”

He did a little more checking and learned that property tax revenues went up faster than any other major revenue source!

So Prop 13 simply cannot be the reason for California’s impending bankruptcy. Though the measure limited tax rate growth, and helped homeowners, it did not unbalance the budgets.

Humungous increases in spending did. Politicians need look no further than their own projects.

This is Common Sense. I’m Paul Jacob.

Hope for the Hopeless

Tuesday, June 9th, 2009

Illinois is hopeless. When John Tillman hears people say that about government in the Land of Lincoln, he gets pretty peeved.

Tillman, head of the Illinois Policy Institute — a think tank offering what it calls “liberty-based public policy initiatives” — doesn’t think battling big government is hopeless at all. For instance, the Institute helped generate support for transparency legislation that passed.

And last week, as the state’s legislative session closed, Governor Pat Quinn’s proposed 50 percent income tax hike was soundly defeated . . . by the state’s very blue legislature.

How did that happen?

Well, the first step is always to believe enough in your fellow citizens to wage a fight for their “hearts and minds.” Hope helps.

Next step? Getting the facts out.

The argument for huge tax increases is always that government can’t survive without the additional money. In a series of media appearances and grassroots events, Tillman and the Institute kept talking about sensible ways to cut spending.

Governor Quinn talked about the painful consequences if government didn’t have more money. Tillman spoke about the painful consequences if working families, already paying high taxes, had to fork over still more dough.

Kristina Rasmussen, the Institute’s Executive Vice President, published a report entitled, “Would My Family Pay Higher Taxes Under Governor Quinn’s Plan?” The answer for the average Illinois family was: Yes — 17 percent more.

Hope wins again. Helped by hard work.

This is Common Sense. I’m Paul Jacob.

March to Bankruptcy

Wednesday, May 27th, 2009

I have warned, before, about the upcoming double-barrel crisis aimed at the U.S. financial system: The insolvency of the U.S. government itself, as entitlement debt can no longer be kept afloat by FICA withholding, and as Treasury debt can no longer be maintained on a monthly basis simply because it has grown too big.

Last week our entitlement system’s trustees said that the current recession is so undermining Medicare Part A that payments for elderly care will fail in eight years, with Social Security itself imploding in less than 28.

That is, if the economy doesn’t get worse.

Medicare Part B, covering doctors’ visits and outpatient care, and Part D, covering prescriptions, are right now insolvent, sucking money from general revenues.

This crisis rushes closer, even as our president insists on reforming health care in ways that will almost certainly add new entitlements — which will also have to be paid for.

President Obama says that more government will do the opposite of what it’s done in the past. Until now, government involvement in medicine has increased costs and prices. Now he says what he’ll do will make for more “efficiency.”

Why do politicians believe in the magic of their new programs rather than the history of their old ones?

Why is it that, in politics, irresponsibility rises to the top?

However you answer that, the march to bankruptcy is picking up pace.

This is Common Sense. I’m Paul Jacob.

Golden State Voters

Monday, May 25th, 2009

California voters are said to be in big trouble. You see, they didn’t vote the way their newspapers and politicians told them to vote on the six ballot measures on the May 19th ballot.

The first five measures — a combination of tax-raising and spending shifts to cover a $21 billion budget hole — were defeated by voters by a whopping two-to-one margin.

Only the sixth proposition passed — and it cuts the salaries of legislators and state officials.

The lessons are obvious, but not likely to be learned by the political elite, who now argue that the ballot initiative process should be restricted if not abolished altogether because the people didn’t vote according to their wishes.

Lesson One: Raising taxes isn’t terribly popular even in a blue state. Voters seem to think legislators should find ways to cut back spending without gutting essential services. In every county, and even in very liberal Los Angeles and San Francisco, these ballot measures went down hard.

Lesson Two: It’s good when politicians have to ask us before raising taxes. While some bemoan that voters aren’t minding their governors, I’m of the school that believes that those who govern are supposed to mind the voters.

Golden state voters are fortunate that politicians had to seek their approval to raise taxes — and smart not to have given it.

This is Common Sense. I’m Paul Jacob.

Taxing Charity

Monday, March 30th, 2009

The federal government allows people to give money to non-profit organizations and then deduct the money they give from their taxable income. If you donate to a hospital, a homeless shelter, the Salvation Army or an educational foundation, you don’t have to pay federal income tax on that money.

But President Barack Obama wants to change that longstanding provision, at least for higher income taxpayers — you know those newly suspicious folks who make $250,000 or more a year. These “wealthy people” wouldn’t get to fully deduct their charitable contributions.

Obama insists this won’t matter to donors or to the charities they support. Regarding the hurt this might put on charities, who have already been hit by the economic downturn — and I quote — “It’s not going to cripple them.”

Gee, thanks for not absolutely “crippling” charities.

Studies suggest charitable donations could fall by 5 percent, however. That’s almost $4 billion that won’t go to feed the poor, help the sick, educate people or provide legal defense for citizens fighting for their rights.

As times get tough, now seems a bizarre time to undercut charitable giving. Instead of removing some tax-deductibility from wealthier Americans, we ought to give extra deductibility to everyone.

Isn’t the goal to maximize help for those in need?

Don’t tell me it’s to maximize government’s role, to the exclusion of private charity.

This is Common Sense. I’m Paul Jacob.