Occam’s Razor

A new inconvenient truth: we need to raise taxes

Way back in 2003, I penned this post that more than five years later still gets regular hits. (It has received eighty hits since the start of the year, according to Google Analytics.) I was very politically incorrect back then when I suggested that we are not paying enough in taxes. I still feel this way and I am sad to say that recent news articles bear me out. We are woefully behind simply maintaining the infrastructure that we have. This was tragically borne out a year ago with the catastrophic bridge collapse of the I-35W Mississippi River Bridge in Minneapolis that killed thirteen people. As a direct result of this event, federal and state money suddenly materialized to replace this bridge. The replacement bridge will cost $234 million and is scheduled for completion by Christmas.

You would think that this event might have changed the dynamics. However, as the Associated Press found, just twelve percent of our most structurally deficient high use bridges have been repaired. It would cost an estimated $140 billion to repair just the bridges that need to be repaired right now. Yet, President Bush is threatening to veto a transportation bill because it spends $1 billion more than he likes. It will not surprise you to learn that Bush’s motives are wholly ideological. He is a conservative and conservatives do not believe in raising taxes or spending money on projects not considered essential. Apparently, despite overwhelming evidence to the contrary, bridge construction is not essential to this president. Our War in Iraq though is essential, and at least some of that money is going to build new bridges for Iraqis. Apparently, bridges are essential for Iraq, but are not essential for the United States. Go figure.

I picked bridge repair as an example only because it is easy to see the consequences of inaction. In fact, our infrastructure is crumbling all around us. Here in Virginia, our state House of Delegates once again bollixed up attempts to raise transportation taxes. The result is that not just bridges that are suffering, but cars spend much time sitting in traffic and consequently unnecessarily spewing emissions. So far this year there have been three Code Red air quality days for the Washington region, and twelve Code Orange days.

Better air quality, like safe bridges, are solvable problems. Neither is solved by rocket science but by the application of money and will. Just as maintaining your car means you extend its useful life, bridge life can be extended through regular maintenance too. Instead, we would rather defer the cost of maintenance to have a little more cash in our pockets today. The result is like driving your car on a half a quart of oil. You can do it for a while, but at some point, you are looking at some very expensive consequences. It is pennywise and pound-foolish.

The anti-tax crowds, epitomized by nuts like Grover Norquist, are pennywise folk. They are convinced that all expenditures of money by governments are ultimately wasteful no matter how much they address a public need. Their philosophy though amounts to living in the moment and closing their ears when the application of their philosophy results in inconvenient news, like what happened in Minneapolis one year ago exactly on August 1, 2007. These problems do not go away by ignoring them. They simply get worse and more expensive to fix.

The irony is that if instead of aggressively cutting taxes we had prudently kept the old tax rates then we would have had the money back then to fix many of the systemic problems that are cropping up all over the place today. Our tax rates seemed quite acceptable to the American public when our president was inaugurated. We were even paying back some of our massive debt. Granted, even back in 2000 we were not quite spending what we needed to spend to address problems like deteriorating bridges. This was due in part to federal gas taxes not having changed since 1993. However, construction costs have increased during that time. The result is that there is less money available to fund projects like bridge maintenance. Rather than raise gas taxes, thus far Congress’ solution is to charge it. Hopefully only as an interim measure, the House of Representatives voted overwhelmingly to add eight billion dollars to the Highway Trust Fund by supplementing it with money from general Treasury funds. In other words, we will go into more debt to pay for it and pass its cost on to future generations.

Our fiscal crisis in many ways mirrors our blindness with the oil crisis. We buy more foreign oil because we are used to an oil-based economy and do not want to think about how hard it would be to change to something else. We know that recoverable oil is a finite resource that in general will only get pricier because it will be harder to extract. Similarly, we borrow money from creditors on the expectation that they will always be willing to lend it to us. As some overleveraged homeowners are finding out, if your liabilities exceed your assets no one is willing to loan you any money. The same can happen to the United States government. Our weak dollar, trading at record lows, suggests the time may not be that far off.

To solve the oil crisis we must realize that we cannot drill our way back to our previous lifestyle. To solve our fiscal crisis, we have to realize that we cannot indefinitely depend on our creditors unless we first show a willingness as a nation to roll up our sleeves to fix some of these problems. In short, we need to raise taxes.

Raising taxes is never convenient, particularly at a time when so many Americans are struggling. That is why my suggestion will go over like a lead balloon. That is also why if I were ever inclined to move my fantasy run for president into a real run for president, my message would fall mainly on deaf ears. Like John Anderson in 1980, I would lose spectacularly.

Still, most of us, if we stop listening to the spin and start listening to our hearts, know that we face a new inconvenient truth. The cost of not raising taxes today simply means that to fix these problems tomorrow will cost even more. So yes, for a while, those extra taxes would hurt. At some point, you sufficiently address the under-funded infrastructure problems and taxes can be eased. Nevertheless, taxes must never be eased beyond the point that we can adequately maintain the infrastructure we need to run our modern society.

Instead of running for president, all I can do is be that fly in the ointment. I am more than willing to pony up my share of additional taxes. Most likely, I would pay disproportionately more in taxes than many of you, since I have a six-figure income. I do not like paying more taxes either, but I am willing to do so. I do know that despite laughably naïve men like Grover Norquist, we are interconnected. We critically depend on our infrastructure and our social safety nets. Since like you I get great value from these things, I am not afraid to pay my share.

As was true when I wrote about it in 2003, things cost money! They cost what they cost because that is how much it costs! No ideology can change this. I expect to pay close to $200 on Monday to have a locksmith fix a bad lock, which must work with our house key. It seemed like a lot of money to me too, but that is the going rate for fixing a problem that I cannot fix by myself. I would rather pay the $200 than find that anyone could get into my house or that I could not get out when I needed to.

We have a great nation that thanks to the low tax mantra is rapidly moving from first-class status to second-class status. I think I am a patriot by coming forward to proclaim that I am willing to have my taxes raised to make sure we remain a first class nation.

August 1st, 2008 at 12:46pm Posted by Mark | Politics 2008 | 3 comments

Guffawing over a War Tax

It is not often that I agree with Senator Joe Lieberman. Nevertheless, with his bizarre proposal yesterday for a War on Terror Tax, I found myself in a rare moment of agreement. Yet while also nodding in agreement with the intensely odd senator from Connecticut, I was also guffawing over his utter cluelessness.

Of course, his proposal has virtually no chance of becoming law. It would not even get brought up in committee. Right now, the hardest part for his fellow senators when encountering Joe in the hallways is to avoid laughing aloud. It would be charitable to call him just a jokester, but his proposal apparently was delivered while he was completely sober. In doing so, he is demonstrated how completely out of touch he is with political reality.

