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Government Spending Ratchet

October 9, 2012, 12:40 pm

In 2010, Arizona v0ters passed proposition 100, a 1% "temporary" sales tax increase that was meant to help fill in the budget hole created by the recession.  The tax was only to last 3 years.

It is pretty clear that by the end of 2013, when the tax expires, the rationale for the temporary tax cut will have passed.  Already the state's finances are improving and all signs are that by 2014 the economy and real estate market should be greatly recovered.

But, having got taxpayers used to paying the higher tax, supporters of big government and public employees unions have put a proposition on the ballot this year (204)  to make the 2010 tax increase permanent.  The tax extension will go to a mish-mash of new programs.

This is how the government spending ratchet works.  A "temporary" tax increase is justified in a fiscal emergency to fill in a recession-created hole.  Government insiders decide they like having more money, and make the tax permanent.  The new money is used to create brand new programs.  Then, in the next recession, when all these brand new programs are now "essential" and "beyond the reach of even the worst austerity", a new, even higher "temporary" tax increase is necessary.

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Category: Taxes
  • fredrick.

    In CA we were able to let a temporary tax expire after voting down the extension. Of course governor brown is trying to blackmail us with Prop 30 to get the temp tax back again.

    Point is, even with all the cute "save Big Bird" programs the government/Unions throw in, there is hope to get it repealed.

  • JIMC5499

    Sounds like what Jacksonville Florida did in the 80's. They passed a 1% sales tax that was supposed to replace the tolls collected at several bridges. They collected both for several years.

  • GoneWithTheWind

    Say it isn't so! The government wants to make a temporary tax permenant. Who could have possibly seen that coming?

  • norse

    Worse... http://www.dailykos.com/story/2012/10/08/1141896/-Rachel-Maddow-Puts-Romney-s-2-Trillion-Proposed-Defense-Budget-Expansion-into-Historical-Context
    If accurate, that's the only reason I've seen so far not to vote Romney. Note that it's no reason to vote for anyone, as the preferred alternative would be to go back to at least a semblance of somewhat reasonable defense budget, an option that's not on any table.

  • Wintercow20

    When the Behavioral Economists come out and say that our thumbs need to be on the scale against such temporary programs because of the time inconsistency-ish problem here, then you will know that they are serious thinkers and not a cadre of scientism used to justify more government intervention. I won't hold my breath.

  • Harry

    Back in the early seventies, Milton Schapp ran for Governor of Pennsylvania saying he would replace the sales tax with an income tax. He won. Guess what happened?

  • obloodyhell

    Florida had a 4% sales tax some decades back. Then they added another penny and got a 5% sales tax. The legislature, always out for new revenues, passed legislation that would have applied the 5% sales tax to all services, including lawyers, doctors, accountants and the like. The caterwauling could be heard in Moscow. So they rescinded it... but... of course they had already budgeted for the extra revenue, so they claimed they needed to boost the sales tax to 6% to cover the missing revenue already budgeted (Why, no, cutting BACK on budgeted items isn't allowed... EVER).

    That was something like 25 years ago. Still have the 6% sales tax, even though that tax year is loooooong gone.

    They started to try and boost it again by a half cent. Got lots of hell, so they decided to make it a "local option tax" -- that is, let the county governments take the heat.

    There was lots of heat, so almost all the county governments put it to the voters.... and almost uniformly got rejected. But was THAT the end of that? Oh, FUCK NO... Dangle that revenue source in front of a pack of government officials, it's like dangling a haunch of beef in front of a pack of winter-starved wolves. They kept trying to invent various excuses for what it was needed for. "Midnight Basketball" (keeping park facilities open and lit for more hours), yada. yada. yada. Eventually, they found an "excuse" that worked with most of the different counties, so that most of Florida's sales tax (it does vary county-to-county -- fun for businesses that operate in multiple locations, I'm sure) is now at least 6.5%

    Lesson: ALWAYS vote against increased taxes. For any purpose. For any excuse.

    One thing Florida can count on, is no income tax. Why? Because it's in the State Constitution that there shall be no state income tax, and it can't be changed without permission from the voters. One hopes THAT never manages to pass.

  • obloodyhell

    Y'all should remember this Come The Revolution.

    One codicil that should be a part of the new Contract is that the entire tax structure gets eliminated every 20 years, and the legislature has to start again, and CANNOT use the old tax code to create the new one. They have to vote on all additions piecemeal, one by one.

    That goes along with "no directly funded public schools" and "governments MUST use GAAP in ALL accounting" as rules to be demanded enshrined in the new Constitution.

  • Sean

    The ratchet on the spending side is even worse, particularly when it comes to state worker pensions. In flush years of the stock market, state worker pensions can increase for every active and retired worker with the stroke of a pen because it "won't cost the stae anything". When the market turns negative as it inevitably will, the shortfall is made up out of the state general fund. If a fix is introduced, it doesn't cover current retirees, only those hired after a start date in the future. From a taxpayer standpoint, you get liabilities in an instant but corrections take a generation.

  • Bram

    New Jersey passed an income tax 30 years ago to reduce property taxes. Now I pay 6.37% income tax and over $1k a month in property taxes.

  • Nehemiah

    Just think how much higher your property tax would have been without that income tax.

  • obloodyhell

    Just think how much lower both would have been if you'd just hung the bastards like you should have....

    ;-P

  • wolf

    coyote man, you only need to look at this to understand there is no recovery coming in 2014. http://www.usdebtclock.org/
    the storm that is hanging over europe has yet to make its way to u.s. shores. please dont be naive.

  • mesocyclone

    All they have to do is say "education" and a whole bunch of idiots automatically want to make us all pay for it. They don't have a clue that our public education system spends more per pupil every year and doesn't do any better. Then throw in a bit of green stuff and the enviros get a tingle up their leg and vote for it. We now have a tax rate here in the valley that is out of sight - around 10%!

  • Ian Innes

    In Britain Income Tax was introduced as a "temporary measure" to fight Napoleon. I might be wrong but methinks he died quite a while ago now!

  • nehemiah

    Not my job. I don't live in NJ. I choose to live in a state with zero income tax. You don't need immigration papers to move to another state.

  • ColoComment

    I have two Constitutional amendments I'd like to see proposed. The first should require sunsetting of every federal law and regulation after some [reasonable] time certain unless re-enacted by no lesser vote required than the original. The second would read something like: Congress shall make no law to which itself, its members and their staffs and families are not subject, with no waivers and no exceptions permitted.
    I think those two would solve a lot of our current problems.