Paying taxes is painful… but reading about them shouldn’t be.
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Remember last month when Secretary of the Treasury Timothy Geithner would not rule out a tax increase for the middle class to resolve our budget woes?
Well, apparently he’s changed his mind. Speaking this week, Geithner was asked the same question. This time, his answer was: “I don’t think so, no.”
So there you have it. Yes and no. (I still expect no.)
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I’m guessing that Gov. Schwarzenegger thinks something very different when he sees this slogan these days: The thing that won’t die, in the nightmare that won’t end.
It’s not the Terminator but rather, the budget.
The state of California is facing a $21.3 billion shortfall. Billion.
And the measures that Schwarzenegger hoped would be a step towards resolving those issues failed – and failed miserably. Voters in California voted down five of six proposals on Tuesday with more than 60% of voters issuing a resounding “no.”
The one proposal that did pass prevents certain state officials from receiving pay raises when California has a budget deficit. But other measures failed. The controversial proposals included shortening the school year by a week and a-half, cutting education jobs, eliminating health insurance for nearly 250,000 children, laying off state firefighters and limiting funds paid to local governments.
Cuts are inevitable now. So are higher taxes. Just months after California cut billions in spending, raised the state sales tax by a penny, borrowed and yes, begged, from the federal government, the state is expected to once again raise taxes. This time, income taxes are the likely target.
But wait… Before you start writing those “what did you expect from California?” comments, consider this statistic: 33 of 50 states have either already raised taxes or are considering raising sales, income and/or excise taxes to make up shortfalls in their budgets. My own state, Pennsylvania, is one of them.
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It’s Fix the Tax Code Friday!
Remember that study that I cited from the Tax Foundation earlier in the week? That same report offered another statistic. In 2007, the cost of balancing the budget would have cost each taxpayer an additional $1,789 in taxes. This year, due to “the bailouts and the Troubled Asset Relief program under the Bush administration, as well as the stimulus and fiscal year 2009 omnibus spending bills under the Obama administration”, that number has skyrocketed to $8,798. Yep, $8,798 extra to balance the budget.
Is it worth it?
Today’s Fix the Tax Code Friday question is:
Would you be willing to pony up $8,798 in extra taxes to balance the budget? If not, what about would you be willing, if any, to put up?
(Psst, in case you’re wondering, the Tax Foundation study found that 6% of taxpayers would be willing to pay the whole thing.)
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John McCain and Barack Obama both promise to be fiscally responsible and not raise taxes on the middle class if elected president. It’s a tall order no matter who wins… the current White House has released information about the country’s economic status and it’s not good news.
Last week, the White House estimated that the deficit will hit a record $482 billion deficit for the 2009 fiscal year. The crazy part is that does not include an additional $80 billion in costs related to the war in Iraq. That brings the country’s total debt to $9.5 trillion. (For more on the difference between debt and deficit, see my prior post)
What does that mean? For one, the US is paying a lot more interest and less principal (sound familiar?) to service its debt. According to The Concord Coalition, the US paid $200 billion in debt interest last year alone.
Paying off the debt – as well as the interest – will be a huge task for the next president. According to the Tax Policy Center, both candidates will add to the deficit. Estimates are that, if the plans stay as contemplated (which you can bet that they won’t), over the next 10 years, McCain will increase what we owe by $5 trillion, Obama by $3.4 trillion. Those numbers don’t include the costs of health care proposals or Social Security/Medicare, both of which are substantial issues for either candidate.
There has to be a “give” somewhere – continuing to increase spending and promising to cut revenue (taxes) isn’t likely to work. That’s a lesson that I learned the hard way in college… Why can’t Bush, McCain and Obama get it?
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