Opinionated @ CFE

Balanced Budget Pitfalls

May
20

Since long before I was on this earth, politicos of all stripes have frequently talked about balanced budgets, both at the state and federal levels. Many states have adopted laws or even constitutional amendments to ensure that, unlike the feds, expenditures do not exceed revenues. In many cases, these help keep states from going gorging on debt spending. There are, however, a number of pitfalls lurking just around the corner that can thwart the intention of such laws and even serve as an impediment to sound government finances.

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Are Utah's federal fights worth it?

Apr
17

This last legislative session ended in Utah trying to pick some big fights with the federal government. From seizing federal land to bucking federal gun regulations to suing to stop the health care bill that just passed, our legislature and AG are digging in for a knock-down brawl. A lot of criticism has been leveled at them for the expense of these fights, but I’m starting to wonder if the potential payout isn’t worth it.

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A Tax By Any Other Name

Feb
15

Local governments all around are facing some tough times and Salt Lake County is no different. The county had to make some deep cuts, over 17%, to make ends meet. Certainly lean times lead to creative solutions, but I’m not so sure about the way that the Unified Police Department has chosen to go about it.

As you may have read, the UPD has decided to implement a fee for police service to be collected once a quarter. This fee is about $174 per year. That in and of itself isn’t that big of a deal to me. What is a big deal is the manner in which this fee is being collected and the manner in which the county is trying to spin it. Call it a fee, a surcharge, or whatever you want, it’s still a tax.

What’s particularly laughable is that this fee is being billed as somehow much more transparent than an annual property tax statement. On the contrary, it’s even less so. My property tax statement contains line items for each service that I am receiving. I can, at a glance, figure out how much I pay for fire, library, and even garbage service. If the increase cost of policing were, instead, listed as a line item on my property tax bill, I would still know exactly what I’m paying for police service. By keeping it on a separate statement, however, I now have to start adding up various bills to figure out just how much my local government costs. Making a taxpayer do more work to figure out what they are paying and what it is for is less transparency, not more.

It’s also a non-argument that using fees instead of taxes gives the county more flexibility. If the county can’t implement flexible taxation based on residence type or the number of employees at a business, then it’s time to ask the legislature to make changes to the law. I agree in principle that businesses that create higher police costs should bear a higher portion of the burden. (You may also notice that apartments are charged more than homeowners, a tacit admission that single-dwelling units cause less crime.) It’s also a good thing to have non-profits contributing at least something to the costs of running the county. Just don’t use fees as a end-run around legislative roadblocks. That kind of behavior doesn’t solve the problem and, more often than not, incurs the wrath of the legislature with retaliatory new laws.

Fixing the 2010 Budget

Dec
10

Utah finds itself in yet another deep budget hole, this time to the tune of nearly $1B. This, of course, sets of the debate of if the Legislature should cut spending, raise taxes, or a bit of both. Sen. Steve Urquhart, who I have tremendous respect for, has called for his colleagues to oppose any new tax increases, focusing instead on finding places to make cuts. His rationale is that the rate of growth in state government expenditures has outpaced population plus inflation. While this sounds like a sound argument, it doesn’t mesh with some stark realities.

The demand for state services is not a function of just population and nowhere is this more obvious than in our transportation budgets. As we continue to live in the burbs and commute to work, vehicle miles driven has actually grown as much as twice as fast as population. The cost of construction materials has also risen dramatically higher than inflation as China and India consume more of the world’s steel and concrete supply. Education has also taken a hit as more ESL students enter our school systems, students that have a significantly higher cost to educate. (Large immigrant populations account for a significant part of New York’s high education spending and drag their results down.) A rigid formula leaves little room to address these kinds of variances.

We should also consider that despite all of the posturing, Utah’s state budget has been fairly stable as a percentage of state GDP. During the last two decades, it has fluctuated from a low of 15.5% to a high of 17.2%. That is an amazing amount of restraint given the large surpluses that we had just a few years ago. Whether this is because of or despite the hand-wringing about state government spending is anyone’s guess, but the caricature of free-spending double-talkers seems better suited to Congresscritters than it does our state government.

While I can certainly appreciate the sentiment against raising taxes unnecessarily, you can’t just sweep that option off of the table wholesale. I hope our state representatives and senators will bear this in mind as they start making tough decisions next month.

Raising Taxes And Fiscal Responsibility

Sep
28

Ever since Reagan, the unending call of conservatism has been to cut taxes and cut ’em deep. The theory is that with massive cuts in revenues, Congress would have no choice but to start cutting back on spending. What we saw through the Reagan, Bush I, and Bush II years is that the plan backfired. Instead of paring back on spending, Congress showed an incredible lack of willpower and whipped out the national credit card to make up the difference. Apparently the “starve the beast” approach didn’t work despite 20 years of White House policy enforcing it, so why are conservatives still marching behind it?

That’s the question that Bruce Bartlett asked last week in Forbes. Since huge deficits don’t make people call their Congresscritters and demand reductions in spending, perhaps raising taxes across the board to cover the increased cost of government largess would do it. Let me say right now with no qualification that we should all be expected to pay the full cost of the government services which we are receiving. If it can’t be paid for with taxes or savings, the money simply is not there to spend.

I know, it sounds like crazy talk, the same kind of crazy talk that President George H. W. Bush was talking in 1990 when he expended a mountain of political capital to institute PAYGO rules. These same rules were likely responsible for large balance-sheet surpluses in the 90’s. True to form, though, Congress used all of it and then some on increased spending leading to an even larger national debt. (Not much of a surplus if you ask me.) If this situation sounds rather recent and familiar, replace the word Congress with California legislature and you get an idea of how this story ends.

So what are we to do? It seems that there is an insatiable demand for increased services and decreased taxes from the citizenry and the federal government has been trying to placate both. I say raise taxes to pay for these services and see what happens. It can’t be any worse than saddling future generations with a debt costing many times what it does now and just maybe a few more people will be willing to give on their demands for government services.

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