Raise taxes to fund an unpopular war? It is clear that taxes will not be raised on Bush’s watch, no matter how much debt we have to incur. While a Democratic Congress might be inclined to raise taxes on the rich to fund programs for the poor and middle class, it has zero appetite for a special tax to pay for Bush’s War on Terror.

This is too bad because, looked at from a non-political perspective, there are virtues to his proposal. Democrats keep trying in vain to find a means to get our troops out of Iraq. In the Senate, even holding a formal debate a non-binding bipartisan resolution expressing concerns about Bush’s planned “surge” of troops in Iraq became politically impossible. A war tax though, if it could be signed into law, would definitely end our involvement in Iraq for good. However, it would also end the Democratic Party’s control of Congress and send any senator foolish enough to vote for a War Tax into permanent retirement. That is why those senators who understand political reality will not touch it with a ten-foot pole.

What is strange is that it appears that Senator Lieberman actually thinks Americans could be persuaded to support a war tax. Exactly the opposite would happen. It would infuriate the American people. They might ignore it for a while, but they could not ignore it when it came time to file their taxes. Imagine Joe Taxpayer’s reaction when their annual income tax refund suddenly disappeared to pay for a war instead.

Bush may appear to be stupid, but he was at least smart enough to put Karl Rove on this staff. While Rove’s batting average has been off lately, in 2001 he was astute enough to realize that the War on Terror could be used to ensure a Republican grip on power. It could be done by substituting knee-jerk flag waving for genuine sacrifice. The War on Terror became a No Sacrifices War, except for those who felt called to serve their country. Bush hopes that economic growth that will fund the War on Terror.

In reality, it is foreign creditors with piles of cash burning a hole in their pockets that are funding this war. After all, you cannot make any interest stuffing all that dough in a mattress. Thank goodness for the U.S. Treasury. Its appetite for debt appears to be insatiable.

It is ironic that cash rich nations like China are funding the War on Terror. In helping us fund a lost cause, China is in effect helping itself. China is our nation’s second biggest creditor. As of last November, it held $346 billion dollars of our debt, more than any other country except Japan. Put another way, every American currently owes $1153 to the People’s Republic of China, and the amount continues to grow. If we need to go to War with China, who will fund it? I think we can rule out the Chinese.

Here is a bulletin for Senator Lieberman: the public is simply not vested in the War on Terror. Yes, we cared about it immediately after 9/11. Moreover, we were still scared a year later, when Bush erroneously told us to invade Iraq because Saddam was “grave and gathering danger” we could no longer ignore. However, the War on Terror is so five years ago. Now we simply give it lip service. We were told to fight the enemy by spending money as if the War on Terror never occurred. So we did. As in the War on Drugs, the War on Terror has been outsourced and abstracted. We have been trained to be complacent and to assume Big Brother had it all under control. Now that we realize Big Brother bungled it beyond redemption we simply want it to go away. Poll after poll indicates that is why the Democrats swept Congress last year.

Add a war tax though, and watch the public go ballistic. This tax would make an abstract War on Terror suddenly a very personal War on My Pocketbook. Since most of us are barely keeping even with inflation, a war tax would have the direct effect of decreasing our standard of living. In other words, it would hurt.

That is when, instead of getting tens of thousands to an antiwar demonstration in DC, protestors would be marching in the millions. The din would be so loud and so insistent that even the most pro-war Congressman would realize on what side their bread is buttered. Burned once, simply getting rid of the war tax would not do. Protestors would insist that Congress get out of Iraq altogether. No war, no war tax. It is that simple. Only Joe Lieberman would cast a dissenting vote.

So Senator Lieberman’s interesting idea, in the final analysis, simply shows how dramatically out of touch he is with the American people. As a fiscal conservative, if we must have a War on Terror then I would much rather pay for it up front than put it on plastic. I remain convinced that terrorism is a serious problem and needs to be addressed more effectively. Nevertheless, like most of the American public, I too have figured out that our war in Iraq is futile and ruinously expensive. We just need to get out.

If it takes a War on Terror tax to do the trick, I will be writing my Congressman.

February 7th, 2007 at 07:36pm Posted by Mark | Politics 2007 | no comments

Communication Taxes are Obscene

It is not often that I agree with a Republican. This article in today’s Washington Post though had me agreeing with Virginia Republican Delegate Samuel Nixon. His bill before the Virginia Legislature, which is now in session, would replace a number of ad hoc communication taxes with a flat 5% state tax on phone bills, cable bills and various other forms of electronic communication services.

As long time readers know, I do not object to paying taxes. I believe taxes are the cost of civilization. I believe that in many cases we need to pay more taxes. We clearly have been stinting necessary services like road maintenance. I do though think that tax rates should be fair. I am completely supportive of graduated income tax rates. Lord knows I have paid plenty of income taxes, given my comfortable financial situation. I am less enamored with sales taxes, which hit both rich and poor equally, but I think they have their place. What I really object to though are over the top, usury taxes. My telephone bill is Exhibit Number One. It seems like every year the bills expand with newer and higher taxes, while the value I get from the service remains constant.

My telephone bill last month was $35.77. That is clearly not a whole lot of money. It would be a lot less though if it were not for the extra taxes and surcharges. My actual bill is $24.81. It includes a $1.88 for a non-listed number. The rest ($10.96) include a variety of taxes, almost all of which are state and local.

As a percent of the total phone bill, I am paying a tax rate of 31%. As a percent of the total of services billed, the tax rate is 44%. I cannot think of any other form of tax that is so usury. Interest rates this high are rightfully outlawed. Why do we tolerate tax rates this high that also sock it to even our most income challenged citizens?

Where does this $10.96 in taxes go? $3.00 of it helps pay for a 911 center. $5.77 goes to my county’s general coffers. 77 cents goes for federal taxes.

Of course, I pay other communications taxes. The taxes on my cable and internet bill are more modest. Cox Communications is our ISP and cable provider. Our bill is $85.65 a month, of which $3.47 are local taxes. This is about a 4% tax rate. We also have cell phones. Since we are cheap and tend to use email instead of cell phones, my wife and I carry Virgin Atlantic prepaid mobile phones. Even when prepaying for minutes though there are taxes. We pay $1 in taxes for every $20 in minutes, or a tax rate 5%. We also have a long distance provider. Again, we hardly ever call anyone long distance. I was sick of plans that required a minimal monthly payment. Therefore, I found Pioneer Telephone, which has a plan where I pay only 2.7 cents a minute with no minimum monthly payment required. For many months, my minutes were tax-free. Although my bill last month was only 93 cents last month (29 minutes), 15 cents were tacked on for various taxes. The effective tax rate is 16%.

How did this sad state of taxation evolve? Apparently, over the years it was easier to nickel and time telephone customers than to make other choices, like raise general sales or income taxes, or cut spending elsewhere. Most of this money goes to local governments, which are often constrained by the state on charging other forms of taxes.

