Reading the news is an exercise in dis-jointed thought.   One of the biggest stories is of course the pending overhaul of healthcare to a system where we mandate coverage for all.   Just yesterday the Director of the Congressional Budget Office reported that his analysis contradicted the reports of the White House and those sponsoring the current legislation in as much as the cost will be much greater than forecast.   That means that the cost will be even more than the $1 trillion+ we have been asked to believe. The way to pay for it...taxes, of course.   On those pesky rich people.   But wait a second, there are already people lining up to tax those pesky rich people.   And it's not working. A couple of pages further into the news you find that states are reporting the largest drop in revenue in history - a fall of 11.7% year over year in the first three months of 2009.   This is the percentage change, so this is comparing apples to apples in terms of historic significance.      The main culprits are corporate income tax (down 18.8%) and personal income tax (down 17.5%).   Sales tax was down 8.3%. So the exact source of revenue that we are told will serve as the piggy bank to fix what ails us at the federal level is already wreaking havoc on state finances.   And it gets worse.   Among the states that have reported revenue for April & May, the numbers are running at -20% year over year.   As the Rockefeller Institute report so eloquently put it, "Such extraordinary weakness in revenue, along with continued if more moderate growth in expenditures, make widespread budget shortfalls highly likely this year." Yep.   That seems about right.   Keep spending a lot more than you are making and you will have a budget shortfall.   But no matter.   Keep spending. That's what the states are doing.   Look no further than Illinois, where the state has agreed on a "budget".   I put budget in parentheses because the state borrowed money to fund its pensions obligations, and readily acknowledges that they will have a multi-billion dollar shortfall by mid year.   That is not a budget.   As you move to the back of the paper, at least in the WSJ, there is an editorial on something we have discussed several times.   Even if you try to tax this dwindling group of high earners, nothing says that they will stand still and take it.   Why would they?   Why would anyone, if there are reasonable, legal ways to avoid increased taxation?   By the Journal's calculation, by adding the surtaxes that are being contemplated to fund healthcare and then considering state tax rates, high income residents in much of the US will find themselves taxed higher than socialized countries like France.   Unless of course they choose to arrange their finances in such a way as to avoid these taxes. In which  case we will see even more declines in tax revenue, even though expenditures continue to rise.    And the possibility of these tax dollars materializing to pay for health care? Not good.   The possibility that high income earners spend more time working on ways to pare their tax bill?   Now THAT seems  highly likely!  

Posted in : Taxes 

Comments

You Americans are missing some BIG sources of tax revenue. Why not increase tax on fuels like petrol and diesel fuel like what's done in Europe and to a lesser degree in Canada? I live in Canada and, despite complaints about high fuel prices, most people obviously don't mind the "high" prices. That's obvious when you see a lot of one person car trips, most cars above the speed limit on the highway (which uses more fuel, a lot of SUV's, and cars left idling for long periods in the winter. Another good source of revenue is more taxes on tobacco and alcohol. If you need more money to pay for health care, doesn't it make sense to increase taxes a potential source of health problems? You Americans want more public funded health care, and that's a good thing as you deserve it as much as anyone else does. What you have to do now is follow the example of how countries that already have public funded health care manage to pay for it.
Posted by paynedoug@hotmail.com | July 17,2009 03:52 PM

Rodney you are totally right on and I'm glad someone noticed! Not surprised that it was you! Also, I thought the top Op-Ed piece, "Obama Needs to 'Rest" His Presidency" was especially interesting because it was written by a Democrat who worked in the Johnson administration. (i.e. the Dems still need some "adult supervision" - my own comment!)
Posted by bruce.mazo@lfg.com | July 17,2009 03:16 PM

The post that says that those nations who use the most energy are the most prosperous is probably correct about that if you define prosperity as a large per capita GDP. However, I would like to suggest that just because an economy is largest doesn't mean that we are the best off -- if our air quality were like China's as a result, would that be ok? We might pay pay a similar price in the future because we have not taxed dirty energy for it's negative concequences. Also, the post implies that cheap energy leads to prosperity. I wonder if there might be many other factors (and, to repeat the above paragraph, we may pay a price in the future that we would rather not, so our "prosperity" may not be quite what we see now).
Posted by jburkland@sbcglobal.net | July 24,2009 08:52 PM

Is more taxes the answer? I know. All Mike Tyson needs to do is make more money. Our Gov't. is financially illiterate. We had a surplus a few years ago in Calif.. It was spent on anything. Don't save it for an emergency whatever you do. I say fire the dead wood in Gov't from the Fed to the city. Cut the fat so we can have a solid foundation to work with. It doesn't not mean we have to do without. The DMV should be open 5 days. It has been cut to 4 so they don't have to lay anyone off. That is a cut on our services. I say, get it over with and cut heads! Sided Note: A person works for the Gov't. for a couple of years and they are unemployable.
Posted by terryjanssen@att.net | July 17,2009 07:24 PM

