Nationwide Tax Revolt Is Coming

Cities, states, and municipalities have a huge budget problem. That problem is caused by too much spending. The sensible thing to do would be to reduce expenditures.

Instead Cities Turn to Fees to Fill Budget Gaps.

After her sport utility vehicle sideswiped a van in early February, Shirley Kimel was amazed at how quickly a handful of police officers and firefighters in Winter Haven, Fla., showed up. But a real shock came a week later, when a letter arrived from the city billing her $316 for the cost of responding to the accident.

�I remember thinking, �What the heck is this?� � says Ms. Kimel, 67, an office manager at a furniture store. �I always thought this sort of thing was covered by my taxes.�

It used to be. But last July, Winter Haven became one of a few dozen cities in the country to start charging �accident response fees.� The idea is to shift the expense of tending to and cleaning up crashes directly to at-fault drivers. Either they, or their insurers, are expected to pay.

With the economy flailing and budgets strained, state and local governments are being creative about ways to raise money. And the go-to idea is to invent a fee � or simply raise one.

Ohio�s governor has proposed a budget with more than 150 new or increased fees, including a fivefold increase in the cost to renew a livestock license, as well as larger sums to register a car, order a birth certificate or dump trash in a landfill. Other fees take aim at landlords, cigarette sellers and hospitals, to name a few.

Wisconsin�s governor, James E. Doyle, has proposed a charge on slaughterhouses that would be levied on the basis of each animal slaughtered.

Washington�s mayor, Adrian M. Fenty, has proposed a �streetlight user fee� of $4.25 a month, to be added to electric bills, that would cover the cost of operating and maintaining the city�s streetlights. New York City recently expanded its anti-idling law to include anyone parked near a school who leaves the engine running for more than a minute. Doing that will cost you $100.

The �accident response fee� idea could spread, too. A company in Dayton, Ohio, called the Cost Recovery Corporation specializes in setting up collection systems for municipalities that bill for police and fire responses. (The company keeps 10 percent of billings.) Inquiries have tripled in the last year, says the company�s president, Regina Moore.

Tax Capital of the World

In a game of leap-frog between New York and California, once again New York has the dubious honor as The Tax Capital of the World.

Like the old competition to have the world's tallest building, New York can't resist having the nation's highest taxes. So after California raised its top income tax rate to 10.55% last month, Albany's politicians leapt into action to reclaim high-tax honors. Maybe C-Span can make this tax competition a new reality TV series; Carla Bruni, the first lady of France, could host.

They can invite politicians from the at least 10 other states that are also considering major tax hikes, including Oregon, Illinois, Wisconsin, Washington, Arizona and New Jersey.

In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point "millionaire tax" on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation's highest taxes on investment income -- at a time when Wall Street is in jeopardy of losing its status as the world's financial capital.

Mr. Silver says of the coming tax hikes: "We've done it before. There hasn't been a catastrophe." Oh, really? According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes. How does Mr. Silver define "catastrophe"?

This is advertised as a plan of "shared sacrifice," but the group that is most responsible for New York's budget woes, the all-powerful public employee unions, somehow walk out of this with a 3% pay increase. The state is receiving an estimated $10 billion in federal stimulus money, and Democrats are spending every cent while raising the state budget by 9%. Then they insist with a straight face that taxes are the only way to close the budget deficit.

Taxing Your Way Into A Deeper Hole

Cities and states are taxing themselves in to an ever deepening hole. It is fiscally irresponsible to do anything but shrink government salaries and privatize all services that cannot be eliminated.

Irresponsibility in Vallejo, California

The unions of Vallejo, California got part of what they have coming when a Judge Ruled Vallejo Can Void Union Contracts.

Not surprisingly, a self-serving website sponsored by the Vallejo Police Officers Association, Firefighters Local 1186, and IBEW Local 2376 is pleading the case for raising taxes so they can receive ridiculous, unjustified salaries and pensions at taxpayer expense.

Taxpayer Resentment Is Growing

Resentment towards unjustified property taxes, sales taxes, income taxes, and fees is building. At some point, I just do not know when, there is going to be a massive taxpayer revolt to throw the bums out, privatize services, and end the powerful grip public unions have over our lives.

Private pension plans have gone the way of the dinosaur, it's long overdue that public sponsored pension plans and public unions follow suit.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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