I certainly do not want to stop funding 911 centers or the salaries of operators that help the hearing impaired. That too is part of the cost of civilization. I just think these taxes should come from general revenues. While these taxes might amount to a couple hundred dollars a year for me, that may be a lot of money to someone on a fixed income. An impoverished woman who is living month to month on social security may be splitting pills in order to pay these taxes.

Therefore, this bill is a sensible step in the right direction. If all my communication services were taxed at a flat rate of 5% then clearly my telephone bill would take a nose dive. On the other hand, taxes for my cable and internet services would go up. At least the taxes would be reasonable. I would happier if these services were just considered part of the cost of state and local government. I believe is better to marginally change income and sales tax rates than to slap such exorbitant fees on services that cost relatively little, but which we all need.

January 24th, 2006 at 09:31pm Posted by Mark | Politics 2006 | no comments

Stop Selling Our Highways

The State of Virginia recently received an unsolicited offer from a group of businesses. This consortium wants to take over the operation and maintenance of the Dulles Toll Road, a major thoroughfare here in Northern Virginia. The details are sketchy but the group appears to want the right to run and improve the road for the next fifty years. In return they will give the Commonwealth about a billion dollars in ready cash and commit to making modest improvements to the road.

The Dulles Toll Road connects Northern Virginia inside the beltway and the Capital Beltway with the key business and residential areas in Northern Virginia. These include Tysons Corner, Reston, Herndon and Washington Dulles International Airport. (Airport traffic rides free on the Dulles Access Road. The Dulles Toll Road runs parallel to and outside the Dulles Access Road.) The Dulles Toll Road also connects with the Dulles Greenway, a private and obscenely expensive interstate quality road that for those who live in northern Loudoun County.

The Dulles Toll Road is one of these roads that most residents can neither live with nor without. With four lanes of traffic in each direction, it moves a crushing number of commuters every day. During our extended rush hours, and particularly where it merges with the Capital Beltway, it acts as a giant parking lot. Cars spew tons of hydrocarbons tediously wait to merge onto the beltway. On the other hand, there are not a whole lot of alternatives during rush hours. The back roads, such as they are, are just as congested. The typical commuter now pays $1.25 each way for the privilege of waiting in traffic. The tolls were recently increased fifty cents in each direction, ostensibly to help pay for a future extension to the Washington Metrorail system to Dulles Airport.

The current group-think is that corporations must be able to do everything better than government. So naturally there are plenty of people (most of them Republicans) who would be glad to turn over essential services like maintaining our roads to the private sector. Virginia has been doing a lot of this “innovative thinking” lately. For example, the state plans to let two companies create HOT (High-Occupancy Toll) lanes on 14 miles of the Capitol Beltway. Apparently, the Virginia Public-Private Transportation Act legalizes such dubious deals. Naturally, Congress wants to smooth the way for more of these private sector road projects. Yes, Congress wants to give corporations the right to raise money for private toll roads with bonds that are exempt from federal income taxes. (And guess who will be left holding the tax burden.)

Why is the Dulles Toll Road is under the radar of private developers? It is no mystery to me. First, it is a beautiful and well-maintained road. Second, it is a huge and profitable cash cow, generating profits in the tens of millions of dollars every year. It has a captive set of customers with few alternatives except to move out of the area. Third, while the consortium can make claims about making improvements to the road, there is not much they can really do to speed up the traffic. That is because the traffic simply bottlenecks at the exit points. These are principally Tysons Corner and the Capitol Beltway. Oh sure they promise to widen exit and entrance ramps from the beltways onto the toll road. Fat chance that will do much good. Until the dubious day that the beltway gets eight lanes in each direction, the traffic during rush hours on the toll road will not speed up.

Perhaps they will turn the one lane in each direction that is currently reserved for carpools into a HOT lane. This should allow anyone with sufficient dough to cruise at highway speeds, even during rush hour. In addition, perhaps those HOT lanes could feed into the HOT lanes planned for construction on the Capital Beltway.

Do we see a pattern here? Consumers can expect higher tolls from these deals but little relief from congestion. For those with the money you will have your HOT lanes but you will pay premium prices. For most HOT lanes are designed for flexible pricing. The idea is HOT lanes should never be congested, so authorities keep raising the tolls until they run smoothly. It is another “wonderful” example of the market economy at work. Yes, it is wonderful all right. If you are rich you will get where you want to go quickly. As for the rest of us — you know the “little people” who live on normal incomes and do not get special tax breaks — we will be stuck in worse traffic and paying more for it.

Ugh. Let us just say no to more of this nonsense. Here is a crazy notion, but one that has worked well for much of our nation’s history: let us keep the roads public and free. If we have to have toll roads, let us make them equal access. Our public roads are not the airlines. There should not be a first class section for the privileged and coach class for the rest of us. Maybe in Animal Farm some pigs are more equal than others are. However, if I have any influence, it will not happen in my country.

I have written Virginia Governor Mark Warner expressing my displeasure at this brazen attempt by the private sector to pick my pocket. I hope if you live in Virginia that you will write too. Nevertheless, wherever you live, you need to be watchful and make your transportation views known. We complain about gas taxes. We raise hell if our legislatures want to up the tax by even a nickel a gallon. However, we will allow private companies to skim hefty profits off our public roads. You know what this really is? It is a tax increase. Only this time instead of any profit from these roads going into more transportation projects or, God forbid, even our public schools, they go straight to stockholders of these corporations.

No more. Sadly, this is more evidence that we now live in a country of, by and for the corporation. What is next? Is a private company going to buy the roads in my subdivision? Will I have to pay a toll to get out of my own driveway? Is this the kind of enlightened private sector innovation we want to foster? Or are we being played for fools? I suspect the latter.

July 27th, 2005 at 08:37pm Posted by Mark | Politics 2005 | 2 comments

Education: Walk the Walk

Some years back I opined that there are few places where we are more hypocritical than in our public schools. Therefore, I was not surprised when I heard this story today on NPR Weekend Edition Sunday. Texas, like many red states, is getting high from continually sniffing that Republican glue. Common sense is taking leave of its governor Rick Perry and its legislature. Apparently, it is more important to stand on a dubious principle than to do what is right for the children of Texas.

For those of you who do not want to listen to the seven-minute story here is a brief summary: Texas has no income tax. Its main forms of revenue are the state sales tax, already one of the highest in the country (which disproportionately affects the poor) and the property tax. The Republican legislature in its infinite wisdom requires that the portion of property taxes devoted to education must be capped at 1.5% of a house’s assessed value. Most school districts have hit the cap, but the student population in Texas is growing at around 80,000 students a year. Of course, this means that many more schools that need to be built and more buses have to be purchased. In general, the costs just to maintain the status quo have gone up. However, with property values leveling off, even wealthier districts are getting the squeeze. Large numbers of teachers are being laid off. Some school system superintendents are convinced that if the crisis continues the Texas public schools will be reduced to teaching reading, writing and arithmetic.