To our friend in Canada who claims that we should tax everything in sight to pay for a Canada type of healthcare, please know that we appreciate your concern, but don't try to give us what does not work. Many of us are aware of the Canadians who come to the US, when they need good care. We also know of the waiting lists (and lotteries in some cases) that are used in Canada when one wants to see a doctor. We have some problems, but the answer is not to give everyone a poor system, but to fix our system so everyone who is in our country legally, can have access to it.
Posted by gkor6727@comcast.net | July 18,2009 07:36 AM

Rodney's sarcasm is spot on: "Keep spending a lot more than you are making and you will have a budget shortfall. But no matter. Keep spending." The core issue is not "BIG sources of revenue", it's the utter and complete failure on the part of government to REDUCE spending. In a nutshell, the recent financial/economic problems are the direct result of people spending far too much using ill-advised borrowing to finance the splurge. Even President Obama has said so in one of his plethora of speeches. Yet the government is nevertheless well on the road to committing the exact same stupidity on a national scale. Public funded health care will substantially increase spending. Yet a viable alternative presently exists, but the present powers that be do not want it for ideological reasons. That alternative is the combination of high deductible, catastrophic insurance and a health savings account funded by employers and/or covered individuals/families to pay for health costs not otherwise covered under the high deductible insurance. My family has used it now for over 10 years. It works. It works because it places responsibility for the highly individual matter of one's health care squarely where it belongs: On the shoulders of that same individual, not on the regulatory desks of faceless, nameless bureaucrats.
Posted by bazwm@att.net | July 18,2009 09:01 AM

Our current health care system is so scary that I believe it is worth a try to find a better way. Does it make you feel good that we spend so much more than other countries and yet our health status is so much lower? We have pharmaceutical companies who push drugs on us that are dangerous (read the fine print) and many don't provide better benefits than drugs already available. And they charge an arm and a leg. There are alternative treatments that work and are much less expensive but the FDA does not allow them to be prescribed by doctors if the doctors still wish to practice. It takes a great deal of time and effort to learn what you should do to make sure you can arrange for the best treatment for your personal issues. It would help everyone if such information were more readily available.
Posted by vsdill408@gmail.com | July 18,2009 10:43 AM

I believe the word used was "reset" vs "rest" in WSJ. Perhaps the same thing in this case.
Posted by pnolan@aol.com | July 18,2009 01:52 PM

No one likes to pay taxes obviously and I agree the gov't should spend less, but don't make the proposed surtax on "the rich" sound so egregious or unheard of, like it's unprecedented. I never made more than $200k but was in a 45% federal bracket back in the 70's and not long prior to that the top rate was 90%. So by comparison a 1% surtax on income of a million doesn't sound all that bad, IF necessary to balance the budget (eventually).
Posted by rbdoner@verizon.net | July 18,2009 02:19 PM

Want to reform health care? Try starting with these simple changes... 1. Eliminate ALL media pitching medications to consumers. After a few hours of watching TV even I believe I have several advertised diseases. 2. Make the patient pay for his/her health care when administered as was the case in the "old days". When faced with making the payment themselves instead of submitting the bill to the insurance company, most individuals will think twice about going to the doctor for frivolous reasons. 3. Make it mandatory that health care providers publish or otherwise make known to patients their charges before health care is administered. 4. Deny health care insurance for anyone who smokes. Does anyone have a good argument against these four "rules"?
Posted by dmm5169@gmail.com | July 18,2009 10:15 PM

Actually there is quite a number of us in America who want nothing to do with publicly funded healthcare. We would like to keep our highly innovative system that allows private enterprise and competition to provide efficiencies and quality healthcare. Our system is not perfect and it does need improvement but Canada or France is not the model I would have our leaders aspire to. As far as fuel taxes and cap and trade go, they are simply another tax on those who use energy. You will notice that throughout the world those nations who use the most energy are the most prosperous. Force your national populations to artificially use less energy and you will be cutting the life blood of your economy. When you tax energy more you will see it reflected broadly in the goods and service people now enjoy.
Posted by sssixxx@gmail.com | July 20,2009 12:48 AM

