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These taxing budget times

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POSTED: August 21, 2012 4:00 p.m.

It sure gets confusing trying to figure out what Georgia’s state political leaders are saying when they seem to be talking out of both sides of their mouth at the same time. No wonder so many citizens have given up on public affairs or on hope of fixing anything … well, at least based on low voting turnout as evidence.

Let’s offer up a few examples on that most-important of topics: money, which in the public sector means taxes.

Almost every month this year the governor’s office has danced a little jig of joy in announcing that revenues (income and sales taxes, etc.) are up over the same month a year ago (most recently, 7.4 percent for July and 4.8 percent for the year).

Then the same governor’s office followed this up by sending out a warning to all departments to plan for more possible budget reductions (up to 5 percent) in the next fiscal year, plus told others their current year allocations are being reduced. This will mean five years in a row of “less than before” in funding, which have hit education and health care the hardest, with the blame typically laid on the doorstep of not enough tax revenues coming in.

Huh? More taxes collected than before means less money than ever to spend?

Doesn’t seem to make a lot of sense, does it? That may be because if Georgia’s government ever learned how to keep a checkbook balanced it might be possible for citizens to figure out what’s happening to their money. And that may not be what the politicians want to happen.

As most paying attention to how their tax money is used are aware, states must balance their budgets unlike the federal government that can borrow and hence runs at a deficit building a giant national debt. The problem is, in Georgia at least, that the budget is not actually balanced at all except in a wishful-thinking manner. Georgia legislators and the governor routinely spend money they do not have.

For instance, the current fiscal-year budget anticipated that revenue increases would be 5 percent and they’re only running 4.8 percent. The state is thus in the hole and must adjust to avoid red ink.

Even more alarming, the reason for the sudden belt-tightening in the current fiscal year is that the state also “balanced” this budget by only including enough money to pay for 11 months of one of its biggest items: Georgia’s share of the Medicaid program (of which more than 70 percent actually comes from Washington). Well, that “balanced” the budget all right in the same way that a household might by skipping setting aside money for one monthly mortgage payment on the expectation that a winning lottery ticket will magically appear. Normal people don’t spend or budget this way. They don’t also assume the boss will give them a 5 percent raise in the coming year. Indeed, nowadays they don’t either expect or assume anything. ...

The state also tends to dole out money in a fairly strange way — it likes to cut the most out of the budget items that are the largest regardless of their importance to the overall community. In Georgia’s case that is education and health care, which would be like a family deciding that it needs to cut food and rent instead of eliminating, let’s say, the premium cable channels.

Let’s grant this is a very complex ledger that the state has and perhaps most shareholders in this venture only look at the bottom line and not how it is attained. However, there’s a fundamental at work here that needs grasping. Washington budgets by openly spending money it does not have. Georgia budgets by sneakily spending money it does not have but prays will appear.

Neither approach is wise.

Disturbing as such bookkeeping is to those citizens who worry about robbing Peter to pay Paul — most actually seem willing to ignore Peter’s plight as long they’re in Paul’s household — of more concern is that many look at such passing scenes casually and don’t understand them … or care to.

Yet, knowing how this works — which currently seems to be very badly – distorts any efforts at initiating repairs.

For instance, the popular chant of “No more taxes” is deceiving. Taxes aren’t the problem. For example, New Hampshire has no income tax (zero) and no sales tax (zero) relying instead mostly on property taxes for everything, and yet neither Coca-Cola nor Delta have moved their headquarters there.

Spending what isn’t there yet is the problem in Georgia. How much easier, even if bad for re-election campaigns, would it be if future budgets were based on the past year’s actual receipts instead of optimistic projections? ...

It is not “no more taxes” that should be of concern. Indeed, as few Georgians appear to know, this state’s per capita taxation load, as distributed across every man, woman and child, is the 47th lowest in the nation. On highway spending it actually ranks 49th, which explains the roads that aren’t there and urban traffic jams.

Yet much of the political rhetoric is about the need for lower taxes (income in particular) and how that will turn this into the land of milk and honey — remember how before the downturn hit and this “creative accounting” actually seemed to work in much the same way as the real-estate market’s success once did the same politicians were talking about how this was already the land of milk and honey?

This state does not have money/tax problems so much as it has politician/priority problems. Its citizens need to be given a reality check and an honest, simplified look at the way the books are being kept.

No more taxes, as the well-meaning tea drinkers must learn, does not have curative powers. It is how long the tax leaves are steeped and how hot the public watchdog waters around them are that determine the strength of the shared public services in the cup.

 

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