So why would this be a problem? From our current president and former Texas governor, these things matter. (Actually, in Texas, high school football trumps everything else.) If necessary, science, music, the arts, even gym are expendable. It is important to know how to read, write and do math. It is apparently not important to teach our children about the humanities and certainly not important at all to learn how to think critically. How do we know it is not important? When push comes to shove, we will not pay for them.

The school funding issue is a hot button one in Texas. The Texas legislature is back in session yet again to try to cough up more money to fund the schools. There is some discussion that the sales tax rate might need to be raised. However, it sounds like with the “no tax increases ever” mantra from the Republican controlled legislature that even this proposal is unlikely to go anywhere. School districts are getting so desperate that they are petitioning the Texas courts, hoping the courts will step in where the legislature fears to tread. So far the courts have been hands off, expecting (probably naively) that the legislature and the governor will do their duty and find the money somewhere.

You do not need an HP calculator to figure out the Republican’s strategy for dealing with the problem. Yes, you guessed it: they are going to expect school districts to make unspecified efficiencies and cut out the waste to solve the problem! Argh! I do not even live in Texas, but it is enough to make me want to repeatedly hit my head against a brick wall. How can our leaders grow up to be so stupid? The reality of the funding caps is already playing out in Texas schools. Teachers are being let go. Class sizes are increasing. Trailers are taking over school parking lots. The list of elective subjects is growing leaner. Still this does not seem to be enough. The obvious result if Texans are foolhardy enough to keep charging forward can be found near where I live. In Prince George’s County, Maryland back in the 1980s voters put in place a property tax cap called TRIM. The result? Twenty years of substandard education in Prince George’s County. By limiting funds for the schools, students predictably dealt with larger classes, mediocre teachers and inferior facilities. The county has consistently placed in the bottom two Maryland counties for educational test scores. It is currently on a state watch list because it is having difficulty meeting the requirements of President Bush’s No Child Left Behind law.

Perhaps the Texas legislature is apathetic because poor test scores are really not the big deal that they claim. While Texas certainly has its prosperous parts, it has many school districts that have always provided poor educations because they have never been adequately funded. Texas ranks 38th in teacher salaries ($32,426 per year) and 34th in expenditures per pupil ($5,267 per year). Despite the dubious “Texas Miracle”, Texas places in the middle of national educational rankings.

Nevertheless, Texas is hardly in unique in underfunding its schools. Nor is it unique in not doing much to actually prepare students for real life. I am willing to bet that you can graduate from high school in the vast majority of our states without ever learning how to balance a checkbook. I bet there is no requirement for students to spend time surveying the costs of independent living. As a result, I bet no student is required to put together a realistic financial and logistical plan mapping out their first five to ten years of adulthood.

Oy, this is but one of many egregious areas where students need some genuine education that they are unlikely to get from the public schools. Most school districts skimp on sex education. Students might absorb the practically compulsory lessons on abstinence but they will not know how use a condom should the need arise. (Why should it? When the times comes, the abstinence fairy will restrain their natural urges!) Moreover, there will likely be no classes on the psychological differences between men and women or relationship theory. There will probably be no course on personal finance, the dangers of credit cards and the wisdom of saving parts of your salary. Likewise, there will probably be no learning on early childhood education, parenting, insurance and financing an automobile. In short, a high school degree will continue to mean what it has always meant: a subset of skills that might make someone marginally marketable but will do little to prepare him or her for real life.

But by golly our students will be darn good at taking dumbed-down standardized tests. In my last entry I noted my wife’s experience teaching community college students. They want everything handed to them. And why shouldn’t they? Like Pavlov’s dogs, they know the drill. Have they not been heavily and repeatedly coached ad nauseum by their teachers so they could pass these standardized tests? When have they had the opportunity to apply any critical thinking or independent thought in the classroom? How many teachers have time for open discussions about the pros and cons of various lifestyle choices? How many of these students have learned from their parents and their churches that life is not squishy, only to find out in adulthood that real life is invariably complex and multifaceted?

We are doing serious injustices to our children who will someday run our country. Yes, it is good that they are at least getting some education. In many countries, there is no such thing as public education. However, we are not properly preparing our children for the real world. Reading, writing and arithmetic are foundations for learning, but they are not the result of education. They are tools used to allow us to engage and make sense of the rest of our complex world.

Like it or not we are sending some bad messages to our public school students. Do not think our students are not savvy enough to figure out the subtext. Here are some. Only the basics really matter because that is all we will give you. Low taxes for me are more important than giving you a quality education. We will expect you to be solid citizens and to manage your way in a complex world but we will not necessarily give you the straight facts or help you think through the complexities of the real world. Maybe your parents will help you and maybe they will not. Lastly, we will not give you many tools to deal effectively with the chaos into which you are about to be thrown. You are on your own. So do not be surprised if in adulthood that you bounce from one bad relationship to the next. Do not be surprised if you run up huge debts. Maybe if you are lucky in twenty years you will learn these for yourself. But we sure don’t care enough about you to warn you about these mega hurdles.

Sadly, our public schools have become a noxious experiment into which we inject our dubious values, philosophies and biases. Meanwhile graduate, here are ten dollars and a suit. Good luck, kid.

July 17th, 2005 at 09:38pm Posted by Mark | Politics 2005 | 2 comments

The Implications of Rising Property Taxes

I bet I’m not the only property owner in Fairfax County, Virginia to do a double take this week. I opened up my 2005 property assessment today to find out that my house is allegedly worth $94,045 more than last year. That’s right: my modest three-bedroom, one car garage house is now worth $454,250.

In 1993 we paid $191,000 for the house. This means in one year my house appreciated more than half the cost that we paid for it.

Does that strike you as just a little strange?

Apparently it shouldn’t. Residential properties in Fairfax County, Virginia averaged a 23% increase in assessments compared with 2004. Perhaps we got off cheap. My house had only a 21% increase.

Still my mind reels. Last time I checked our net worth was about $560K. In one year without working any harder we are now worth about $660K. At this rate in five years we’ll be a millionaires. But somehow when that occurs (and it is only a matter of when) I doubt we’ll be eating caviar for dinner every night. In fact our lifestyle will be pretty much what it is now. It may actually be worse. (More on this in a moment.)

Because of course we have all this net worth but we can’t really spend it. Because we have to live somewhere. We won’t be able to do much to leverage this new wealth unless we move into a trailer or find some modest housing far away from metropolitan areas. And although $454K for our house seems like I have a lot of money in many communities it doesn’t buy squat. If I were to move to San Francisco I probably wouldn’t be able to purchase a condominium with it.