Quote: Actually there is quite a number of us in America who want nothing to do with publicly funded healthcare. Yes there are, and they are the wealthy people who can afford it, or who have coverage through their employer. What about all those people who don't have such coverage or are poor? Quote: We would like to keep our highly innovative system that allows private enterprise and competition to provide efficiencies and quality healthcare. Actually, because of having to support all those separate bureaucracies Americans pay about twice as much per person for health care than in Canada or France and not everyone is covered. How efficient is that? Quote: You will notice that throughout the world those nations who use the most energy are the most prosperous. Well how is it that Europeans produce about twice as much GDP per person per unit of energy than Canadians or Americans? In this day in age with environmental concerns, as well as expected social and economic costs of climate change we should be using energy far more efficiently. The best way to get such improvements is with financial incentives. Not only that, doesn't it make sense intuitively to increase taxes where the money is as evidenced by the most wasteful use?
Posted by paynedoug@hotmail.com | July 22,2009 08:45 PM

Rodney is spot on Abitibidoug - not so much. Too much spending is not an effective way to economic health. Al Gore said it best ( perhaps the only thing with which I ever agreed with him) in the 1992 presidential election. If you tax it you get less of it, If you subsidize it you get more of it. Why do we wnt less profits, trade, sales, jobs, health care, etc. Why do we want more Ethanol, poverty, homeless people, UAW pensions. You get the Idea, Abitibi ? This is not Canada or Europe. We are used to creating and generating wealth through creative capitalism which allows success and failure. Fail and move on, but don't drag the world down with you in th form of higher taxes and less real money producing activities. Money begets money. Taxes beget Canada or Europe. Read some of your countryman Charles Adam's work on Taxes, "For good or evil . . ."
Posted by niknar2003@yahoo.com | July 26,2009 10:07 PM

Why do we want more Ethanol, poverty, homeless people, UAW pensions. You get the Idea, Abitibi ? Quite frankly I don't know why you would want those things either, but most voters would disagree and appear to want more. As long as that's the case, you'll have to find a way pay for it somehow. Taxes beget Canada or Europe. Is that a bad thing when tax money is spent wisely? In Canada there is a federal government organization called the Canada Mortgage and Housing Corporation, or CMHC for short. This organization would NEVER have allowed subprime mortgages to be given to those who couldn't afford them, so that's why this subprime crisis never occured in Canada. In fact the economy, and housing market, across Canada are picking up again. Is it a bad thing to spend tax money on regulations that prevent crises and make for a more stable and prosperous economy where you don't have to spend billions after the fact to pay for all those bailouts?
Posted by paynedoug@hotmail.com | August 02,2009 10:13 PM

To legalone, the individual who derided the Canadian for offering taxation alternatives to income or capital gains taxes of the "wealthy" (as defined by the powers that be), or whatever else Americans think reducing the populace in Canada to eating dinner out of cans of Alpo, know that I'm an American, who took a job in Canada, and will soon have dual-citizenship status. I fully support his suggestions of alternate sources of funding, and take particular issue with the relentless use of the Canadian's "substandard" healthcare system, and its funding mechanisms which, in the mind of ignorant Americans would make Canada appear to teeter on the status of a 3rd world nation for this issue alone. I just finished listening to a podcast of an interview with Harry Dent, recorded in Canada in July, talking about countries in which he would prefer to be, and in which to invest, at the bottom of the projected downturn, and Canada was the 2nd word out of his mouth (Australia the first). For the outcome of the "substandard and horribly socialized" quality of the Canadian healthcare system, you can refer to the following study, where, the overall quality of life and health in both countries are similar. http://healthcare-economist.com/2007/10/02/health-care-system-grudge-match-canada-vs-us/ And finally, on behalf of the Canadian poster who offered his views and was so berated, and for the rest of Americans who fire the vitriolic "Canada's system is so horrible" crap to make their cases for sustaining a dysfunction system, I've written my own experience, from both sides of the fence. Because I am still an American, and I can, and unlike my Canadian counterpart, I've experienced both systems as most middle-class individuals would. Perfect thought it may not be, it's a far cry from what I left behind. http://tumbulwead.blogspot.com/2009/08/healthcare-canada-versus-us-from-both.html Fund it however you will (or not, in a bankrupt nation without the means to do so), but DO NOT disparage those countries such as Canada, France, Australia or Switzerland (whose model most closely resembles proposals currently on the table in the U.S.), that have long since allocated resources toward fixing (or better yet, preventing) what is broken.
Posted by pierce.kenny@gmail.com | August 20,2009 01:49 AM

Excellent, thorough, and well thought out posting, Tumbulwead!
Posted by paynedoug@hotmail.com | August 20,2009 05:05 PM

Healthcare Improvements Needed: Personal, Portable, Private Health Insurance Personal: It’s mine. I have choices and I’m responsible for the choices I make. Portable: My healthcare insurance is not tied to my employer. It’s my policy and I can take my policy to a new job (even in a different state) or to start my own small business. Private: There must be competition for my business by privately owned companies. Competition among companies sparks innovation and creates products that fit my needs.
Posted by cy.heath@consultant.com | August 22,2009 12:11 AM

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