There is no doubt that Fairfax County is a desirable place to live. There are lots of high paying professional jobs here and I live within 3-10 miles from tens of thousands of them. Our schools are excellent, our crime is low and our industry is virtually all tech. No belching smokestacks here in Fairfax County. And we have our standards. We don’t permit ugly billboards like in neighboring Prince William County.

And although my house is modest my neighborhood is laid out just right. Unlike many of the newer subdivisions that surround us our houses are not supersized. Our lawns are usually at least a quarter acre, but not so large as to require a lawn tractor. Most of the time you don’t hear your neighbor. The houses are a bit bigger than those in the neighborhood where I grew up, but not that much.

So yes we were fortunate. We bought at an excellent time (we had our pick of homes during the Bush I recession) and profited from our location and the inevitable growth in the population.

Even so, $94,045 in appreciation in one year?

What’s the downside? Property taxes, of course. Last year my property tax bill came to $4073. The new property tax rate is going to be $1.03 for $100 of assessed value. That’s $.10 per $100 of assessed value less than last year, but I can do the math. With my new assessment that’s $4678 a year, an increase in $605 from last year, or about another $50 a month.

I’m certainly all for funding the county adequately. I know we have lots of needs, including huge costs for quality schools, transportation etc. The proposed county budget is 4.47% higher than in 2004. In addition to getting more money from property taxes, the county also proposes to hike a bunch of other fees. Starting April 1st, a trip in an ambulance will cost you $300-$550, plus a $7.50 a mile transportation fee.

I am also aware that the state is not exactly generous in the money it gives to counties. Subsidies for public schools haven’t really kept up with inflation. To maintain the decent level of services that us citizens demand the difference has to be made up somewhere. So the county does it in the form of highway robbery ambulance fees and property tax rates that are routinely a point or two above inflation.

It’s beginning to dawn on me that I may not be able to afford to live in my own house once I am retired. Unless my mortgage is paid off I probably could not afford to indefinitely pay $500 or so more each year in additional property taxes. I will either have to keep working (assuming I am able) or downsize my life.

There must be a fairer way to collect taxes. Perhaps county income taxes would be fairer. I don’t feel like we should stick it to those of modest or low incomes. But neither should people like me have to indefinitely keep increasing their income to be able to afford to stay in their own home. Right now my wife is unemployed. I figured we could continue this situation indefinitely. But now I’m wondering if she must go back to work at some point simply to keep a roof over our heads.

All this and we will soon be millionaires. At some point I may be a millionaire eating hot dogs.

March 1st, 2005 at 07:04pm Posted by Mark | Politics 2005 | one comment

Oh Canada!

For someone from the United States visiting Canada is like visiting some sort of parallel universe. It looks so much like the United States. The roads look the same. The houses seem the same. The cars are the same familiar makes and models. But there are differences. Distance is measured in kilometers. Liquids are measured in liters. But these new units were easily mastered. What struck me is that Canada seemed to be missing the sectarian anger and hatred that seems to comprise living in the United States these days. In many ways Canada is a much saner and more civilized place.

In the evenings when not otherwise engaged we watched a lot of Canadian TV. Mostly it was the Olympics from a Canadian point of view. One thing I noticed is that there were markedly fewer commercials during their Olympic coverage than would have been shown here in the United States. In the United States the franchisee (NBC) would feel duty bound to squeeze every last nickel of profit out of the experience for the corporation. So no doubt this meant twenty minutes of more of commercials during prime time, plus myopic attention on the most interesting competitions that would bring in the most viewer interest.

But while watching the Olympics from the Canadian perspective we saw events that I doubt were covered by NBC, including a competitive cycling event that included a Canadian. In Canada every Canadian medal was a triumph and cause for celebration. With the United States collecting over one hundred medals another medal for the United States was pretty much a ho hum affair. Americans only get excited when multiple Americans win medals for the same event, or when one athlete earns more than one medal. In Canada events like Perdita Felicien of Ontario tripping over a hurdle at the start of the women’s hundred meter hurdle was big news. Here was a woman who could very well have won a gold medal for Canada but made a tragic mistake. I wasn’t in the USA to know if it made our sports sections at all, but I suspect if it was mentioned it was buried deeply within.

With the population of Canada about one tenth that of the United States it is natural that a medal won by a Canadian will mean a lot. But the news coverage of the Olympics itself was markedly more restrained than NBC’s. While there was fawning over every Canadian athlete — and lots of Canadian companies were busy flaunting their sponsorship of Olympic events — the coverage missed the extreme hype and over the top flashiness typical of Olympic coverage here in the States.

But it was also interesting to watch Canadian news. It’s amazing how myopic we Americans are. All this really interesting stuff goes on just across the border from us and we are largely clueless. Canada might as well be some remote country in the African bush as far as we are concerned. The big political news had to do with a recent election in which the Liberal Party had won a plurality of the votes, but not quite a governing majority. So it needed to include a few lesser parties to get the governing majority it needed, and the jockeying was interesting. But mainly it was such a joy to be visiting a country where the Liberals were in charge. In Canada being a Liberal is nothing to be ashamed of. Indeed the average Canadian is more likely to be a Liberal than not. Rush Limbaugh would probably suffer a stroke if he lived in Canada because the country seems to embrace its limited socialism. And yet amazingly enough in spite of being a country full of liberals it seemed both happy and prosperous.

Canada is a progressive country that embraces quasi socialism, such as its national health insurance system. We heard complaints from some Canadian friends that in order to save money ambulance rides and eye exams were no longer covered. And there are horror stories that trickle into the States about how medical care seems to be rationed with their single payer plan. Nonetheless with the three Canadian friends we met none wanted to do away with their health insurance system. At most they wanted some modest changes. Three people are not a representative sample by any means. But our discussion with them suggests that we may be getting a false picture here in the states about the popularity of their health care system.

The taxes in Canada take some getting used to. They are markedly higher than here in the States, at least when it comes to sales taxes. Whether it was a meal, a purchase at a drug store or a night spent at a hotel all bills came with two mysterious taxes “GST” and “PST” taxes. GST taxes are apparently a “Goods and Services Tax” applied nationwide and amounted to 7%. The PST (Provincial Sales Tax) is the amount in addition to the national tax that each province (Quebec and Ontario, in our case) add to support their regional needs. It is 8% in Ontario and 7.5% in Quebec. I don’t know what their income tax rates are, but it’s a good bet they are higher than in the United States. (Note to travelers: if you keep your receipts you can get a rebate on your GST and PST taxes.)

Yes, it’s a lot of money in taxes. On the other hand no Canadian has to worry about not having health insurance. Yet there are 45 million Americans who are uninsured. Those of us who do have insurance are being eaten alive by ever-skyrocketing premiums and drug costs. What else do their taxes buy? Well, from this traveler’s perspective their infrastructure is very good. The roads are well maintained. The streets are clean. The crime seems very low. And as best I could tell the citizenry seem quite happy with their semi-socialist state. I know that overall the unemployment rate in Canada is higher than in the United States: 7.2% in August vs. 5.5% here in the United States. But I’m betting that fewer out of work Canadians are eating dog food or living on the streets.

In short my brief taste of Canada was not an unpleasant experience. When it was suggested to me recently that because I don’t agree with my president I should emigrate I spurned the suggestion. But I returned from Canada impressed. In many respects I think they are a much saner and more civilized country than the United States. If being an American in the 21st century means voting Republican, giving obscene tax breaks to the rich, bankrupting the national treasury and delighting in our Darwinian class struggle then perhaps the idea of me emigrating to Canada has merit. But America: are you sure you want to lose a talented hard working citizen like me?

September 5th, 2004 at 10:26pm Posted by Mark | Politics 2004 | no comments

Why Bush Will Lose in 2004 - An Update

It was about a year ago (July 4, 2003) that I wrote what at the time seemed to be a rather fantastic prediction: that Bush would lose this year’s election. Judging from the number of hits and comments it has received this entry turned out to be one of my most popular entries. A year ago even the most rabid Bush haters were stewing in silence. None except perhaps Howard Dean really thought Bush could realistically be defeated. His reelection seemed like a slam-dunk.

I think most of us realize now that Bush’s chances of staying in office are at best 50/50. As I said a year ago (and still believe) there are always last minute factors that could tip the election to Bush. I still think it is possible that some horrible September 11th type event, timed perhaps in mid October, could produce an emotional response that would reelect Bush, though not validate his governing style. We will all be hoping and praying that this does not happen. One of the few positive things I have to say about Bush was that I thought his approach to dealing with terrorism within the United States has been decent. It is by no means ideal. Our borders are still pretty porous. There are significant security gaps in our ports and in our air cargo system. But border security is much better than it was. I’d rate this aspect of the war on terrorism as a B, while I’d give others like securing nuclear stockpiles a D or an F.

The economy perked up a bit more than I expected. Bush hasn’t erased the three million jobs lost during his watch but he has perhaps a 50/50 chance of at least ending his term with no net loss of jobs. It’s unlikely that this is the sort of statistic he can use to ensure his own reelection. As others have pointed out the unemployment rate hasn’t changed much these last few months, in spite of the new jobs. This is because those who gave up hope of finding a job are more hopeful now and have put themselves back in the market. But there is also the disturbing problem that the new jobs tend to pay on average less than the old jobs. And though wages are rising, these don’t feel like good times yet to those who are coming off unemployment. And at least so far this year inflation is rising faster than wages. That of course means a net loss in income for the average worker. Gas prices that are likely to hang around or over two dollars a gallon won’t help Bush either.

Those on the top enjoying Bush’s large tax cuts are living large and have seen real income growth. Those on the bottom end of the income scale pay little or no income taxes and consequently haven’t seen much improvement in their standard of living. Most of them are paying markedly higher housing costs that have actually put them further behind.

Howard Dean has been vindicated on tax shifting. When taxes are cut in one place they tend to rise elsewhere. Most of us see it on the state and local level. I haven’t done a personal study of my own income. But I am willing to bet that my federal tax cut has been offset by other tax increases. Our house just keeps rising in value. Just this year alone I can expect to pay several hundred more dollars in property taxes. Over the course of Bush’s term in office I am likely to see my property taxes go up by about $1000 a year. And then there are those other taxes. For example our Virginian Republican legislature decided to raise taxes effective July 1st, in spite of pledging never to do such a thing. Miscellaneous taxes continue to rise too. My telephone bill is about 30 percent taxes. So for the vast majority of us tax cuts on the federal level have at best kept us even in our overall level of taxation.

Most of the trends I noticed a year ago are still true today. Iraq became the quagmire I predicted. Actually it is worse than I imagined a year ago. Not only is our war in Iraq a failure but also our war on terrorism in general is a failure. Our only success was overturning Afghanistan’s Taliban regime, which supported al Qaeda. But despite this Osama bin Laden remains at large. Al Qaeda has launched many attacks on our allies and on us. Liberating Iraq doesn’t really count because it was never a threat to our national security and was never allied with al Qaeda. Our erstwhile “ally” Saudi Arabia is in a virtual state of siege.

Meanwhile the Taliban in Afghanistan are resurging. We don’t really have enough troops in Afghanistan to do more than ensure the Taliban can’t take over the country again. Planned elections in Afghanistan look dicey at best. Female poll workers are being killed. The country, unfortunately, is not yet at a mature enough place where true democracy for all can flourish. Iraq’s culture is more contemporary, but it must fight its own civil war with puritanical Islam before it can take root, if it ever does. Iraqis are more used to strongmen as leaders and are likely to revert to that model. If democracy happens in Iraq it is likely to be a long and violent process. If you can remember what a bloody place Beirut was in the 1970s and 1980s you have a pretty good idea of what Iraq will be going through for many years. And sadly it won’t be alone. Predominantly Islamic Countries all over the Middle East need to complete a soul-searching process. It will likely be violent and last for decades. Much the way the Soviet Union finally got the clue that communism was unworkable, eventually these countries will figure out that theocracy won’t work. Eventually and inevitably these countries will discover what we learned long ago: that a certain amount of secularism is required to enjoy the benefits of a modern state.

But I digress. If you want to know why Bush is likely to lose look not just at his poll numbers. Look also at how Americans are feeling overall about the economy and the war on terrorism. The only area where Bush gets positive marks now is his overall handling on the war on terrorism, and there he holds only a slim majority. When asked about particular aspects, like the War in Iraq, he no longer gets majority approval. And now it is clear that this will not change substantially before the election.

Red states will still vote bright red and blue states will vote bright blue. But Republicans will not vote passionately for George W. Bush. Many of them will stay home out of apathy and disgust, much as Democrats did for Carter in 1980. But apathy won’t be the case with the Democrats in this election. A lot of people, and not just Democrats, really really don’t like George W. Bush. Karmic elements are at work. The sort of rabid hatred Republicans heaped on Bill Clinton for marital indiscretions is about to be returned on George W. Bush doubly by Democrats. Democrats finally have a Republican they just can’t stand. Basically they just hate the guy. And hatred while not the most noble of our emotions can be very strong.

Although it’s too early to say for sure we can perhaps see the future in the weekend’s new box office hit, Michael Moore’s Fahrenheit 9/11. Even in bright red states like Texas shows are selling out days in advance. Many of the people I know who voted for Bush in 2000 have changed their mind and won’t vote for him again. Many are doing so as a protest. They just feel he has totally screwed up.

And we feel that America has changed for the worse. This is not the country we remember. We expect our president to act from deliberation and consideration, not from prejudice and instinct. We expect our president to keep an open mind. We expect dialog from our president, not one sidedness. We expect presidents to find synergy with our international partners, not piss them off. We expect most of all: moderation. Lack of moderation is really the key to Bush’s downfall. Moderates win reelection. Radicals don’t. And the swing voters are, as always, the moderates. Bush promoted himself as a moderate but he was a chameleon. Now they know better. Bush will paint Kerry as a left-winger but Kerry will sensibly steer toward the moderate middle. Bush can no longer claim that territory. Through his actions he has shown that he is not a moderate.

Bush will be hit by a tsunami of disgust from large numbers of very angry voters. They will be telling their friends not to vote for Bush, and their friends will be telling their friends. The moderates will be seeking anyone who will actually steer toward the middle in this election. Kerry is the only choice for them. So I put the odds right now at 85/15 for a Kerry victory. And I predict when the popular vote is counted it will be Kerry 53%, Bush 45%, and Nader (plus miscellaneous candidates) at 2%. This is a minimum. I suspect Kerry’s number will actually trend higher.

Come back November 3rd and see how I did.

June 28th, 2004 at 09:17pm Posted by Mark | Politics 2004 | no comments

Your Hidden Taxes

Are we all happy with the lower withholding rates and federal tax cuts? This means more money in our paychecks. And that certainly seems good. Otherwise we’d just be giving more money to the government. And for most of us giving Uncle Sam more of our hard earned tax dollars is not something we’d choose to do voluntarily.

And clearly that extra money in our paychecks will probably get spent. That can only help, not hurt the economy, right? But most of us are aware that what the government gives with one hand it often takes away with the other hand. For instance: here in Fairfax County state money to the counties has been reduced due to reduced collections. Revenues from sales taxes are also flat. The pressure on counties is to increase local taxes to make up the difference. I live a desirable spot: close to high paying jobs where land is at a premium. My assessments increase every year. Even though the county cuts the tax rate I end up paying more property taxes every year. This year it will amount to a couple hundred dollars, as it usually does. I don’t particularly like it, but I understand it. Unlike some of my tax phobic neighbors I’m not willing to let the roads deteriorate or to shove fifty kids in a classroom in order to save a couple hundred dollars in taxes.

So most of us understand this painful necessity even if we don’t like it. But a lot of us are unaware of hidden taxes. The best example I can think of happens at the gas pump. And I’m not talking about those federal, state and local taxes tacked on to the price of gasoline.

Doubtless you are aware that gas prices are at record highs. I paid $1.88 a gallon for 87 octane last weekend. Ten years ago, according to the EPA, the average price of a gallon of gasoline was $1.04. Now it is $1.88. Arguably gas prices are still a bargain. It’s hard to find a country in the world where it can be procured so cheaply. To have an accurate comparison today’s prices need to be adjusted for inflation. In 1968 gas cost about 35 cents a gallon. Add inflation and that would be about $1.90 a gallon today. So overall gas costs about as much in real dollars as it always has. The notion that OPEC has us over a barrel of oil is somewhat fallacious. Oil prices have proven to be very inelastic, to use an economics term. Naturally we don’t tend to think of gas prices in those terms. We can spend $3.50 for a cafe latte at Starbucks without giving it a second thought. But we will go out of our way to save a couple pennies a gallon for gas, particularly when prices are as high as they are today. I suspect that the cost of gasoline is actually a much smaller percentage of our budget today than it was in 1968.

But you may have read that OPEC wants to increase its benchmark price for oil. Actually OPEC doesn’t really set prices; that is determined by supply and demand. But they do try to encourage member nations to price their product in a range. And the current benchmark range is $22-$28 a barrel. However with demand high as economies recover the average price of a barrel of crude oil is hovering around $34 at the moment — about as high as it has ever been. Certainly this has an effect on the price you pay at the pump.

But here’s the kicker: oil prices in Europe are steady. How is that possible? Have vast new deposits been found off the coasts of France and Spain? Is OPEC cutting Europe a special deal? The answer is they are paying the same rates as everyone else. But they have an advantage. Oil is traded in U.S. dollars. And the U.S. dollar has been sinking against all major currencies, including the Euro. When George W. Bush assumed office one U.S. dollar bought 1.07 Euros. Today, one U.S. dollar buys .82 Euros.

Taxes on gasoline are much higher in Europe than in the United States. No doubt about that. But let’s assume that taxes were the same. That would mean that the gallon of gas I bought last weekend for $1.88 a gallon could be purchased in Europe for the equivalent of $1.45 in Euros.

In short because our dollar is now weak we pay a penalty. If the dollar had the same exchange rate with the Euro as it did at the start of the Bush presidency, that gallon of gasoline I bought would be priced at $1.55 a gallon instead of $1.88 a gallon. In these terms then the penalty for a weak dollar is thus currently $.33 a gallon. Now of course all things are never equal and currency rates are always fluctuating. But assuming you put 12 gallons into your automobile once a week this adds up. That’s $205.92 per car per year. If you have two cars, that’s $411.84. All because of a weak dollar.

Now you’re probably asking yourself “How did our dollar get so weak?” Again there are lots of factors that influence exchange rates but in this case there is the 800-pound gorilla that makes the other factors rather moot. And that is the United States continues to live beyond its means. To finance our needs, including government, we need money we don’t have. So we get it from overseas. Other countries lend us hundreds of billions of dollars annually. Certainly not all of the federal debt is financed from overseas, but with federal deficits running $300B to $500B a year that’s a lot of dough crossing the ponds so you can have that tax cut. So I think there is a clear link between deficit spending and the fall of the U.S. dollar. Arguably more deficit spending will just make the dollar weaker.

So what does this have to do with taxes? In this case a weak dollar is a hidden tax. A weak dollar has some positive economic effects in making our products cheaper to buy. But it also means that imports cost a lot more than they otherwise would. The current grumbling from oil producing countries is that they are losing gobs of money because oil is traded in dollars. In effect oil-producing countries are selling oil at a considerable discount. This sucks when they want to exchange those oil dollars for their local currency.

But actually we are benefiting. If OPEC decided suddenly to stop selling oil in dollars and demanded, say, Euros instead we’d be in a hell of a fix. That gallon of gas might cost us $2.50.

My point is that deficits do matter, as much as Dick Cheney would argue otherwise. Consequently balanced budgets matter. They drive low inflation and increase confidence in the United States. That’s exactly what happened during the Clinton years. The economy became a self-sustaining proposition. Why? Because that economy was built on the solid foundation of fiscal discipline. (The end of the Cold War certainly didn’t hurt either.)

So maybe if you’ve been to college you are thinking, “Hey this isn’t news. I studied economics. Inflation is a tax.” This is true. It’s also very abstract. We just don’t think of it as a tax. And sometimes, particularly in times of historically low inflation like now, inflation is still there although it may not be obvious.

The Federal Reserve is seeing signs that inflation is making a come back, spurred in part by the rising cost of foreign good and oil prices. We now see that much of this is a result of the low value of the U.S. dollar. As a result the Fed is likely to raise interest rates at its next meeting. And this will be a tax too. Anyone who borrows money will feel the ripples. Money that would otherwise go to buy things will instead go to creditors, the majority of which will probably be overseas. The Fed is trying a little medicine here. Their interest rate increases are designed to keep cause mild short-term inflation at the benefit of reducing the long-term inflation. In the short term the effects may be higher unemployment. It may mean higher mortgage payments. It may mean some won’t be able to buy that first home at all.

My conclusion: there is no free lunch. As much as the Bush Administration would like us to believe it we cannot spend ourselves into true prosperity. We can perhaps live high on the hog for a while, but the piper will have to be paid. If we can stop this foolish deficit spending habit perhaps those glorious economic days of the Clinton 90s can return. But first we need to put people in power again who truly understand economics. It is time to stop buying into the lie that Democrats are big spenders. Republicans, particularly George W. Bush and today’s Republican Party with their lock on all branches of government are the true big spenders. They are charging our national charge card to the maximum and don’t want to pay back any principle.

If you truly value your economic future you should pull the lever for Democrats this fall.

May 6th, 2004 at 08:18pm Posted by Mark | Best of Occam's Razor, Politics 2004 | one comment

Hold the presses! Virginia Republicans are raising taxes!

Things are tough in Richmond, Virginia. Our legislature is back for its annual attempt to have its cake and eat it too. Last year it papered over massive state budget problems. This year it has run out of creative ways to keep basic state services going and not raise taxes. Needless to say for our Republican legislature this has involved a lot of wailing and gnashing of teeth.

True to form for the first few weeks our Republican legislature made brave promises that it would not raise taxes and parroted the usual silly assertions that the state government was just spending too much. Our governor Mark Warner, after campaigning on a platform of no new taxes, submitted his plan to address our state’s serious revenue deficiencies. It said that yep it looks like we really need to raise taxes folks but let’s call it rewriting the tax code instead of a tax increase. In the legislature it was, of course, declared immediately dead on arrival. On Monday Governor Warner conceded as much. But that still leaves that pesky little problem of how to balance our state budget (required by law) and not cut funding further for schools, transportation, the prisons and all those other essential services.

So how did the Commonwealth get into this mess? There is no denying the economic slowdown affected Virginia as well as virtually every other state out there. But it is more than that. During the 1990s Virginia, like many states, lived in flush times. Our technology industry in particular was going gangbusters. The area where I live in Northern Virginia (Fairfax County) attracted some of the very best and brightest of the software industry, including companies like AOL. We also had innumerable technology companies providing services to the federal government, like SAIC and AMS. While they were raking in the profits the state got its share. This meant citizens’ tax rates could be kept about where they were. All was right: we could keep spending more without changing the sales or income tax rates. Partially as a result the Republicans took over both houses of the state legislature.

We also elected James S. Gilmore as our governor back in 1998. The Reagan-like Republican Gilmore rode into office promising to get rid of the most despised tax in Virginia: the car tax. Counties are allowed to tax personal property in our state. However, the car tax money was critical to the counties. It was used for minor things like funding the schools. Gilmore succeeded in keeping the first $20,000 of the assessed value of the car from being taxed. The state reimbursed counties for the lost revenue. And all was right until the recession started. At that point it became politically untenable for the State to stop subsidizing the counties for this lost revenue. So it became a huge new liability for the State it couldn’t politically undo.

The State became caught between the rock and a hard place. One solution could have been to reinstate the car tax. However, the voters would not stand for it. So this new state liability became politically impossible to remove. Instead the legislature invoked the usual one time accounting tricks while making cuts to transportation, education and public safety.

This year there the choices become extremely painful. The legislature now has to figure out whether it will increase taxes or cut deeply into essential state services. Will it lay off public school teachers? Make civil servants go another year without a cost of living raise, or actually reduce their salaries? (It already laid off thousands of civil servants.) Will it in effect continue to raise taxes by shifting the burden to universities, who have to make up the difference in huge tuition increases?

Former Governor Gilmore is of course appalled that his fellow Republicans would even consider raising a tax. Yes, the same governor whose reckless overspending and tax cutting got us into this situation is castigating Mark Warner for his proposal to increase taxes!

Slowly, and with the greatest reluctance the legislature is considering (gasp) tax increases. The straw that broke the camel’s back seems to have been various reports that the state’s excellent credit rating was about to take a tumble. That wouldn’t look good. It would prove our legislature was full of incompetent boobs who could not manage money. If Moody’s decides Virginia is being run by a bunch of flim flam artists, our costs of borrowing go up or maybe go away altogether. We might even end up looking like California, which is going through its own fiscal shenanigans and has already had its credit rating lowered.

I’ve been a resident of Virginia for 20 years. I was not drawn here because taxes were a bit lower than they were in Maryland. I just wanted to live in Reston. But one aspect of Virginia government I did admire somewhat was that the state had a reputation for living inside its means. It knows how to pinch a penny. But it’s clear that any waste and bloat that did exist in Virginia government is long gone. Even the silly Center for Innovative Technology, a state funded high tech consortium, has largely lost its state funding as revenues sank. But no more. Our credit rating is in jeopardy.

Virginia Republicans are raising taxes. Who would have thunk? Looking for those to absorb the tax increases, businesses have become the primary targets. I guess it’s because businesses don’t vote. The House plan calls for $520M in tax increases. The Senate plan, proposed by a much more sober State Senator John Chichister, calls for $1.8B in tax increases. Governor Warner seems to favor the Senate approach. It will be interesting to see what actually passes and even more interesting to see how the state Republicans spin their tax increases.

Meanwhile rest assured our legislature is working on things that really matter. Noting that gays are being married in truckloads in San Francisco, it is reaffirming that it will have none of that same sex gay marriage crap here in Virginia. It is also working hard to restrict abortion rights. One proposal would make it unlawful for university health clinics to provide over the counter morning-after birth control pills.

But at the same time two other curious bills are going through the legislature. HB1006 will allow companies to offer group insurance benefits to gay partners who live together. This is especially curious since we still have sodomy laws the legislature refused to repeal even though they were invalidated by a recent U.S. Supreme Court decision. In addition HB187 was passed that no longer restricts state mortgage loans only to those who are married or are blood relatives. It remains to be seen if our state senate will go along. It is also unclear why we are getting a couple progressive bills through the legislature while being obnoxiously conservative on other bills. But maybe, just maybe this is a small sign of progress. If Virginia Republicans can actually vote to raise taxes anything is now possible in my state again.

February 19th, 2004 at 09:01am Posted by Mark | Politics 2004 | no comments